Amore Pacific sales take off at airports

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Amore Pacific sales take off at airports

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Customers check out a Laneige outlet at Grand Century Shopping Mall in Hong Kong. Provided by the company

Amore Pacific, Korea’s No. 1 cosmetics maker, is aggressively ramping up its presence in the retail market for travelers worldwide.

The company opened a new era in the history of the nation’s cosmetics industry by becoming the first to surpass 2 trillion won ($1.7 billion) in sales last year.

Now it is hoping to set new benchmarks at duty-free shops in aiports several years after first venturing into this market segment by making its presence more strongly felt among recession-hit consumers.

It opened an outlet for its Laneige brand at Singapore’s Changi Airport in March 2008. As of this February, Laneige and another of its popular brands, Sulwhasoo, are available at 43 airports and on 16 airlines in nine countries including Hong Kong, Japan, China, Taiwan and Indonesia.

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“The global duty-free market is growing at an annual pace of 10 percent, and growth in Asian market is even stronger at 17 percent,” Amore Pacific CEO Suh Kyung-bae told executives in January.

“The success in Asia’s travel retail market will elevate the company’s overall influence in the region. To deliver Amore Pacific’s concept of Asian beauty more broadly we should continue penetrating the travel retail industry with an initial focus on the Asian market, and gradually expand to other markets.”

Suh is targeting customers in their 20s and 30s with Laneige, but hopes to appeal to a bigger age bracket with the company’s high-end herbal cosmetics brand Sulwhasoo, industry insiders said.

The two brands have seen combined growth of 133 percent per year on average in the travel retail segment, the company said.

At Changi Airport, a key hub in Southeast Asia, Amore Pacific’s brands generate an average of 140 million won per month in sales. Meanwhile, its Laneige outlet at Sanya Duty-Free Shop in the southern Chinese tropical island of Hainan, raised 200 million won last October to set a new milestone in monthly sales by a Korean cosmetics brand in the overseas duty-free market.

Of growing importance

Market observers said Amore Pacific is shifting its focus because of the lucrative potential of this area due, in part, to emerging markets like India and China, where outbound travel is booming.

According to Generation Search, global sales from the duty-free and travel-retail market reached $39 billion in 2010. Of the total revenue, 30.8 percent was collected from fragrances and cosmetics sales at worldwide duty-free outlets, second only to the 36 percent netted by the luxury sector.

“The increase in mobility between countries has created a new level of consumer demand for travel retail,” Hanwha Securities analyst Lee Jin-il said. “This has boosted the number of duty-free shop customers and also brought some improvements in business infrastructure. Countries now compete to bring popular brands to their airports as they bid to become major tourist destinations.”

Amore Pacific plans to open more duty-free outlets in Japan and Malaysia this year, it said.

“Some international tourists who didn’t know our brands before bought our products after they tried them at duty-free shops,” said Park Doo-bae, who manages the company’s international travel retail team. “Marketing or products at duty-free shops allows us to secure new customers. They in turn spread the word about our products to their friends back home, further raising the profile of our brands.”

Unique marketing strategies

Amore Pacific runs a unique policy for its sales staff working at the company’s overseas duty-free outlets to better position itself to international customers who are unfamiliar with its brands.

The company trains them to stick to what it calls a “one-point selling strategy” by delivering a quick description of the product in one sentence to give a stronger impression to customers who are often in a rush.

“This strategy works well for customers shopping at duty-free outlets,” said Park of Amore Pacific. “Travelers at airports have limited time to shop and approaching customers by saying ‘this Laneige Water Sleeping Pack is sold every 30 seconds and it’s a globally best-selling product,’ makes them think about a brand they weren’t aware of before.”

While some foreign rivals only offer sample cosmetics to customers who spend over a certain threshold, Amore Pacific, the world’s 16th largest cosmetics maker, gives each customer samples customized to their skin type regardless of the size of their purchase.

It also sells various exclusive sets for travelers tailored to their spending habits.

“The Sanya Duty-Free Shop in Hainan, China only allows customers to buy a maximum of six cosmetics each, so they tend to prefer sets,” Park said. “As such, Laneige sells its Water Sleeping Pack and Water Bank Essence duo sets exclusively for duty- free shops in China, where they account for 30 percent of the brand’s duty free sales in the country.”

The response from overseas duty- free shop operators has also been positive.

“Sulwhasoo and Laneige are very competitive at our duty-free shop and they’re well known among Chinese and international travelers,” said Grace Wang, an assistant director of the cosmetics and fashion department at China Duty Free Group, which operates the Sanya Duty-Free Shop. “We believe more brands from Amore Pacific Group could be invited to our shops in the near future.”

Far to go

Analysts say Amore Pacific needs to keep pursuing its aggressive expansion overseas to secure a firm grip on the worldwide travel retail market.

“Fifteen percent of Amore Pacific’s sales were generated from outside of Korea last year, but this is still very much lower than [world’s No.1 cosmetics firm] L’Oreal Group’s 66 percent,” said Lee of Hanwha Securities. “Cosmetics firms will reap high growth only when they invest enough in infrastructure in related markets.”


By Kim Mi-ju [mijukim@joongang.co.kr]

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