The masks are off, but beauty spending remains low

Beauty products are displayed at a cosmetics store in downtown Seoul. [YONHAP]

Korean consumers continue to tighten their purse strings around cosmetics, even after the peak of the pandemic, amid prolonged inflation and the rising popularity of soft, natural makeup style.

The latest available data from the Bank of Korea's economic statistics system indicate that monthly cosmetics expenditures via personal credit cards reached 182.9 billion ($141 million) in August. This figure stands notably lower than the pre-pandemic monthly average, which consistently surpassed 200 billion won.

Despite a record-breaking surge in consumers' credit-card spending, which totaled 62.3 trillion won in July, the cosmetics market's recovery remains slow compared to other consumer sectors.

Factors such as mandatory mask-wearing and the rise of remote work have led to changes in consumer behavior, with many individuals opting for simplified makeup routines.

“I haven't purchased any makeup items this year; I just grabbed some skin care items during the sale,” said Ms. Jang, a 26-year-old office worker in Incheon.

“I've always liked putting on makeup, but with the rise of the 'natural makeup' trend after Covid, I've found myself purchasing more skin care products than color cosmetics,” said Ms. Cho, a 26-year-old graduate student in Seoul.

The influx of Chinese group tourists, once a significant consumer group in the Korean cosmetics industry, has resumed; however, the market has not experienced the anticipated boost as Korea is seeing more individual travelers.

The cosmetics industry is cautious about predicting a swift rebound in growth.

“Since 2020, the tourism slump and a domestic spending downturn caused by the influence of Covid-19 have led to a stagnant market,” LG Household & Health Care (LG H&H), one of the two biggest cosmetics players in Korea along with Amorepacific, wrote in its third-quarter report. “Even post-reopening, the market's demand remains subdued due to challenges in China and global economic conditions, creating an uncertain outlook for short-term growth recovery.”

Industry insiders suggest that the current environment of high inflation has given rise to a thrifty spending trend, benefiting small- and medium-sized cosmetics brands. While premium sellers may face further contraction, smaller and lower-priced brands appear to be capitalizing on emerging growth opportunities.

Industry giants like LG H&H and Amorepacific reported double-digit on-year decline to operating profits in the third quarter of this year, yet smaller brands like Tony Moly and Able C&C's Missha have seen a two- to three-times surge.

Daiso, a dollar store with uniform pricing ranging from 500 to 5,000 won for all items, experienced a substantial increase in sales of its cosmetics range during the first half of this year — the sales surged by approximately 70 percent from the same period of last year. Notably, sales of basic skin care products increased by 90 percent, according to the company.

“The cosmetics market recently has become more competitive with the entry of diverse small- and medium-sized brands in both skin care and makeup segments,” Amorepacific wrote in its third-quarter report.

“As low consumption persists, a reinforced shift toward frugal spending, a characteristic trend during economic downturns, is anticipated,” said Bae Song-yi, an analyst at Mirae Asset Securities. “This change is most noticeably taking place in the cosmetics industry, which, among consumer goods, is renowned for swiftly adapting to trends and being highly sensitive to trends.”

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]