The global cosmetics industry makes a ton of money. That includes shampoo, makeup, perfume, cologne, deodorant, soap. The list goes on. Analysts expect the industry’s revenue to grow within the next four years to more than t$379 billion. But when you break down that number, it’s skincare that’s driving much of the growth. And it’s not slowing down. I’ve used moisturizers upwards in like 250 dollar range. The most expensive single item would be around 50 dollars. I try not to spend more than 50 for in essence or moisturizer. Probably like this really expensive moisturizer that I kind of got conned into buying for about 150 dollars. Skin care is an increasingly lucrative business for cosmetic companies.
That’s why big names like Amazon and the Kardashians are trying to cash in. And there’s one country that’s been playing an outsized role on skin care. South Korea. Here’s why. Skincare is a big moneymaker for big beauty brands. Over the last five years, skin care has grown so much that it’s become the largest piece of the pie when you break apart the beauty industry by product category. It makes up about 24.9 percent of a total $52.4 billion in annual revenue. And the global skin care products market size is expected to reach more than $196 billion by 2024. But what is making skin care so popular? And, why are these bottles of face wash and tubs of lotion bringing in so much money? This is Larissa Jensen. She’s a skin care and beauty industry analyst with the NPD Group. Skincare has been growing very fast. It’s actually growing the fastest of all the beauty categories that we track, including makeup and fragrance. So, it’s been the strongest performer for the past couple of years. What’s really driving a lot of that performance is actually wellness and health, and you know, really natural brands.
That’s what’s really driving the performance of skincare. Wellness doesn’t mean just being healthy. In 2019, it means clean eating, the latest fitness fads and the no-makeup look, which actually does involve some makeup. At any rate, the wellness trend is driving consumers to take better care of their skin. This skin-first philosophy did not originate in the U.S. Instead, it was born on the other side of the world, where skin care is a part of the culture. It’s where the latest skin care innovations are concocted and where a large chunk of manufacturing happens in the first place. South Korea.
Hi guys. It’s Charlotte. This is Charlotte Cho. She’s an entrepreneur, Korean beauty guru and the author of “The Little Book of Skin Care.” She started Soko Glam, an online marketplace full of curated K-beauty products for U.S. consumers. I was born and raised in California. I didn’t know anything about skin care until I started to live and work in Seoul, South Korea, and I was completely amazed at the product selection there was in Korea. And also the real focus on a skin-first philosophy. So, every woman and man in Korea it seemed really knew how to take care of their skin and at an early age. They had categories that just simply did not exist in the U.S., so it was really intriguing to me and I saw results on my own skin. I firmly believe that K-beauty created a skin care wave. They opened the door to innovations. They’ve allowed indie brands to come to the forefront of a lot of the skincare trends. They’ve also widened the appetite for new products, new categories. They’ve also been a big part of the education around skin care. South Korea’s cosmetics exports have exploded in recent years. In 2014, exports were over 1.7 billion, and then in 2017, they had grown nearly 5 billion. Not only is South Korea a large exporter of beauty products, but is also a huge manufacturing hub, even for American brands. Local cosmetic production there went from 8.5 billion dollars worth of goods in 2014 and grew to more than 13 billion in 2017. I think the impact of K-beauty goes far beyond just brands that are now introduced into this global marketplace. It’s actually allowing Korean manufacturing companies to grow rapidly as well.
For example, a lot of European brands and U.S.-based brands are formulating their products with Korean R&D chemists and manufacturing plants. So, a lot of your favorite brands that are not based in Korea, they are sourcing their innovations from Korea as well. Now, when there’s an innovative product coming out of Europe, you have to check the back of the product and see if it’s actually made in Korea. So while South Korea is continuing to grow as this hub of beauty innovation and creation, consumers are taking more time to educate themselves about the ingredients in the products they are purchasing. The same way you might check ingredients on food packaging. I think it was very important for American consumers to be educated about skin care. It brought empowerment to the consumers and they now know how to take care of their skin. The skin care boom owes a lot to social media. Think of all the selfies people take. People want to look good in their photos, wherever and whenever they take them.
What’s more, is skincare gurus and makeup artists have become huge stars on platforms like YouTube and Instagram. Influencers and social media were key for Korean beauty to take off and for skin care to become at the forefront of beauty. It really took influencers explaining to their followers and their community why certain products were incorporated into their routine and what impact it had on their skin. They loved showing what their skin care routines looked like on social. They loved sharing their shelfies, so they had rows and rows of their products displayed. At the same time that consumers are discovering more about different ingredients and learning about how to take care of their skin, more and more products are flooding the market. Companies are strategically acquiring brands to stay on top of beauty market trends, like Unilever’s purchase of Japanese skincare brand Tatcha for a possible $500 million. And, some companies are even spinning off their existing cosmetic lines to include skin care.
Sephora has started their own skincare line. Kylie Jenner launched Kylie Skin, and even Amazon is offering its own line. Part of the reason? Skin care is a higher margin business than cosmetics. That means companies keep more of the profits when selling skin care products than makeup. For a very long time, makeup, traditional makeup brands were purely focused on color, but now they see that American consumers are far more educated about skin care, and so they’re here to capitalize on that market. Do I foresee that the category is going to go into decline anytime soon? I don’t believe so. It’s doing really, really well and it’s continuing to be the strongest performing category in 2019 year-to-date. We believe there is going to continue to be a lot of excitement around the skin care category at least for the next two years. Though the shift to this skin-first, makeup-second philosophy is still expected to grow skin care industry revenue for the next few years. The question remains — how does skin care continue to evolve in this market? I think there’s a lot of noise in the space right now because there are so many people rushing to market with their brands and their products. So, it really takes a lot of education, continuous education about how they formulated the product, why it’s a trusted formula, what it’s going to do for their skin. At the end of the day, people want to see results.