K-Beauty Longtails : why Korean local industries?

An in-depth study on beauty industry longtails based on South Korea's retail market.

* K-Beauty: Korean Beauty & Cosmetics

* Longtails: (in retail and marketing) used to refer to the large number of products that sell in small quantities, as contrasted with the small number of best-selling products.

The following below are the requirements for cosmetic manufacturers to be approved by the Korean FDA.

- Property Management Ledger (Area, usage, and owner confirmed)

- Manufacturing and testing facility statement (facility list and photos)

- Manufacturing and quality test consignment contract

- Floor plan showing manufacturing movement

- The CEO must prove that he or she is not suffering from a mental illness or drug addiction; and the facility must include changing rooms, storage rooms, weighing rooms, dispensing rooms, filling rooms, packing rooms, washing rooms, etc.

Once registered as a cosmetic manufacturer, annual fiscal report must be submitted to the Korea Cosmetics Association every year, and cosmedical products must be reviewed and reported by the Ministry of Food and Drug Safety. In addition, qualifications can only be  maintained and renewed yearly through educational sessions.

As of 2021, a total of 4,416 companies have met the strict standards for the Korean cosmetics manufacturing industry. Within them only two companies (Cosmax, Kolmar and its affiliates) cover more than 25% of total revenue generated (USD 3,006,795,366 of 11,707,876,447). In 2020, a total of 124,560 cosmetics were made in Korea. Even if calculated arithmetically, the top 2 companies make about 30,000 cosmetics a year, and the other 4,000 manufacturers make more than 90,000 cosmetics every year.

Why we have to pay attention to the Long-tail of cosmetic manufacturers

Korea is a global trend leader with the world's third largest export market for cosmetics.

The number of small, medium-sized and large enterprises in Korea in 2019 was about 6,895,000, of which about 0.39% were recorded as cosmetics manufacturing and responsible sales.

Unlike the dispersed market share in the case of brands, Cosmax and Korea Kolmar occupy more than 25% of the market share when it comes to manufacturers. LG Household & Health Care, a large company, is following this trend, however not enough to be included in the Long-tail.

From the table above you can see that 25% of Korean beauty online sales come from the TOP2 manufacturers and 75% from the rest of the manufacturers. Korean manufacturers usually start from previous manufacturer employees, family business, and branches. Long-tail manufacturers in Korea have developed individually as researchers from large corporations by creating best practices, branching out, and re-establish themselves as new companies. Although there are differences compared to companies like Kolmar and Cosmax  in scale, facilities, and number of raw materials, the highly competitive 75% portion of the market of long-tail manufacturers have been able to secure the world's highest level of quality.

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