Where do Kingos mainly buy their cosmetics, daily necessities, and snacks? Many visit a Health & Beauty (H&B) store, which can be easily seen not only in the university district but also in the downtown areas of the city. Recently, the growth of domestic H&B stores has been on the rise. However, this growth has also brought about some downsides. Therefore, the Sungkyun Times (SKT) is going to introduce the growth of the domestic H&B store, as well as its strengths and weaknesses
The Start and Growth of H&B Stores
The Idea and History of H&B stores
H&B stores stand for Health and Beauty stores and are also referred to as drug stores. The H&B store is a comprehensive lifestyle channel that sells various items such as pharmaceuticals, health supplements, daily supplies, and cosmetics. At the beginning of the 20th century, the United States (US) drug stores started selling pharmaceuticals, foods, beverages, and newspapers all together. Some examples of major drug stores around the world include Walgreens in the US, Boots in the United Kingdom (UK) and Watsons in Hong Kong. In Korea, there are CJ’s Olive Young, GS’s Lalavla and Lotte’s LOHB’s.
The Growth of the H&B Store
The H&B store market has grown gradually since 2013. With the growth of domestic cosmetic high-street shops, the number of cosmetic companies has consequently increased. Young, rational consumers who are interested in cost-effectiveness wanted to compare and buy products from different brands at a glance, and the H&B store met this demand. In 2016, sales of domestic high-street shops, which previously relied on the spending of Chinese tourists, started to decline due to the Chinese government’s retaliation against the Terminal High Altitude Area Defense (THAAD). At the same time, however, the H&B store, which focused on Korean consumption trends, grew even further. Nowadays, H&B stores’ average annual growth rates over the last five years have recorded 22.5%.
The Strength of Domestic H&B Stores
Giving a Chance to Small Cosmetic Brands
The strategy of the H&B store is to promptly enter products that are gaining popularity online. Launching small and medium brands’ products to an H&B store is a marketing opportunity in itself because the small-sized brands lack distribution channels, marketing competitiveness, and capital. In the case of a new brand, its entry to a well-known H&B store has become a certification of quality. For example, L&P Cosmetic’s Mediheal gained popularity and became the top facial masks brand in Korea after entering Olive Young, which originally had low brand recognition. The strategy of H&B stores not only gives a chance to small and medium brands but also triggers the development of the cosmetics industry through increased competition among those brands.
|Mediheal, One of the Most Famous Facial Mask Brands / medihealshop.com|
Reflecting Consumption Trends Combining Generations and Genders
➊ Targeting Generation Broadly
H&B stores commonly target young consumers. Today’s 2030 consumers prefer the H&B store because they value cost-effectiveness, and can compare various products and brands at a glance. An increase in single households is also an important growth factor. This is because the H&B store sells daily necessities such as toothpaste and shampoo that are in small packages. It is, however, not only young people but also the middleaged and older customers who are H&B stores’ other targets. Nowadays, the culture of “young forties and fifties”, a phenomenon of 40-50-year-olds being sensitive to recent trends and live young, is spreading. According to Olive Young, the percentage of customers in their forties increased from 6.8% in 2012 to 16% in 2018. The relatively older customers mainly buy products such as facial masks, functional cream products, and vitamin supplements that help with health and skincare.
➋ Targeting Young Males Interested in Appearance
Currently, the Korean male cosmetics market is growing. From 2013 to 2017, the average growth rate of the male grooming category was about 40%. The term “grooming” refers to when a man shows an interest in improving his appearance. Men’s cosmetics include a variety of skincare, hair, body care, shaving, and makeup products. Olive Young’s sales of men's color cosmetics in the first half of 2019 increased 77% a year from the year before.
|Men’s Grooming Zone in Olive Young / kmib.co.kr|
H&B Stores: Problems to Get Through
Lack of Difference Among Stores Imprinted on Consumers
Due to the success of the domestic H&B market, many latecomers are now appearing. Under these circumstances, latecomers need to develop and possess traits that distinguish them from other stores, or they would fall behind. According to the mobile research company Open Survey, the decisive reason for consumers in choosing a particular H&B store is distance. This means that most consumers buy nearby, regardless of brand. Although the H&B stores tried to differentiate by entering the famous brands and special discounts, the reality is that consumers do not know. By accelerating competition in domestic H&B stores, each store should have strengths that customers can be aware of to increase competitiveness.
The Declining Offline Market
H&B store shopping is usually done through the offline market. However, online shopping purchases are steadily increasing while offline shopping purchases are decreasing. According to the Korean Statistical Information Service (KOSIS), the online cosmetics transaction scale in 2018 was 98.484 billion won, growing 88% over three years. This is about five times higher than the H&B store sales. It is because consumers with purchasing power tend to order cheaply and easily at home or work. The number of H&B stores is high due to aggressive competition for size expansion from 2015 to 2017. Those H&B stores are currently facing problems such as the economic recession, high rental fees, maintenance Men’s Grooming Zone in Olive Young fees, and increased labor costs.
In the past, H&B stores were able to grow rapidly due to changes in the domestic cosmetics market. With the recent trend of consumption changing again, however, the H&B store has entered a new phase. The H&B store is incorporating new strategies in various ways, such as private brand product development, to overcome the limitations. Keep an eye out for the future of the H&B store carefully, as Kingos are also the part of the 2030 consumer trend
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