“Faster than Fried Chicken”- Cosmetics delivery in South Korea picks up speed as customers want their makeup on-demand
As the online market for cosmetics remains vibrant in South Korea, short delivery times are gaining momentum in order to attract customers. Retail giants, cosmetics manufacturers, big brands as well as delivery platforms are competing to get ahead of the competition. In this report, we introduce the major players in the cosmetics delivery business in South Korea.
Olive Young aims to delivery products within three hours
According to the Korea Statistical Office, the online transaction value of cosmetics, which was 9.85 trillion (US$7.9 billion) in 2018, rapidly expanded to 12.3 trillion won (US$9.5 billion) in 2019. Then in 2020, it hi a record high of 12.43 trillion won (US$9.65 billion). The market remains strong, although individual monthly statistics show a plateau from late 2021 to 2022.
As the market grows, getting the product into the hands of customers more quickly has become an important point of differentiation. Beauty companies and brands have successively developed their own delivery networks or announced partnerships with delivery platforms, offering services that deliver cosmetics to users within a few dozen minutes. The competition in delivery is so fierce that the Korean media has described it as “cosmetics that arrive faster than chicken (chicken is synonymous with home-delivered food in Korea)”.
So what kinds of players are actually entering the delivery competition? First, as major retailers that have developed their own delivery networks, Olive Young, the largest H&B store, and Shinsegae Group’s online mall SSG.com, stand out.
Since 2018, Olive Young has been offering a “same-day delivery service” that reduces delivery time by using its nationwide network of over 1,000 physical stores to ship products ordered online from a store near the delivery destination. Options such as “Express,” “Three Four,” and “Midnight” have since been added to the service to further reduce delivery time and improve convenience.
For example, Express is a three-hour delivery service, but the average delivery time for this option, compiled for the first half of 2021, is about 45 minutes. Three Four and Midnight, on the other hand, allows customers to pick up their items at their desired specified time between 3–4 p.m. and 10–12 a.m. By the end of 2021, the number of same-day delivery orders exceeded 1 million in the Seoul area alone since the service’s launch in 2018.
Delivery is free for purchases of 30,000 won (US$25) or more, with an additional charge of 5,000 won (US$4) for Express and 2,500 won (US$2) for Three Four and Midnight if the purchase amount is less than 30,000 won.
Olive Young has announced plans to open six micro fulfillment centers (MFCs) in 2022, mainly in Seoul and other metropolitan areas, with each MFC handling approximately 12,000 product SKUs, about 85% of the size of a large distribution center dedicated to e-commerce. The number of SKUs handled at the MFC is significantly larger than that of the company’s existing nationwide brick-and-mortar stores, which have served as its main distribution centers.
On the other hand, SSG.com, an e-commerce site operated by Shinsegae Group, one of the major retailers in South Korea, offers an “Early Hour” service that delivers products ordered by the previous day by 6 a.m. the next morning. The number of cosmetic brands it handles has increased from 49 to 60 and the number of products has doubled to 600.
Delivery platform “Yogiyo” partners with beauty retailers
Major cosmetics manufacturers are also main players in the delivery race. Amore Pacific, the industry’s largest cosmetics company, has signed business agreements with major e-commerce operators with fulfillment centers, including NAVER, 11th Avenue, and Koopan in 2020 and in 2021, It strengthened relationships with eBay Korea, Lotte Home Shopping, and SSG.com to expand its online delivery network. In September 2021, the company’s curated store ARITAUM officially partnered with delivery platform provider Yogiyo.
Yogiyo is a popular food delivery app in South Korea, and over the past year or two has also begun delivering cosmetics-related products, offering related services based on the principle of delivering products to users within an hour. Its clients also including cosmetics e-commerce site lalavla and cosmetics maker TONYMOLY.
In 2020, LG Household & Health Care signed an agreement with CJ Daehan Express and NAVER to offer a “Within 24 hours” delivery service. When an order for LG Household & Health Care products is placed from NAVER, the products are dispatched from a mega fulfilment centre operated by CJ Daehan Transport to a hub terminal near the user’s address, thereby significantly reducing delivery time. In Korea, it was necessary to place orders by 3 p.m. to receive e-commerce purchases the next day, but with the three companies’ partnership service, customers can receive their products the next day if they order before midnight.
With Koopan Eats, cosmetics products are delivered within 10–15 minutes
Koopan Eats, operated by e-commerce giant Koopan, has begun delivery tests in some areas of Seoul, with the goal of achieving an astounding delivery time of within 10–15 minutes. The service is available from 8:00 a.m. to 1:00 a.m. The company has already completed partnership agreements with Innisfree, Round Lab, and Etude, among others.
Pedal People, the largest food delivery company in South Korea, has also entered the cosmetics delivery market. The company began a cosmetics delivery service for customers in the Seoul and Gyeonggi areas in the second half of 2020, using its own offline store, B-Mart, as a delivery base. By the end of January 2022, 60 brands, including Amore Pacific, Etude, TONYMOLY, and Skin Food, have partnered with the service.
The quick commerce service, which delivers cosmetics in a short time, has been well received by users, and as the online market expands and speedy delivery services are enhanced, the trending decline of physical stores is further accelerated.
According to the Korea Fair Trade Commission, Amorepacific’s ARITAUM had 1,250 stores as of 2018, but by the first half of 2021 this number had plummeted to 710. MISSHA, the first generation of South Korea’s most popular road store, has gone from 304 to 214 stores in the same period, while TONYMOLY’s directly managed stores have also declined from 318 to 223. Also, Innisfree’s sales floor, which had 1,047 stores in 2019, will have 920 stores in 2020.
However, based on a synthesis of domestic Korean press reports and comments from related parties and experts, the decline in real stores is perceived in a pessimistic light. Rather, it is regarded as a new consumption trend that is created by enhanced shopping platforms, including e-commerce sites, and quicker delivery services, which are more convenient for users.
The city of Seoul is smaller and more compact than other cities in other countries, such as Tokyo, and is also geographically characterized by a high concentration of retail stores and shipping offices in the suburbs. This is one of the reasons why the company can set a delivery time target of within 10 to 15 minutes at the shortest. In the future, it will be interesting to see how the company achieves speedy delivery outside of urban areas.
Text: Ching Li Tor
Original text (Japanese): Jonggi HA
