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(Yonhap Interview) It's Skin adopts 'two-track' strategy for Chinese cosmetic market

All News 18:17 April 28, 2016

By Kim Eun-jung

SEOUL, April 28 (Yonhap) -- Snail may live by the mantra of "Slow and steady wins the race," but a South Korean cosmetic company that makes all kinds of products with its extract moves fast and quick to survive in the highly competitive market.

Established under Hanbul Cosmetics a decade ago, It's Skin has steadily expanded its foothold in the mid-end cosmetic market with its hot-selling snail slime cream, "Prestige Cream d'escargot" released in 2009.

Ranked as South Korea's No. 4 cosmetic maker with 309.6 billion won (US$269.45 million) in sales in 2015, It's Skin is now speeding up its efforts to tap deeper into China, its biggest export market.

"We will adopt a two-track strategy for the current and future Chinese market," CEO Yoo Geun-jick said in an interview with Yonhap News Agency. "We plan to expand the local distribution channel to sell our existing products, and also develop a new brand through the joint venture."

The 51-year-old Yoo joined It's Skin in 2010 after serving in senior executive posts for other South Korean cosmetics companies, including the Face Shop and Skin Food, for about a decade.

Since going public on the KOSPI market in December, It's Skin has forged a series of global partnership in major markets and with duty-free operators, including the world's leading luxury retailer DFS.

Last week, It's Skin inked a deal with Hong Kong-listed New World Development Company Ltd. with vast sales network in Hong Kong and China.

The move came as more than 40 products made of snail extract are currently waiting for approval from the Chinese Food and Drug Administration for direct sales in the mainland.

The firm has also agreed to formed a joint venture with Shanghai-based Chinese fashion company, Zhejiang Semir Garment Company Co., to co-develop a new brand later this year. Under the agreement, the Korean company will develop new cosmetic products and the Chinese apparel company will take charge of marketing and sales in China in early 2017.

Direct sales of its existing line-up and development of a new brand in China would ultimately lead to competition with each other, but Yoo said that's inevitable in an era of "unlimited competition."

The more important question is, said the CEO, "How long China's frenzy for Korean cosmetics will last?"

"Not for so long, I think," Yoo answers. "The cliff is on the horizon."

Unlike semiconductor factories that need large investment in the initial stage, cosmetic production lines are easier to build and have lower entry barrier. Major Chinese firms have recruited senior researchers from Korean cosmetic labs with higher pay and have established factories to develop their own brands over the past years.

Learning lessons from Chinese tech companies growingly eating up shares of Korean phone makers, Yoo said it's only a matter of time for emerging Chinese cosmetic makers to raise their share on their home turf.

Although entering the market is easy, surviving for over a decade is difficult, he said. The key lies in "software," a concept that encompasses brand power, marketing strategy and heritage.

"Our brand did not just grow in a short period of time through intensive advertisement or promotional events. Best-selling items have gained popularity through the word-of-mouth," Yoo said. "We need to make consumers recognize It's Skin as a good brand which they are willing to follow wherever they go. Otherwise, we can't survive in this market."

Like other major Korean cosmetic makers, It's Skin releases a dozen new products every month to stay relevant in the market.

"Bad performers are soon out of the store, and we move onto the next products," Yoo said. "It's common in the domestic market, but not so much in other parts of the world."

The outspoken businessman described cosmetic companies as "swans," which have to constantly kick their feet underwater to stay float on the water gracefully. That's especially so in a country where people put so much focus on being good-looking and idol singers put heavy eye make-up on TV shows.

"It may look nice in the outside, but the competition is real tough. We have to constantly catch up with the latest trend," the masculine CEO with short hair said. "You know, Korean consumers are really picky about cosmetics."

Although the domestic and global economy have been slowing, Yoo remained optimistic about the beauty industry that has constantly transformed itself to adapt to the new environment.

He said the 1998 Asian financial crisis gave local players a breakthrough to develop cost-effective products and open budget brand shops. Then came the Korean Wave, which opened up more chances for the local beauty industry ready to venture out the global market thanks to popular dramas and star marketing of Korean celebrities.

"The Korean cosmetic industry has undergone a sea of change," he said. "As South Korea has made names in the beauty industry, the overall business environment has improved in the export market."

While China has contributed to the fast growth of the brand over the past years, Yoo now sees much growth potential in India, which has the world's second-largest population with 1.25 billion people.

Last month, It's Skin signed a memorandum of understanding with Indian retail giant Dabur to sell its cosmetics in its New U beauty retail chain starting in September.

"India has seen a growing number of middle-income population and there will be more demands in the beauty market," he said. "I think India will become the 'Next China", considering its fast-growing population and the geographical proximity."

While products made of snail extract accounts for about 90 percent of sales, Yoo was less worried about the heavy focus in the natural ingredients. He claimed there's very little chances of it falling out of favor or running out of supply.

"Snail has long been considered edible species, and its slime has long been used as beauty treatment. The long-lasting trend will not suddenly change or go away," he said, adding it is very prolific.

Since getting involved in the snail-focused cosmetic lineup, Yoo said he has developed strong emotional ties with the small creature, though he eats them when "there are opportunities."

When spotting three big snail mock-ups in a park during his visit to Shanghai, he couldn't resist the urge to take a photo in front of them as a beauty entrepreneur who makes money on them.

"I missed the chance (of taking photos) because I was inside a car," Yoo said, shrugging his shoulder.

The next goal after expanding presence in emerging markets, Yoo wants to see his cosmetic brand make name in mature markets such as Europe and North America, an evidence that "it can survive anywhere in the world."

In the long run, Yoo hopes It's Skin to become a long-running brand like a snail, which is just slow and steady.

"I want It's Skin to survive for a long time to have a good brand story and heritage," he said.


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