.svg){kind=spacer}
K-beauty products, which gained popularity among Asians and Asian immigrants, are now crossing racial, national, and market boundaries.
The success of K-content centered around K-pop has significantly influenced this trend. K-pop idols topping the Billboard charts and performing at Coachella signify this era. Korean content like "Squid Game" has notably contributed to Netflix's stock value. The Korean Wave, which began in the early 2000s, is now truly taking the global stage, and K-beauty has joined this trend.
According to a report, the global market size for K-beauty products stood at $91.99 billion in 2022. It is expected to grow at a compound annual growth rate (CAGR) of 9.3% from 2023 to 2030.
K-beauty products have carved a niche for themselves by focusing on luxury beauty products with quality ingredients. It is considered that brands producing K-beauty items prioritize safe, effective, and natural components, increasing their adoption among global consumers.
'Signature Label', a K-beauty startup, is challenging the competitive global market by facilitating easier international expansion for Korean cosmetics brands.
It positions itself as a K-beauty incubator, assisting brands from distribution to branding. The company has even launched its own K-beauty brand, 'ZIGTAG', to demonstrate the overseas potential of K-beauty products.
Signature Label currently handles the international distribution for over 30 cosmetics brands, including Nine Wishes, Dr. Bio, NOTSEEBACK, and OOTD. Within just nine months of its inception, it has generated sales of around 400 million KRW.
For 2024, the company is setting an ambitious revenue target ten times that amount. It is a rapidly growing startup that aligns with the globalization of K-beauty.
What drives Signature Label to venture beyond a K-beauty brand to take on the roles of an accelerator and incubator? What are the current trends in K-beauty and the status of overseas markets according to them?
Asia Tomorrow sat down with Lee Jeong-min, CEO, and Kim Yun-jin, Vice President of Signature Label, to hear about the startup's founding story, its business model, and their views on the K-beauty market.
Lee Jeong-min : Hello, I'm Lee Jeong-min, the CEO of Signature Label. I have been involved in the beauty distribution industry since 2016.
I first encountered the Southeast Asian market while managing new business initiatives at B2Link (now Craver Corporation), a time when K-beauty was just beginning to stretch its wings in the region. My experience launching the brand 'Skin 1004' and making it a hit in the K-beauty scene inspired me to start my own business.
Kim Yun-jin : Hi, I'm Kim Yun-jin, the COO and Vice President of Signature Label.
My career spans various venture capital firms and startups, including The Banks Foundation For Young Entrepreneurs (d.camp), Yello Mobile, and B2Link. After several years at Bluepoint Partners, I joined Signature Label as a co-founder.
CEO Lee: I saw signals that K-beauty would expand into more markets around the world.
Each market has its own pace and stage of accepting K-beauty. For example, Southeast Asia embraced K-beauty relatively early, whereas the U.S. and Japan are just beginning to notice it, which is considered the 'introduction phase'.
From my perspective, leveraging my background and strengths in 'distribution' to connect K-beauty globally seemed promising.
There are many excellent brands in Korea, but it's a fact that direct overseas expansion is not easy for them. I believed I could contribute by helping these brands secure distribution channels in various markets and implement appropriate marketing strategies.
Our intention with founding Signature Label was not only to promote well-known K-beauty brands but also to discover new ones and help them grow globally.
COO Kim : Our mission at Signature Label is to act as a K-beauty brand incubator.
Before founding the company, I was considering starting my own business and took a break for about 2-3 months in Singapore. During this time, I experienced firsthand the fame of K-beauty, which I had only heard about through the news. This direct exposure solidified my decision to engage in this venture.
The Hallyu trend has moved beyond just consuming K-content like Squid Game and K-pop. International consumers are showing significant interest in Korean consumer goods as well. Seeing the unprecedented rise in trust and popularity of Korean products, I felt it was the perfect time to start a business centered around 'Korean items'.
Upon returning to Korea in 2022, a mutual acquaintance introduced me to CEO Lee Jeong-min.
After meeting and sharing insights, we gradually developed our business concept. We were convinced that Signature Label should play a role as a brand accelerator and connector, devoting to the global expansion of K-beauty. This led us to co-found the company.
CEO Lee : Initially, my motivation for joining B2Link was to gain experience in venture business rather than K-beauty itself.
As a new business manager, I was eager to create something from nothing, and my first task was to distribute Korean beauty brands in Southeast Asia. At that time, B2Link was already expanding its influence by popularizing K-beauty in the Chinese market.
Our new business team began by conducting market research, attending exhibitions, and deciding on strategies and brand selections for entering the Southeast Asian market.
Starting from scratch in early 2017, we gradually began to see results, and by the end of the year, the success of Skin 1004's Centella Asiatica ampoule solidified our foothold in the Southeast Asian market. This not only underscored the potential of K-beauty brands but also showcased the strategic importance of these markets in our global expansion efforts.
CEO Lee : Before managing the new business of distributing Korean cosmetics in Southeast Asia, I worked at the Korean branch of Trip.com as a MD. Essentially, the core task is the same: sourcing good products to sell. However, selling hotel products has inherent scalability limits.
Reflecting on my past MD experiences, I perceived the beauty category as an industry with significant scalability but also high entry barriers.
For instance, apparel is extremely vulnerable to counterfeiting. You often hear about 'logo swapping'.
But with cosmetics, if someone tries a counterfeit product, they'll notice the difference immediately if they've ever used the genuine article, leading them not to repurchase the fake. Simply put, cosmetics belong to a category within beauty products that are not easy to copy due to the technological base required in chemistry, creating a barrier to entry.
CEO Lee : Moreover, South Korea is the world's second-largest exporter of cosmetics, a country internationally recognized for its cosmetic technological prowess. Adding the K-beauty trend into the mix, the next big opportunity for Korean entrepreneurs is 'the globalization of cosmetics'.
At Signature Label, we aim to support the growth of these K-beauty brands, creating pathways for products and brand values to be recognized globally, enabling not just these brands but also Signature Label to grow as the entire K-beauty market expands.
COO Kim: K-beauty brands are inherently geared towards the global market.
Major Korean cosmetic corporations like Amorepacific and LG Health & Beauty do not merely identify themselves as 'Korean cosmetics companies'. They rebrand themselves as consumer goods companies operating globally, actively engaging in international markets.
Certainly, K-pop has significantly contributed to stimulating consumer curiosity and demand for Korean products.
For example, an international fan may want to emulate the makeup style of their favorite idol, and this becomes an opportunity to purchase Korean consumer goods. The sustained interest in Korean culture, transcending race, nation, and culture, offers a 'premium' opportunity as this interest translates into consumer product sales.
CEO Lee : Introducing, distributing, and promoting sales of K-beauty products in new markets involves several segmented processes, making it challenging for one company to manage everything. Even if a product becomes known online by chance, building a system or finding partners to smoothly facilitate its sales in foreign markets is crucial for long-term success.
We often compare the overseas expansion of K-beauty to the entertainment business.
Just as an unknown singer can now gain exposure through platforms like YouTube or Spotify, ① getting a song to become a mega-hit and ② consistently producing hits are still different challenges. Moreover, unlike music, cosmetics require the consumer to purchase and use the product to assess its quality. Relying on a single hit is not sustainable.
Signature Label aims to develop a formula and system that helps K-beauty brands make their mark, similar to how K-pop entertainment companies continuously scout and debut artists who can become hits.
These companies have successfully launched multiple artists by discovering brands, nurturing them, and implementing effective market entry and branding/marketing strategies. I envision introducing such a system to K-beauty.
CEO Lee : Fundamentally, Signature Label reviews dozens to hundreds of beauty brands monthly. We actively seek out products, initiate contact, and test them upon receipt. We evaluate various aspects such as :
For instance, in hotter climates, cosmetics like heavy re-formulating collagens are generally less preferred. Also, markets with a younger demographic tend to have a lower preference for collagen.
We assess products based on multiple criteria like climate and demographic distribution to choose brands for collaboration. Signature Label also considers the product's concept and the brand's philosophy before initiating discussions for partnership.
After setting everything from price range to target market, Signature Label begins proposing these brands to sales and distribution channels in international markets.
CEO Lee : Ultimately, no matter how good a chef is, they can't cook without ingredients. Similarly, local distributors are willing to sell products if they are of good quality, using them as 'ingredients' to cater to local tastes.
In some cases, distributors from countries where K-beauty is well-known might request analysis on whether a less-known Korean beauty brand is performing well in Korea. For example, they might ask how well a certain brand is received at a major Korean drugstore like Olive Young and which products sell best.
The sales and distribution channels vary as much as the size of the overseas markets, so the acceptance and approach to K-beauty products differ widely. In the same country, distributors who focus on cost-effective Korean cosmetics might sign distribution deals based on that criterion.
Signature Label works hard to diversify and connect with these overseas sales channels and distribution players to create the best networks for introducing K-beauty brands to each market.
CEO Lee : There's a manufacturer's suggested retail price (MSRP) set by the brand. The selling price is a discounted version of the MSRP. The product supply price is determined considering both the MSRP and the selling price, including the cost of the product plus shipping, VAT, and company fees.
In B2B product distribution, thorough negotiations with local sales channels are necessary. Profit margins need to be considered based on the prices at which products are imported and sold locally. Therefore, the margins left for the brand (supplier) can be relatively smaller when selling B2C.
That’s why it's crucial for smaller K-beauty brands with strong product capabilities to find ways to expand overseas smoothly and increase their long-term sales.
The structure that doesn’t easily allow for short-term profit margins (like B2B cosmetic sales) means that only a limited variety of K-beauty brands become well-known abroad. To enhance consumer choice, a fundamental overseas distribution system for Korean cosmetics is essential.
Utilizing such a foreign sales and distribution system, even smaller beauty brands can consider it a worthy challenge since they can connect with significant sales and distribution channels locally, potentially leading to increased revenue.
Signature Label connects K-beauty products with sales and distribution channels that rank within the top five based on HS code* criteria, so there's a long-term potential for revenue growth.
*HS Code: A system of names and numbers to classify traded products internationally
CEO Lee : At Signature Label, when we identify a product or brand with unique potential, we commit to supporting its international expansion and sales generation as if we are investing in the brand. We continuously monitor and analyze the brand’s overseas sales trends and propose sales strategies.
Our focus is not merely on distributing and connecting brands but on investing in their growth.
Interestingly, this initial investment can facilitate a K-beauty brand's ability to become known in a particular market, which often makes expansion into other foreign markets easier.
There is a sharing of information among market players. For example, a K-beauty brand that hits big in Thailand might find it easier to enter the Vietnamese market, where the initial investment can lead to greater growth outcomes.
Additionally, part of our investment strategy includes quickly conveying local market trends to our partner brands. While we are strong in distribution, we strive not to rest on our strength points but to push the envelope further.
Thus, Signature Label aims to quickly identify K-beauty brands with potential and provide them with the momentum to grow in foreign markets. As a brand incubator, we grow alongside these brands. The revenue generated is then reinvested into scouting, debuting, and growing new brands, creating a cyclical investment structure.
COO Kim : At Signature Label, we aspire to be both an incubator and accelerator for K-beauty brands.
Our structure is similar to that of startup accelerators, which inherently involves a high risk and high return strategy. A significant amount of resources—labor, manufacturing, marketing—are invested initially to launch a single brand.
However, if a brand gains market recognition through its originality, it can establish itself as a viable business.
Another challenge is the need to constantly engage with or create beauty trends. The cosmetics industry demands continual technological innovation to meet consumer needs with new ingredients or formulations. This requires an ongoing commitment to research and development.
COO Kim : It's a challenging yet exciting field. Even after successfully establishing a beauty brand in the market, we cannot rest in our comfort zone. Continuous movement and adaptation are necessary to achieve high returns. This dynamic approach ensures that our brands remain relevant and competitive in the rapidly evolving beauty industry.
One of the challenges in K-beauty is strategically deciding how much to emphasize and leverage the 'K' aspect. There's a delicate balance between catering to market demands with trending products and showcasing the creativity and sophistication that distinguish K-beauty in a given market.
While it's crucial to quickly adapt to market trends for short-term survival, in the long run, it's important to harness the unique aspects of K-beauty.
I believe this approach will become increasingly necessary. Among the many K-beauty brands venturing overseas, those that can maintain their unique identity are more likely to leave a lasting impression on consumers.
The cosmetics industry operates on the principle that “while products are purchased on emotion, they are judged by reason”.
Thus, properly proposing value to consumers is essential. Even if marketing efforts successfully trigger a purchase, if the product quality is subpar, consumers will not hesitate to abandon it. This underscores the complex capabilities required in this business.
Therefore, the role of a beauty brand incubator aligns closely with that of a startup accelerator.
Just as an accelerator supports an excellent team with expertise to dive into a new venture and helps the company grow and sustain revenues over time, Signature Label aims to enhance the K-beauty brands and their business values similarly. We strive to contribute to building these brands into enduring enterprises.
CEO Lee : Signature Label's K-beauty brand, ZIGTAG, is based on the product strength of K-beauty but steps forward from its typical minimalism to offer a distinctive brand identity.
We created our own K-beauty brand as a way to test our hypothesis that "originality is necessary to differentiate a K-beauty brand in the international market". By launching our own brand, we at Signature Label are becoming not only accelerators and connectors but also deeply knowledgeable partners in beauty branding.
To be a successful incubator that grows alongside its brands, it's crucial to thoroughly understand their challenges. Therefore, we are directly engaging in everything from manufacturing processes to branding and market entry, actively solving problems along the way.
COO Kim : I also assume that creating a distinctive K-beauty brand is meaningful, especially as it involves leveraging South Korea’s competitive manufacturing network.
Korean cosmetic manufacturers each have their strengths. For instance, some excel in producing Vitamin C serums, while others are preferred by foreign beauty brands for manufacturing sunscreens when distributing in Korea. There's a variety of skilled manufacturing partners with their own technical strengths.
At Signature Label, our goal is to serve as a hub and connector for K-beauty brands, linking them with not only international markets but also with the best Korean manufacturing partners. This integration ensures that our brands can compete effectively on a global scale, supported by top-tier production capabilities.
COO Kim: Korea is well-known for its advancements in botulinum products, embodying both technical expertise and brand strength.
We are observing a shift toward 'skin boosters' that are not classified as pharmaceuticals but as cosmetics. These products may be priced higher than traditional cosmetics, but they reinforce K-beauty's reputation for innovative product effectiveness.
CEO Lee : I believe cosmetics is a business that must continually invest in R&D.
Basing products on 'chemical technology' is the only way to sustain long-term product strength and originality. This approach not only creates a barrier to entry but also serves as a differentiation strategy. How we view cosmetics from a technological perspective can reveal transformative business opportunities and game-changing strategies.
Ultimately, structuring the K-beauty market to enlarge its overall share is a strategic approach that could differentiate our business. Similar to how the K-pop industry discovers and nurtures artists, turning them into brands, we hope to construct an effective system for globally promoting K-beauty brands? Building a robust ecosystem is fundamentally important.
COO Kim : It's been over a year since we started. We've been diligently laying the groundwork and have secured investment from reputable sources in the beauty sector.
With the necessary funding secured, we anticipate 2024 to be a year where we implement our targeted goals. We aim to create a trend where K-beauty brands that have expanded into foreign markets through Signature Label become more widely recognized.
CEO Lee : We have secured a variety of global sales and distribution channels, including in Indonesia, and diversified our network to maximize both online and offline reach.
Offline beauty shops play a crucial role in cosmetic sales and distribution overseas due to the experiential nature of cosmetics ('you have to try it to know it').
Furthermore, beauty is expanding into the domain of 'experiential content'. Pop-up stores where consumers can directly try products and experience the brand as content have become a prevalent method of promoting and selling products.
Thus, discussing cosmetics without considering offline elements is increasingly untenable. Signature Label aims to grow K-beauty through both online and offline channels.
Within the next three years, our goal is to see K-beauty brands that Signature Label has discovered and invested in succeed in the international market. We hope to create a platform where K-beauty brands with great ideas and excellent products that previously could not connect to international markets can make their global debut through Signature Label.
Written by Jinny (underdogs)
Why did Asia VC, which created a $20 billion economic value, settle a center in Singapore
Meet Erica Kang, the community builder connecting Vietnam, Hong Kong, New York and India with Web3
0 Comments