K-beauty boom draws new challengers to Olive Young's retail dominance

Challengers to Olive Young's dominance in the K-beauty market are emerging as companies armed with strong distribution networks and deep pockets — namely Musinsa, Shinsegae Department Store and Hyundai Home Shopping — aggressively expand stores and ramp up marketing to attract customers.

Competition is heating up in Korea’s beauty retail market for the first time in four years, according to industry sources. Olive Young has effectively dominated the nationwide beauty retail network since the successive exits of Lotte Shopping’s LOHB’s and GS Retail’s lalavla, both in 2022, and onlookers had viewed Olive Young as having successfully fended off its rivals’ challenges.

But the tide is turning. The global popularity of K-beauty has expanded the overall market, while the number of foreign tourists has surged and a consumer culture emphasizing hands-on experiences has spread.

Korea welcomed a record 18.94 million foreign tourists last year, up 15.7 percent from the previous year, according to the Korea Tourism Organization. Cosmetics accounted for the largest share of purchases by foreign tourists at 71.3 percent. At Olive Young, foreign customers generated 28 percent of the chain's 5.83 trillion won ($4.2 billion) in sales last year. The retailer operates 1,376 stores nationwide.

Musinsa, best known among younger consumers as a fashion platform, is mounting a full-fledged challenge to Olive Young. The company will open stand-alone beauty stores in western Seoul's Hongdae next month, followed by locations in Seongsu-dong in eastern Seoul and Jeju in November. The Hongdae location alone is expected to carry 700 brands.

Musinsa opened its first permanent beauty shop in April as a shop-in-shop on the second floor of its Musinsa Megastore Seongsu clothing store. Sales there increased 20 percent in four months and foreign customers accounted for 65 percent of the total. Cosmetics are also sold at 38 Musinsa Standard clothing stores. Musinsa’s online beauty store carries 2,400 brands and its gross merchandise value soared 361 percent on year in the first half.

Tickets for the “Musinsa Beauty Festival,” which ran for three days starting Friday across Seongsu-dong, sold out in 48 seconds. At the festival site visited during a media day Thursday, 64 brands were preparing various hands-on activities and exhibitions. Products from numerous indie beauty brands sold exclusively through Musinsa Beauty’s online and offline channels were also on display.

Olive Young operates five stores in Seongsu-dong alone, including one near Seongsu Station. With Musinsa set to open a dedicated beauty store in the neighborhood in the second half of this year, the two companies are expected to battle for beauty retail leadership in the high-traffic, trend-sensitive area.

Chicor, operated by Shinsegae Department Store, has 21 beauty stores concentrated in major commercial districts including Gangnam Station, Myeongdong and Hongdae. It is considering new locations in areas including Seongsu-dong and Anguk-dong and plans to expand to 40 stores by 2028.

Sales at its Myeongdong and Hongdae stores roughly doubled in the four months after they opened last December. Foreign customers account for more than 90 percent of sales at the two locations. Chicor has differentiated its stores by strengthening its lineup of beauty devices and offering personalized product recommendations from makeup artists.

Hyundai Home Shopping’s beauty retailer Coasis targets women in their 40s and 50s, with skin care products accounting for more than 90 percent of its assortment. It currently operates four stores, including one at Hyundai City Outlet Dongdaemun, and will open its fifth at Hyundai Department Store’s Mokdong branch next month. The Coasis store at Hyundai Premium Outlets Space One in Namyangju, Gyeonggi, draws more than 2,000 visitors a day on average.

“K-beauty is so popular that beauty stores can expect strong profitability if they establish themselves successfully from the outset, so competition will only intensify,” an industry source said.

BY LIM SUN-YOUNG [[email protected]]