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Cosmetics Skincare and Toiletries Market in South Korea

South Korea has a population of 49.5 million and is New Zealand’s fifth largest export destination. In 2011, New Zealand exported US$1.28 billion worth of goods and services to Korea compared to US$966 million in 2010.

New Zealand’s cosmetics, skincare and toiletries exports to Korea totalled US$1.7 million, an increase of 54 percent from 2010.

South Korea’s recovery from the global economic recession has been relatively quick and the GDP grew by 6 percent in 2010, a jump from 0.1 percent growth in 2009.

South Korea’s cosmetics, skincare and toiletries market was worth approximately US$7.47 billion in 2009. The sales value represented a drop of 3.8 percent from 2008 due to fluctuating currency exchange rates. However, in Korean Won terms, the sales have grown steadily.

In 2009, sales grew in local currency by an average of 10 percent and are forecast to grow by 9.2 percent in 2010 and 8.9 percent in 2011.
Skincare accounts for the largest segment, nearly 50 percent of all sales, followed by colour cosmetics, hair care and other toiletries.

Getting your product into market

Korea is a highly sophisticated market and companies must meet high standard consumer requirements when considering entering the market. For example, Korean consumers have a strong preference for fancy and fun packaging.

Packaging plays an important role in consumers’ purchasing decisions as packaging creates the first impression of a product. Generally if products are nicely packed, consumers are likely to get interested in finding more about the product. Exporters need to consider this when developing their labelling design for the Korean market.

When exporting to Korea, companies must check that they comply with all the rules and regulations of the cosmetic industry, which is strictly supervised by the KFDA. While it takes time to go through all the official import procedures requested by relevant authorities, companies must provide required documentation to get their products approved.

Taxes and regulations

The general duty rate for Cosmetics, skincare and toiletries for Korea is 8 percent and value added sales tax (VAT) of 10 percent applies.

The Korea Food and Drug Administration (KFDA) oversees cosmetic industries and all related products in Korea. The KFDA granted an authority to the Korea Pharmaceutical Traders Association (KPTA) to assist with cosmetics, skincare and toiletries import registration.

Opportunities

The level of brand loyalty is decreasing and more consumers are moving away from the trend of buying all category products under one brand.

This creates opportunities for New Zealand companies as more purchasing decisions are made based on function instead of brand image. Unique and convenient packaging is another factor that drives female consumers’ purchasing decisions.

High quality products with natural, organic and herbal ingredients are projected to be popular in both premium and mass brands.

Challenges

Awareness of natural products is relatively low among Korean consumers. Skincare products developed with pure natural ingredients are not easily seen or available in Korea.

New Zealand companies will have a comparative advantage in product differentiation with its unique and natural ingredients. However, it is also a challenge to be recognised and viewed as quality products by Korean consumers due to their limited knowledge and experience in natural products.