FASHION & BEAUTY INVESTMENT OPPORTUNITIES IN KOREA
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KOTRA자료 17-062 INVESTMENT OPPORTUNITIES IN KOREA FASHION & BEAUTY
Contents
Fashion
04 Industry Overview
Definition of the Industry
Status of the Industry
Competitiveness of the Industry
Prospect for the Industry
13 Locational Competitiveness
Status of Fashion Industry Location
Conditions and Benefits of Fashion Industry Location
17 Policies, Cost and Success Cases
Government Policies and Related Laws
Cost
Success Cases of Foreign Investment
22 Related Companies and Associations
Beauty
27 Industry Overview and Locational Competitiveness
Overview and Status of the Industry
Locational Conditions and Benefits
33 Policies, Cost and Success Cases
Government Policies and Incentives
Cost
Success Cases of Foreign Investment
39 Related Companies and Associations
41 Relationship with Other Industries
Most figures in this report are converted from KRW into USD based
on yearly average exchange rates. But growth rates (e.g. CAGR
and YoY growth rate) are calculated based on KRW to prevent any
distortion caused by changes in exchange rates.
Global Link to Success, Invest KOREA
INVESTMENT OPPORTUNITIES IN KOREA
FASHION & BEAUTY
FASHION 4
I. FASHION
01 INDUSTRY
OVERVIEW
5 INDUSTRY OVERVIEW Definition of the Industry “Fashion” refers to the popular and personal practice of style in clothing, accessories, and behaviors, which are accepted and popularized by the public during a particular place and time. • In this report, the fashion industry is defined as a manufacturing industry that covers subjects related to apparel such as yarn (as a finished product mainly made up of fiber), knitted/woven goods, dyeing processing, apparel manufacturing, accessories, and clothing subsidiary materials. Fashion as a highly value-added, knowledge-intensive industry. • Fashion goods have practical and aesthetic values. The former centers on the physical aspect of stability, comfort and functionality, while the latter focuses on aesthetic value and design. -Along with practicality, fashion goods has been increasing its added value given the strengthening of brand popularity, visual beauty, self-satisfaction, trends, design, and materials. Fashion trends spread faster with single cycle. • A trend can catch on globally much quicker nowadays. -The reasons behind this include the development of communication thanks to the Internet and satellite communication, the advancement of mass media, and the growing number and diversification of people with higher income levels. -In addition, fashion products are highly susceptible to seasons and trends, thus making their life cycle short while bringing in continuous demand. This creates sustainable growth for the industry as consumers and preferences diversify, so new products are developed to meet the changing needs of customers. Status of the Industry Status of the Global Market A sharp change in the fashion industry’s consumer pattern. • Consumer demand patterns have become more complicated, especially due to the growing gap between increased consumption caused by higher income and rational consumption caused by the economic recession. Other reasons include the demand for individuality and personalized fashion, the expansion of life-enriching consumption such as leisure and cultural activities, the increase in online purchases, the aging population, and the shift of core consumers.
FASHION 6
-With this polarization, a variety of brands are expanding into the global market, from high-end luxury brands,
such as Burberry and Louis Vuitton, to mid to low-end SPA brands, such as Zara, H&M, and UNIQLO, which have
a strong advantage in design, planning, and distribution.
-While global brands are competing in domestic and overseas markets, the competition in global production
is further intensifying through strengthened production and technological power. This is a result of increased
foreign investment into China and Southeast Asian countries.
The global fashion market has achieved an average annual growth rate of 4.2% between 2009 and 2013,
reaching USD 1.54 trillion in 2013. The market is expected to grow at approximately 4% annually until 2020.
• By clothing type, the womenswear market is worth USD 638.1 billion, accounting for the largest share in the
total market at 41.5%. Menswear accounts for 27.6%, and children's clothing for 14%.
-Products with newly converged technology are growing at a high rate. The “smart” trend is not only being
rapidly developed in clothing that integrates IT technology but also in the production and fashion distribution
process as well.
Scale of Fashion Market by Clothing Type (2013) (USD 100 million, %)
Classification Total Womenswear Menswear Kids wear Shoes
Scale 15,360 6,381 4,232 2,162 2,584
Share 100.0 41.5 27.6 14.1 16.8
Source: Market Line, 2014
Growth Trend in Global Fashion Market (USD billion)
1,600
1,550 1,536
1,500 1,479
1,450
1,418
1,400
1,350
1,355
1,306
1,300
1,250
1,200
1,150
2009 2010 2011 2012 2013
Source: Market Line, 2014
• By region, the fashion market in America is worth USD 560.6 billion, accounting for 36.3% of the total fashion
market, while Europe accounts for 33% with USD 507.6 billion, and the Asia Pacific region for 27.2% with USD
417.8 billion.
-By country, the market size of the United States stands at USD 445.7 billion (29.0%); China at USD 194.1 billion
(12.6%); Japan at USD 116.0 billion (7.6%); Russia at USD 82.7 billion (5.4%); and South Korea at USD 31.8 billion
(2.1%).
7 INDUSTRY OVERVIEW
Status of Fashion Market by Continent (2013) (USD billion)
Russia
U.S.A 82.7
445.7 Europe China
507.6 194.1 Korea
31.8 Japan
116
Americas India 18
Mexico 8.4 560.6 Singapore 3.3
Asia pacific
Taiwan 7.9
Brazil 417.8
50.5
Austrailia 19.6
Source: Ministry of Commerce, Industry and Energy, Report on the 2014 Korean Fashion Market; requoted (Source: Market Line)
Status of Domestic Market
The domestic fashion market continues to grow slightly despite uncertainties like the sluggish domestic
demand.
• The focus of the fashion market is shifting from the sportswear market to the casual wear market, while casual
wear, menswear, womenswear, and underwear are showing consistent growth.
Fashion Market Scale in 2016 and 2017 (USD million, %)
Clothing Type 2016(e) YoY 2017(p) YoY
Casual wear 11,438.1 5.40 12,246.4 6.40
Sportswear 6,059.5 −7.9 5,958.8 −2.3
Shoes 5,361.1 −5.9 5,313.5 −1.5
Menswear 3,991.0 11.80 4,268.6 6.30
Womenswear 3,120.5 2.80 3,363.3 7.10
Shoes 2,153.1 3.60 2,208.4 1.90
Underwear 1,774.9 13.60 1,972.7 10.40
Kids wear 1,051.3 8.90 1,066.2 0.80
Fashion market 34,949.5 1.80 36,397.8 3.50
Source: Korea Federation of Textile Industries(KOFOTI)
-The growth of the domestic fashion market is also attributed to the growth of online and mobile shopping;
the diversification of new distribution channels, such as multi-platform shopping; and the diversification of
consumers, which include the youth, men, and the elderly.
FASHION 8
Production in the domestic fashion industry increased between 2010 and 2014 because of the continued
growth in domestic demand and export volume. However, in the short term, production volume has been
on the decline since 2012 because of worsening domestic production conditions and weakening demand for
locally produced goods.
• As a result, a growing importance of aesthetics in product designs, the continued growth of SPA brands,
and increased exports of "Korean wave" content serve as positive factors for domestic production. However,
production has somewhat dwindled as the growing demand in the domestic market is involved more with
imported products than domestic ones.
Production Trend in the Fashion Industry (USD million, %)
CAGR
Clothing Type 2010 2011 2012 2013 2014
Share (10-14)
Chemical fibers 3,912 4,557 5,021 5,148 4,945 9.1 5.2
Yarn fibers 2,850 3,208 3,306 3,566 3,449 6.4 4.1
Woven goods 5,497 7,109 7,445 7,294 6,385 11.8 3
Knitted goods 3,921 4,051 4,405 4,825 3,644 6.7 -2.6
Dyed products 2,561 2,479 2,726 2,679 2,622 4.8 -0.2
Clothing materials 18,740 21,404 22,903 23,511 21,044 38.8 2.1
Fashion apparel 24,689 27,677 37,826 35,949 33,200 61.2 6.8
Total 37,480 42,808 45,806 47,023 42,089 100
Source: The Bank of Korea, Input-Output Table, Annual report
• Looking at the changes in the production structure of fashion apparel, the share of shirts and workout clothes
increased the most with 28% of the total production in 2014. This is due to the rise in the number of consumers
who are interested in leisure and health, as well as changes in lifestyle. In addition, the boundary among the
types of clothing such as casual style in sportswear and outdoor wear has blurred.
-While the share of women's suits declined slightly, male suits accounted for 19% of the total, because of the
increased interest in fashion among men. Due to better quality and increasing prices, the shares of infant
clothing increased by 2.9% in 2014 despite the low birth rate.
Production Structure for Fashion Apparel (%)
Shirts/
Women's Underwear/ Knitted Clothing
Year Men's Suit Kids wear Workout Others Total
Suit Pajamas Clothing Accessories
clothes
2010 16.2 29.1 2.6 3.8 28.4 8.2 6.0 5.7 100.0
2011 19.4 28.6 1.9 3.8 25.8 8.8 6.5 5.2 100.0
2012 10.0 36.7 3.0 3.6 27.9 7.2 5.7 5.8 100.0
2013 19.5 26.9 2.2 3.6 27.4 10.3 5.7 4.4 100.0
2014 18.8 25.3 2.9 3.9 28.1 10.0 6.0 5.1 100.0
Source: Statistics Korea, Mining and Manufacturing Survey, Annual9 INDUSTRY OVERVIEW
• While the export of fashion apparel increased by 4.4% since 2010 because of the rising popularity and
recognition of Korean brands brought about by the Korean Wave and improved product competitiveness,
clothing materials like textiles and fabrics, showed a downward trend.
-The increased export volume of such fashion apparel was attributed to export growth in countries influenced
by the Korean Wave such as Vietnam (24.2%), Taiwan (16.0%), Indonesia (10.8%), Myanmar (9.34%), and China
(3.2%).
-In particular, exports to Japan, which accounted for the largest portion of fashion apparel in 2010, grew by
1.5% between 2010 and 2016, while exports to Vietnam surged by more than 20% during the same period.
Meanwhile, exports to China increased by 3.5%, as its major export items changed from apparel parts to
finished apparel. As a result, China surpassed Japan to become Korea's first or second largest fashion export
destination.
-However, fashion apparel imports grew rapidly because of the increase in the reimport of mid to low–priced
foreign products and the rise in the import of high-priced products from advanced economies, which resulted
in the rapidly expanded trade deficit.
Export and Import Trends in the Fashion Industry (USD million, %)
Export Import Trade Balance
Industry CAGR CAGR
2010 2016 2010 2016 2010 2016
(10-16) (10-16)
Textile
1,109 1,125 0.2 245 203 −3.1 864 922
materials
Fibers 1,580 1,314 -3.0 2,238 1,862 −3.0 -658 −548
Textile 8,464 7,821 -1.3 1,647 1,838 1.8 6,817 5,983
Fashion
1,462 1,896 4.4 4,247 8,331 11.9 −2,785 −6,435
apparel
Total 12,615 12,156 -0.6 8,377 12,234 6.5 4,238 −78
Source: Korea International Trade Association, kita.net
Status of Foreign Direct Investment in the Industry
Foreign direct investment in the Korean fashion industry has somewhat slowed down since 2013 but remains
stable.
•Unlike in the past when global fashion companies preferred Japan or Hong Kong as their base for entering the
Asian market, they recently preferred to go straight to the Korean market for Chinese and Korean consumers.
Foreign Investment Trend in the Fashion Industry (Textiles/Fabrics/Clothing) (no. of cases, USD million)
Classification 2008 2009 2010 2011 2012 2013 2014 2015
Cases 19 20 28 17 29 16 15 15
Amount 86 55 74 10 316 51 35 363
Source: The Ministry of Trade, Industry and Energy, Statistics on Foreign Direct Investment, based on notificationFASHION 10
However, foreign investment tends to be concentrated more on the distribution of global fashion brands than
on apparel manufacturing, and it mainly includes joint ventures with global SPA brands such as UNIQLO and
Zara.
• Burberry and Gucci are the luxury brands that have directly entered the Korean market to benefit from the
sustained growth in the Korean fashion industry and attract foreign tourists.
Major Foreign Investment Companies in the Fashion Apparel Sectors
Foreign Major
Sales in 2016
Company Entered Sectors Investment First investing
(KRW billion)
Registered countries
FRL Korea
Wholesale of shirts and others (46413) 2004 Japan 1,117
(UNIQLO)
ZARA Retail Korea Wholesale of shirts and others (46413) 2008 Spain 290.5
Retail sale of shirts and other clothing
H&M Hennes & Mauritz Korea 2009 Sweden 156.8
(47416)
242.5
Gucci Korea (Ltd.) Wholesale of goods (46800) 1998 Netherlands
(2013)
Burberry Korea Wholesale of shirts and others (46413) 2002 UK 251.2
Source: The Ministry of Trade, Industry and Energy, Information on Foreign Investment Companies
Note: ( ) Indicates HS Code
Competitiveness of the Industry
Global Market Share
Korea's export market share of fashion apparel continues to decline because of lowered production
competitiveness such as rising labor costs in Korea, emerging competitors, and expanding overseas production.
• The export of Korean fashion apparel accounted for 7.3% of the world's export market in 1990, ranking 5th, but
its share fell to 0.5%, ranking 30th in 2014 because of the increased production and the export from emerging
countries such as Bangladesh, Vietnam, and India.
Apparel Export Market Share of Major Countries (%, USD million)
1990 2000 2014
Rank
Country Market share Country Market share Country Market share
1 Hong Kong 14.2 China 18.2 China 38.6
2 Germany 13.8 Hong Kong 12.2 Italy 5.1
3 Italy 10.9 Italy 6.8 Bangladesh 5.111 INDUSTRY OVERVIEW
1990 2000 2014
Rank
Country Market share Country Market share Country Market share
4 China 8.9 Mexico 4.4 Hong Kong 4.2
5 South Korea 7.3 US 4.4 Germany 4.1
6 France 4.3 Germany 3.7 Veitnam 4.0
11 South Korea 2.5
30 South Korea 0.5
Total
exports 108,129 197,903 483,280
amount
Source : World Trade Organization
• However, as the backbone of fashion apparel, the share of textile materials for apparel in the export market
is 35.6% in 2014 for China, 5.8% for India, 4.9% for Germany, 4.6% for the US, 4.4% for Italy, and 4% for
Turkey, followed by 3.8% for Korea, ranking seventh in the global export market, which shows relatively high
competitiveness.
Technology Competitiveness
The US and Europe have the highest level of production technology for raw materials and new applications,
while Japan is the strongest in commercialization technology. Korea is ahead of China overall, but the gap is
narrowing rapidly.
Korea has a gap of 1.5 years in terms of technology for fashion apparel compared to the highest level in the
world.
• Europe is number one in the world in terms of culture and design as well as the development of luxury brands
for traditional technology, high-speed inkjet printing technology, and dyeing processing technology, while the
US is the best in product planning and biz model development technology.
Korea has a gap of 2.2 years in terms of fashion apparel and living fabric materials, compared to the highest level
in the world.
• The US is the world's best in the fields of safety protection, sports leisure, and smart textiles, while the EU is the
strongest in the field of interior textiles. With this, Japan is the most competitive in eco-friendly, highly sensitive,
and highly functional textiles.
Comparison of Technology Level by Area (score, year)
Technology Level Technology Gap
Category Technology
Korea US Japan Europe China Korea US Japan Europe China
Fashion apparel 86.3 90.4 92.1 100 71.9 1.4 0.8 0.7 0.0 2.8
Fashion
apparel
Innovative process 85.6 93.8 100 92.5 76.1 1.5 0.6 0.0 0.7 2.6FASHION 12
Technology Level Technology Gap
Category Technology
Korea US Japan Europe China Korea US Japan Europe China
Eco-friendly, highly
sensitive, highly 85.1 94.8 100 97.2 71.4 1.5 0.6 0.0 0.3 2.9
functional textile
Fashion
apparel Textile for safety
78.1 100 94.5 95.3 68.3 2.2 0.0 0.6 0.5 3.2
/ textile protection
materials for Smart textile 81.0 100 95.6 94.7 68.3 1.9 0.0 0.5 0.5 3.2
living
Interior, well-being
84.8 93.6 97.8 100 71.4 1.5 0.5 0.0 0.0 2.8
textile
Sports, leisure textile 88.0 100 95.8 99.5 73.4 1.2 0.0 0.0 0.0 2.8
Source: 2013 Report on the Industrial Technology Level, KEIT
Prospect for the Industry
The global textile demand in 2013 stood at 90 million tons and was worth USD 1.8 trillion. By 2020, it will grow at
a CAGR of 3.2% by 2020 in terms of quantity.
(Source: Fiber Organon, 2014, WTO, 2013, Capital Markets Day 2014, Lenzing)
• In terms of quantity, it is comprised of 54% for clothing, 28% for living, and 18% for industrial fiber.
(Source: Estimated based on Capital Markets Day 2012 and 2013, Lenzing, Transparency Market Research, 2013)
• The global fashion apparel market volume in 2013 was estimated to be worth USD 1.33 trillion, and it is
expected to show an annual growth rate of about 4% by 2020.
(Source: Market Line 2014)
-As the market boundaries between countries fall and the O2O business strategy linking online and off-line
converge, the globalization and centralization of the supply chain from production to distribution is being
accelerated.
• The global market for textile materials for apparel amounted to about 9.69 million tons and was worth about
USD 60 billion in 2012. The market will grow at an average growth rate of 3% per year in terms of quantity. While
Japan, the EU, and the US are leading the market, Korea and China are close behind.
(Source: Transparency Market Research, 2013)
The Korean fashion industry is also expected to grow steadily with progress in diversification, segmentation, and
integration along with increasing demand.
• Korea has a balanced production base in the upstream, midstream and downstream industries. It possesses
world-class synthetic fiber materials companies and infrastructure, and has the potential to utilize convergence
technologies such as IT and Nano Technology (NT).
-Meanwhile, the increasing demand for high performance and eco-friendly textiles, as well as consumer
preferences for high quality, unique and diverse clothing are expected to be a driving force of the growth of the
fashion market in the future.
-As fashion apparel shifts to a diverse-type, small-quantity production structure, the markets for fashion apparel
are expected to be diversified, segmented, and converged such as eco-friendly, highly functional, design-
oriented, smart, and highly sensitive apparel.13 LOCATION COMPETITIVENESS
02 LOCATION
COMPETITIVENESSFASHION 14
Status of Fashion Industry Location
The most concentrated locations for the fashion industry in Korea include Seoul, Incheon, and Gyeonggi-do,
which are leading the trend and distribution sector and possess the largest consumer market.
The knitting industry is concentrated in the northern part of Gyeonggi-do and the northern part of Jeolla-do.
• The northern part of Gyeonggi-do is the world's top knitting production area, and accounts for about 40% of
the world market for high-quality knitwear (golf wear, sportswear/leisure wear, etc.), while accounting for about
90% of the domestic knitting production. It is also the largest consumer of yarn, consuming 60% of the locally
produced yarn.
• The northern part of Gyeonggi-do has the world's only short-term delivery (within one week) production
system, and all production processes from yarn to post-processing are done in the region, providing an
advantageous structure for new product development and commercialization.
• The northern part of Jeolla-do is home to various producers, from the spinning industry to the sewing and
clothing manufacturing industry. It also has a production structure mainly based on natural fibers such as
cotton yarn, knitting yarn, and sewing, among others. In terms of products, knitwear (which mainly includes
underwear and kids wear) is the mainstay of the textile industry in the region.
Location of Korea Fashion Industry
North Gyeonggi-do:Knit
Capital
Gyeonggi, Incheon: Fashion apparel Area Gangwon-
do
Seoul: Fashion apparel
Chungcheong-do Daegu and
Gyeongsangbuk-do
Chungcheongnam-do: Jacquard Gyeongsangbuk-do: Synthetic fabrics
Busan and
Daegu: Textiles
Jeollabuk-do: Knit Gyeongsangnam-
Jeolla- Busan: Woolen fabrics
do
do
Gyeongsangnam-do (Jinju):Silk
The jacquard industry in Chungcheongnam-do is mainly occupied by companies that develop fashion and
home interior products using jacquard.
• To develop jacquard products, a variety of labor-intensive work, such as material development, design, and
product planning, is required. Korea has a great deal of design database and colorway tools, which makes a
strong foundation for jacquard development.
In Busan, large-scale apparel companies, such as Parkland, Indian, Colping, and Greenjoy, operate a sewing
factory equipped with automation facilities. Facilities for OEMs are located within a 50 km radius of Busan.
• The city's geographical characteristics, its proximity to the sea, ports, and an international airport, allow the fast
introduction of global trends, giving Busan strong logistics competitiveness and ease in promptly responding15 LOCATION COMPETITIVENESS
to global demands. It has an abundant source of technology personnel on standby and new skilled workforce
with its universities.
In the Daegu and Gyeongbuk region, the production base has sharply decreased because of bankruptcy and the
restructuring of marginal firms until 2005; however, the textile production base has remained stable since 2006.
• As the largest textile and chemical fiber center in Korea, it is the country's leading textile exporter.
The Gyeongsangnam-do and Jinju areas account for 80% of the domestic silk production, occupying more than
70% of the market.
• By shifting its production from OEM to ODM, a direct production method, it is paving the way for the expansion
of a sales channel from the local market to export destinations and its development of highly sensitive materials
for various purposes from products mainly focused on traditional Korean dress ("Hanbok") and ties. It is also
focusing on brand marketing by shifting from fabric-oriented to finished product brands.
Conditions and Benefits of Fashion Industry Location
To promote foreign investment, specific areas, such as foreign investment zones, free trade zones, free economic
zones, and complexes exclusively for components and materials, have been designated. Companies can also
receive various benefits and incentives in these regions.
• Among them, foreign investment zones and free economic zones are closely related to the fashion and beauty
industries.
The foreign investment areas are classified into three types: complex (23), individual zone (75), and lease zone (4).
Benefits include tax reduction, rent discount, etc.
Among 23 complex-type foreign investment areas, Gumi (textile, fabrics) is the most highly concentrated area for
the fashion industry.
Incentives for Lease of Government-owned Land
Eligible appplicant Rent discount Note
1. Companies in individual-type foreign investment zone. 100% * Only for government-owned lands
2. Business over USD 1 million requiring highly advanced 100% for foreign investment zones. according to,
technology & Industrial support service business. 50% for industrial complexes. - the National Property Act;
- the Public Property Act;
In Foreign Investment Zone, - the Law on Operation of Public
- 100% for parts and material; Organizations.
3. Manufacturing business over USD 5 million.
- 75% for others.
In Industrial Complexes, 50%. * For joint ventures,
By no. of regular employees, - foreign investment should account
- 100% for over 200; for more than 30% of its shares;
4. Manufacturing business over USD 2.5 million.
- 90% for over 150; - or the largest stakeholder should
- 75% for over 70. be a foreigner.
* Private contract is possibleFASHION 16
Incentives for Tax Exemption
Tax exemption
Eligible appplicant
National tax Local tax Customs
1. Business requiring highly advanced technology 100% for 5 years, 100% (maximum 15 years by the * 7 years-type
or industrial support service business. 50% for 2 years laws of the local government) - exemption for customs,
2. Companies in individual-type foreign investment 100% for 5 years, individual consumption,
" and value-added tax for
zone. 50% for 2 years
3 years.
3. Complex-type foreign investment zone.
100% for 3 years, * 5 years-type
-Manufacturing business over USD 10 million. "
50% for 2 years - only customs are
-Logistics business over USD 5 million.
exempted.
Source: Korea Industrial Complex Corporation
Exemption of corporate tax, income tax, customs tax, acquisition tax, and property tax for foreign investment
firms in the free economic zones
• In addition, for 10/1,000 of the government-owned land, lease is permitted for 50 years, and rent can be
reduced by 50%–100% according to the local government ordinance.
• In particular, for the Daegu-Gyeongbuk Economic Freedom Zone, support will be concentrated on the fashion
design sector.
Benefits for Foreign Investment Companies in Free Economic Zones
Tax type Details of Reduction Condition for Reduction
Five-Year Tax Reduction.
• For three years: 100% exemption. Manufacturing business: Over USD 10 million.
Corporate Tax • For the next two years: 50% reduction.
National Tax Income Tax 7-Year Tax Reduction.
• For five years: 100% exemption. Manufacturing business: Over USD 30 million.
• For the next two years: 50% reduction.
Customs 100% exemption for five years. Limited to imported capital goods.
Acquisition Tax 100% exemption for up to 15 years according to laws and regulations of the local government.
Local Tax
Property Tax Reduction for up to 15 years according to laws and regulations of the local government.
Source: Korean Free Economic Zones; KFEZ17 POLICIES, COST AND SUCCESS CASES
03 POLICIES, COST AND
SUCCESS CASESFASHION 18
Government Policies and Related Laws
Government Policies and Incentives
Project to Develop Global Expertise
The project aims to develop small and medium-sized companies with the technological innovation capacity
to become a global professional enterprise by supporting the development of major short-term industrial
technology.
Project to Develop Special Technology for Material Parts
The project promotes the development of new technologies and differentiated products by offering financial
aid for technology development to a consortium that plans to jointly implement planning, technology
development, production and marketing between textile and fashion stream (or between the textile fashion
industry and other industries). The textile fashion stream refers to textile fields used for clothing, living and
industrial purposes.
Project to Develop Key Industrial Technology
The project fosters new future industries by offering intensive support for the strategic development of key and
original technologies based on national growth strategies, and creates future growth engines by enhancing
industrial competitiveness of key industries.
Applicable areas include high value–added key technology, source technology and engineering technology that
can have a significant ripple effect and substantially enhance industrial technology competitiveness within 10
years.
The fields of support, meanwhile, are divided into creative industries and material parts industries. The textile
apparel falls into the rebuilt parts industry. Regarding fashion apparel, support is mainly concentrated on the
development of new materials for yarns and fabrics.
Project to Strengthen Design Innovation Capability
The project fosters specialized global companies and upgrades the design ecosystem by strengthening design
innovation capacity of small and medium-sized firms and exploring new design markets.
Applicable Areas
Classification Purpose and Description
Fostering global design (design utilizing) companies equipped with key capabilities to lead the
Fostering global companies design innovation
specialized in design. *A “design utilizing company” refers to a manufacturing business with design capabilities (department exclusively
for design or designers).
Supporting design technology development to commercialize promising technology/products
Developing professional design and business ideas of small and medium-sized companies
technology. *In case of collaborative development among manufacturing companies and design specializing companies*, it is
necessary to submit a royalty contract.19 POLICIES, COST AND SUCCESS CASES
Classification Purpose and Description
Developing next-generation key Supporting the research and development of key and basic design technologies to preoccupy the
design technology. future market
Building new ecosystem for service Discovering–supporting new business areas by integrating service design based on products
design-based manufacturing ※In case of collaborative development among manufacturing companies and design specializing companies*, it
industry. is necessary to submit a royalty contract.
* Companies specialized in design according to Article 9 of the Industrial Design Promotion Act
Applicable Laws and Regulations
A verification of origin of textiles and apparel is conducted under the Korea–US Free Trade Agreement: "Free
Trade Agreement between Korea and US of America” Article 4.2 (8). Upon the request of the importing party, the
exporting party shall carry out the verification for the purpose of enabling the party of import to determine that
the country of origin for the textile or apparel product is correct.
For order cancellations and returns, Article 17 (1) of the "Consumer Protection Act on Electronic Commerce etc.”
states that consumers can freely cancel the subscription within the period of withdrawal of the subscription or
contract termination (normally seven days) regardless of the contents of the e-commerce contract entered into
by themselves.
In regards to the common safety standards for hazardous substances for children's commodities, Notification No.
2010-676 of the Korean Agency for Technology and Standards sets the standard for harmful substances only for
children's products. This standard applies to metal products that are in direct contact with the skin (nickel used in
toys, jewelry, eyeglass frames, sunglasses, clothing, etc.).
The Chemical Control Act protects the lives, property or the environment of all people from chemical substances
by preventing harmful effects on public health and the environment from occurring, manages chemical
substances appropriately and promptly responds to accidents caused by such substances.
The Act on the Registration and Evaluation of Chemical Substances protects the health of the people and
the environment by defining details on the registration of chemical substances, examines and evaluates
the products containing chemical and hazardous chemical substances, and designates hazardous chemical
substances, allowing people to produce or utilize the information on chemical substances.
Cost
Price and Workforce Supply
The proportion of labor costs relative to the production value of the fashion industry is about KRW 1.7 trillion in
fashion apparel, accounting for 9.6% of the total production, while textile materials account for 12.8%.FASHION 20
• For major production costs out of gross output, textile materials account for 65.1%, and fashion apparel
accounts for 55.2%.
• Among the elements of major production costs, the share of the raw material costs is 75.8% for textile materials
and 55.6% for fashion apparel.
• In particular, as for fashion apparel, the share of outsourced processing, such as sewing, is very high with 43.3%,
while electricity and fuel costs are relatively high for textile materials because of processes such as chemical
fiber manufacturing, knitting, and dyeing.
The share of the sales cost out of the sales of fashion manufacturing companies was the highest for textile
materials, being 98% in 2012; however, it gradually improved and dropped to 88.5% in 2015.
Structure of Production Costs for Fashion Industry (2014) (KRW billion, %)
Added Value Major Production
Industry Gross Output
Labor Cost Costs
Textile Materials 18,796 (100) 6,551 (34.9) 2,403 (12.8) 12,243 (65.1)
Fashion Apparel 16,130 (100) 7,227 (44.8) 1,541 (9.6) 8,903 (55.2)
Source: Mining and Manufacturing Survey, for companies with more than 10 people
Note: ( ) refers to the share out of the gross output
-The share of the sales cost for fashion apparel also started to improve slightly from 2013, accounting for 60.3% of the total in 2015, and the price competitiveness
is relatively higher than that of textile materials
Structure of Major Production Costs for Fashion Industry (%)
Major Outsourced
Raw Material Electricity Water Repairing
Industry Production Fuel Cost Processing
Cost Cost Cost Cost
Cost Cost
Textile Materials 100.0 75.8 3.2 4.8 1.3 14.2 0.8
Fashion Apparel 100.0 55.6 0.1 0.4 0.2 43.3 0.4
Source: Statistics Korea, Mining and Manufacturing Survey, for companies with more than 10 people
Share of Sales Cost to Sales for the Fashion Industry (%)
Industry 2010 2011 2012 2013 2014 2015
Textile Materials 87.6 96.4 97.9 91.8 94.4 88.5
Fashion Apparel 56.0 56.5 59.5 67.2 60.0 60.3
Source: Based on KISVALUE, KOSPI
Cost-to-Profit
The fashion industry’s operating profit in proportion to sales is declining to some extent, and profitability is
decreasing. As of 2015, the operating profit margin to sales of textile materials is 3.5% and that of fashion apparel
is 4.9%.
Trend in Operating Profit Margin to Sales for Fashion Industry (%)
Industry 2010 2011 2012 2013 2014 2015
Textile Materials 7.8 −5.1 −3.2 3.5 −0.7 3.5
Fashion Apparel 7.3 7.7 5.3 4.7 5.3 4.9
Source: Based on KISVALUE, KOSPI21 POLICIES, COST AND SUCCESS CASES
The profitability of the fashion apparel market in Korea is highly dependent on the distribution structure.
• The largest share is the distribution fee. For department stores, which account for a large portion of retail sales,
the distribution fee is around 35% for clothing, burdening manufacturers and increasing consumer prices.
In addition, the profitability of the fashion industry is determined by the markup. Selling price is determined by
adding a certain level of markup (including distribution fee) to the manufacturing cost. The higher the brand
awareness and loyalty, the higher the markup is applied, resulting in increased profitability.
Success Cases of Foreign Investment
UNIQLO
FRL Korea, an operator of UNIQLO Korea is a joint venture between Lotte Shopping and Fast Retailing in Japan,
holding 49% and 51% of its shares, respectively.
• Lotte Shopping's strong distribution network was the most attractive factor behind the joint venture, which
enabled UNIQLO to grow into a leader in the domestic SPA industry.
• Out of 180 UNIQLO stores, 58 stores are located in Lotte Department Stores, Lotte Outlets, and Lotte Marts.
Because it is a joint-venture corporation, it has a competitive advantage in terms of price over other apparel
brands because of the lower rent.
UNIQLO's innovation capability minimizes the cost of all stages from raw materials to sales, simplifies design,
attempts to sharply cut down prices by not engraving the logo, and creates a new market by upgrading its
materials and products.
UNIQLO leads the Korean SPA market with sales of over KRW 1 trillion in Korea in 2015.
• It diversified the way of opening its stores in Korea, for example, utilizing major distribution channels, such
as department stores, outlets, and marts, or opening roadside stores. It implements strategies to enhance
convenience and accessibility by expanding its business in local areas.
Growth Trend of UNIQLO (KRW 100 million)
Sales Operating profit
16,000 1,564 2,000
14,000 1,077 1,073 1,500
642 768
520 1,000
12,000 79 107 351 11,169
17 11,822 500
10,000 8,954 0
8,000 6,940 -500
6,000 5,050 -1,000
-1,500
4,000 3,280
2,260 -2,000
2,000 726 1,226 -2,500
341
0 -3,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015FASHION 22
04 RELATED COMPANIES
AND ASSOCIATIONS23 RELATED COMPANIES AND ASSOCIATIONS
Lists of Companies Related to Fashion Apparel
Company Name Major Items Website Location
Namyeung Vivien Women's lingerie www.namyeung.co.kr Yongsan-gu, Seoul
BYC Co., Ltd. Undershirt, lingerie, T-shirt www.byc.co.kr Jeonju-si, Jeollabuk-do
Beaucre Merchandising Womenswear www.ibeaucre.co.kr Geumcheon-gu, Seoul
E-Land Group Kids wear, casual, SPA www.elandretail.com Mapo-gu, Seoul
Ready-to-wear
LF Group www.lfcorp.com Gangnam-gu, Seoul
clothing, fashion accessories
Samsung C&T Corporation
Casual, menswear samsungcnt.com Seocho-gu, Seoul
Fashion Division
KOLON Industry Gwacheon-si,
Outdoor, golf, women, casual, etc. kolonindustries.com
FnC Division Gyeonggi-do
FRL Korea Wholesale and retail of casual wear www.uniqlo.com Jung-gu, Seoul
Adidas Korea Sportswear www.adidas.co.kr Seocho-gu, Seoul
Hyungji Group Women casual www.hyungji.co.kr Gangnam-gu, Seoul
NIKE Korea Sportswear www.nike.co.kr Gangnam-gu, Seoul
Womenswear, menswear, outdoor,
Sejung Group www.sejung.co.kr Geumjeong-gu, Busan
sports
Shinsung Tongsang Men's casual, men's dress suit, SPA www.ssts.co.kr Gangdong-gu, Seoul
Descente Korea Sportswear, golf www.descentekorea.co.kr Gangnam-gu, Seoul
K2 Korea Outdoor www.k2.co.kr Seongdong-gu, Seoul
Blackyak Outdoor www.blackyak.com Seocho-gu, Seoul
F&F Group Outdoor www.fnf.co.kr Gangnam-gu, Seoul
Kumkang Outdoor, golf www.kumkang.com Gyeyang-gu, Incheon
Parkland Menswear www.parkland.co.kr Geumjeong-gu Busan
Sungjoo Group Casual www.sungjoogroup.com Gangnam-gu, Seoul
LS Networks Sports www.lsnetworks.co.kr Yongsan-gu, Seoul
Changwon-si,
Youngone Outdoor Outdoor www.yooutdoor.co.kr
Gyeongsangnam-do
FILA Korea Sportswear www.fila.co.kr Seocho-gu, Seoul
ZARA Retail Korea SPA www.zara.com/kr Gangnam-gu, Seoul
Shinwon Women's suit www.sw.co.kr Mapo-gu, Seoul
MK Trend Casual www.mktrend.co.kr Gangnam-gu, Seoul
Millet Outdoor, climbing suit www.millet.co.kr Mapo-gu, Seoul
Aioli Women's casual, women's suit www.aioli.co.kr Gangnam-gu, Seoul
Lee and Han Casual, outdoor shop.exrkorea.com Gangnam-gu, Seoul
Baba Fashion Women's suit www.babafashion.com Seocho-gu, Seoul
Giordano Casual www.giordano.co.kr Seocho-gu, Seoul
Indong FN Womenswear indongfn.co.kr Seocho-gu, Seoul
Handsome Womenswear www.handsome.co.kr Gangnam-gu, SeoulFASHION 24
Company Name Major Items Website Location
YK038 Womenswear www.yk038.co.kr Seocho-gu, Seoul
GSGM Casual www.gsgm.co.kr Gangnam-gu, Seoul
Biltmore Menswear www.ibiltmore.com Gangdong-gu, Seoul
The Basic House Casual, kids wear www.basichouse.co.kr Gangnam-gu, Seoul
Demoo Women's www.demoo.com Gangnam-gu, Seoul
Valencia Womenswear www.valencia.co.kr Seongdong-gu, Seoul
Chatelaine Womenswear www.chatelaine.co.kr Gangnam-gu, Seoul
Songjungwan Womenswear sonjungwan.com Gangnam-gu, Seoul
www.
Agabang Company Kids wear Gangnam-gu, Seoul
agabangncompany.com
List of Companies Related to Textile Materials
Company Name Major Items Website Location
Nam-gu, Ulsan
Hyosung Co., Ltd. Filament yarn www.hyosung.co.kr
Gumi, Gyeogsangbuk-do
HUVIS Co., Ltd. PSF www.huvis.com Jeongju, Jeollabuk-do
Acrylic tow, spandex, nylon, polyester Nam-gu, Ulsan, Gyeongju,
Taekwang Industrial Co., Ltd. www.taekwang.co.kr
fabric Gyeongsangbuk-do
Chilgok, Gyeongsangbuk-do
TK Chemical Co., Ltd. PF, DTY, spandex www.tkchemi.co.kr
Gumi, Gyeongsangbuk-do
Seongan Synthetics Co., Ltd. Polyester filament yarn www.sasyn.co.kr Gumi, Gyeongsangbuk-do
Cheongwon-gun,
Daenong Co., Ltd. Modal cotton, Tencel, modal www.daenong21.com
Chungcheongbuk-do
SG Choongnam Spinning Co., www.sgchoongbang. Nonsan, Chungcheongnam-
Recycled staple fiber yarn
Ltd. com do
Daehan Synthetic Fiber Co., Ltd. Polyester www.daehansf.co.kr Nam-gu, Ulsan
Samyang Corporation Co., Ltd. Polyester high-strength yarn www.samtangcorp.com Jongno-gu, Seoul
KP Chemtech Co., Ltd. Nylon yarn www.kpchemtech.co.kr Nam-gu, Ulsan
Toray Chemical polyester filament yarn www.toray-tck.com Gumi, Gyeongsangbuk-do
Samheung Co., Ltd. PP filament yarn www.maxlon.co.kr Pocheon, Gyeonggi-do
Shinwon Textile Co., Ltd. Polyester DTY www.chewon.co.kr Gumi, Gyeongsangbuk-do
Seocheon-gun,
Dongil Corporation Komasa (combed yarn) 60 www.dong-il.com
Chungcheongnam-do
Worsted, carded wool, pure wool and Cheongju,
Jayoung Co., Ltd. www.daewon.co.kr
blended wool Chungcheongbuk-do
Cotton fabrics, knitted fabrics, cotton Yeongdeungpo-gu,
TAIHAN Textile Co., Ltd. www.thtc.co.kr/
yarn, etc. Seoul
SEONG-AN Co., Ltd. Polyester fabric Buk-gu, Daegu
Chilgok-gun,
Duckwoo Corporation Polyester fabric
Gyeongsangbuk-do25 RELATED COMPANIES AND ASSOCIATIONS
Company Name Major Items Website Location
Woongjin Textile Co., Ltd. Two-way stretch (PET, nylon, etc.) www.tcktextiles.com Gumi, Gyeongsangbuk-do
Eulhwa Co., Ltd. Chador fabric www.peacetex.co.kr Gumi, Gyeongsangbuk-do
Seodaemun-gu, Seoul
Chonbang Co., Ltd. Denim, cotton cloth, cotton blend fabric www.chonbang.co.kr
Yeongam-gun, Jeollanam-do
Jeongsan International Co., Ltd. Laminated fabric www.jeongsan.com Gangseo-gu Busan
Shinhan Spinning Co., Ltd. Circular knitted fabric shinhan.net Guro-gu, Seoul
Ducksan Enterprise Co., Ltd. Brushed cotton knit fabric Pocheon, Gyeonggi-do
Saechang Commercial Co., Ltd. Light knitted fabric www.saechang.co.kr Icheon, Gyeonggi-do
Mogae Textile Co., Ltd. Polyester knitted fabric www.mogaetextile.com Saha-gu, Busan
Young Shin Textile Co., Ltd. Fabric dyeing processing Yangju Gyeonggi-do
Bomyung Industrial Co., Ltd. Poly blend / printed products www.bomyung.co.kr Ansan, Gyeonggi-do
Seong An Dyeing and Finishing
Mixed fabric, poly knit Seo-gu, Daegu
Co., Ltd.
Hyundai Wool Textile Co., Ltd. Products with worsted and carded wool www.hyundaitex.co.kr Yangsan, Gyeongsangnam-do
Aztech WB 100% wool dyeing www.aztechwb.co.kr Saha-gu, Busan
Hyundai Special Print Co., Ltd. Printed goods www.specialprint.co.kr Siheung, Gyeonggi-do
Bukwang Co., Ltd. Mesh fabric www.bukwang.com Saha-gu, Busan
SungGwang Co., Ltd. Polyester fabric www.sunggwang.co.kr Jung-gu, Seoul
Seong-An High-twist polyester fabric www.startex.co.kr Songpa-gu, Seoul
Pucheon Co., Ltd. Light knitted and circular knitted fabric www.pucheon.co.kr Gangnam-gu, Seoul
Natural fiber, synthetic fiber, soil release
Vision Land www.visionland.co.kr Gangbuk-gu, Seoul
processing
Youngpoong Filltex Skin plus processing www.filltex.com Guro-gu, Seoul
Outdoor and active casual knitted
Ducksan Enterprise www.ducksanbj.co.kr Seongdong-gu, Seoul
material
Fabric mixed with soft fiber and
Shinheung www.monotex.co.kr Gangnam-gu, Seoul
memory fabrics
COTTON-NYLON fabric, jacquard, special
Alpha Fabric www.alphafabric.co.kr Gangnam-gu, Seoul
post-processing
Young Textile Weaving mixed fabric www.youngtex.com Gangnam-gu, SeoulFASHION 26
List of Organizations Related to Fashion Apparel
Company Name Website Major Roles
Korea Federation of Textile To promote the growth and development of the textile industry by seeking ways to
www.kofoti.or.kr
Industry promote restructuring and enhance the competitiveness of the textile industry.
To promote mutual partnership and benefits among member companies by
Korea Chemical Fibers
www.kcfa.or.kr promoting technology development, improvement of quality and productivity, and
Association
strengthening the global competitiveness of the Korean synthetic fiber industry.
To respond to the government's policy for promoting the export of textiles and the
Korea Textile Trade
www.textra.or.kr sound development of the textiles and fabrics trade, and promote the common
Association
interests of members.
To expand demand for cotton products, carry out a joint purchase of parts and
Spinners & Weavers
www.swak.org materials and joint maintenance of facilities, and provide domestic and overseas
Association of Korea
industrial trends surveys and data.
Korea Textile Development www.textopia. To help Korean textile companies prepare for new trends and improve their
Institute or.kr competitiveness with application and process technology.
To open up the overseas market of the fashion apparel export industry, implement
Korean Apparel Industry
www.kaia.or.kr global marketing for exporting goods, conduct global market research, and make a
Association
proposal to the government.
www. To protect the interests of members in the high fashion industry and strengthen
Korea Fashion Association
koreafashion.org competitiveness of the Korean fashion industry.
Korea Research Institute for www.krifi.re.kr To strengthen the capabilities of the fashion industry, carry out R&D activities, and
Fashion Industry support companies.
Federation of Korea Knit
www.knit.or.kr To strengthen competitiveness of companies producing knitted items.
Industry Cooperative
Korea Institute for Knit www.knitcenter. To support R&D of SMEs, prototype production, fashion and design development,
Industry re.kr marketing, and incubation for the development of the knit industry.
To promote R&D in the sewing industry that integrates the IT field and support
Korea Sewing Technology www.sewtec.
prototype production for sewing companies, and provide technical guidance and
Institute re.kr
workforce training.
To build a system for collaborative research such as key development, development of
Korea Textile Machinery
www.kotma.org an automated system, etc., while supporting R&D of small and medium-sized textile
Association
machinery companies.
KOTITI Testing & Research To perform tasks such as test analysis, quality inspection, and R&D on textile products,
kotiti.re.kr
Institute environmental sanitation, and industrial materials.
To develop advanced key technology for the textile business, provide support to textile
Korea High Tech Textile
www.koteri.re.kr industry development, cultivate professional production and an operational workforce,
Research Institute
support prototype production, and analyze and disseminate technical information.
Dyetec, Korea Dyeing
www.dyetec. To develop cutting-edge processing technology in the dyeing processing sector,
& Finishing Technology
or.kr secure original technology, and provide enterprise-friendly research and development.
Institute
To provide comprehensive solutions ranging from tests, inspections, certifications,
assessments, education, and consulting to research and development for industrial
FITI Testing & Research areas, including fashion apparel and consumer goods; the environment, such as water
www.fiti.re.kr
Institute quality, air, and soil; and other industrial areas, such as automobile, architecture, and
electrical and electronic materials, with its professional workforce and advanced testing
equipment.
Korea Apparel Testing &
www.katri.re.kr To perform test, inspection, and certification for the textile fashion industry.
Research Institute
To provide key information for product development by collecting, analyzing, and
Korea Color & Fashion
www.cft.or.kr distributing international information on color and systematically accumulating
Trend Center
various data such as design and lifestyle.
To perform joint sale and joint purchase, provide bidding information, implement a
Korea Garment Industry www.uniform.
mutual-aid project for small businesses, provide financial support, implement a new
Cooperative or.kr
product development project, and make a proposal to the government, etc.27 INDUSTRY OVERVIEW AND LOCATIONAL COMPETITIVENESS
II. BEAUTY
01 INDUSTRY OVERVIEW
AND LOCATIONAL
COMPETITIVENESSBEAUTY 28
Overview and Status of the Industry
Definition of the Industry
Cosmetics are products applied to the human body for various purposes such as to clean, enhance features, and
maintain or improve the health of skin and hair, among others. It is defined as an object that is used on the body
with a mild impact.
• Cosmetics are distinguished from medicine and quasidrugs in that it would be difficult for people to expect
clear results from a short period of use. In 1999, the Korean government enacted the Korean Cosmetics Act and
distinguished cosmetics from pharmaceuticals.
Recently, as functional cosmetics continue to be developed, consumer demand for environmental friendliness
and high functionality, in addition to aesthetic factors and safety, has been increasing.
Status of the Industry
Status of the Global Market
The global cosmetics market, which represents the beauty industry, grew by 4.3% year on year to USD 259.8
billion in 2014 and is expected to grow to USD 330 billion by 2019.
(Source: Datamonitor)
• Despite the sluggish global economy, the global cosmetics market continued to grow thanks to the high
growth in the Asian market, the expansion of the eco-friendly organic cosmetics market, increased interest in
skin care, and the growth of the men's cosmetics market.
Scale of the Global Cosmetics Market (USD billion)
350 330
314
299
300 285
260 272
240 249
250 231
222
200
150
100
50
0
2010 2011 2012 2013 2014 2015(e) 2016(e) 2017(e) 2018(e) 2019(e)
Source: Korea Health Industry Development Institute (KHIDI), Requoted from the Report on the 2015 Cosmetics Industry Analysis29 INDUSTRY OVERVIEW AND LOCATIONAL COMPETITIVENESS
By region, Europe accounted for 37% of the total market, followed by the Asia Pacific market with 32.1% and the
Americas with 28.2%.
• The US market stood at USD 38.7 billion (14.9%); China at USD 26.7 billion (10.3%); Japan at USD 23.5 billion
(9.0%); Germany at USD 15.5 billion (6.0%); Brazil at USD 15.2 billion (5.9%); France at USD 14.3 billion (5.5%);
and Korea at USD 7.4 billion (2.9%).
Scale of Cosmetics Market by Region (USD billion, %)
2014 CAGR
Region 2010 2011 2012 2013
Market Size YoY (10–14)
Europe 86.9 89.1 91.3 93.5 96.2 2.8 2.6
Asia/Pacific 67.7 71.2 74.9 78.8 83.3 5.7 5.3
North America/ Latin
61.8 64.8 67.3 70.2 73.3 4.5 4.4
America
Middle East/ Africa 5.5 5.8 6.2 6.6 7.0 6.0 6.2
Total 221.9 230.9 239.7 249.0 259.8 4.3 4.0
Source: KHIDI, Report on the 2015 Cosmetics Industry Analysis
Status of the Korean Market
Domestic cosmetics production grew by more than 13% thanks to the continued expansion of exports and
rapid growth in the domestic market.
Production Trend of the Korean Cosmetics Industry (USD million, %)
8,000 7,477
7,000 CAGR 13.2 6,459
6,000 5,279
5,000 4,418 4,496
4,000
3,000
2,000
1,000
-
2010 2011 2012 2013 2014
Source: The Bank of Korea, Input-Output Table, Annual
While cosmetics for basic skin care account for the largest portion of the cosmetics market, color cosmetics and
personal care products are growing significantly.
• For color cosmetics, cushion products continue to grow because of the rapid changes in trends and the
growing interest in color cosmetics among young people. In addition, the demand for point makeup products,
such as lip tint, lipsticks, and blush, is constant.
• The share of personal hygiene products is continuously growing because of the increasing interest in physical
beauty, regardless of gender. Most notably, there is a strong growth in men's care products (including shaving
cream, aftershave, etc.) and a steady rise in body cleansing products.
• On the other hand, the growth of functional cosmetics, which are between pharmaceuticals and cosmetics, isBEAUTY 30
prominent. Functional cosmetics, such as wrinkle reducing products, brightening products, and sunscreen, are
growing sharply with 41% of CAGR between 2010 and 2014 with a rising demand from busy consumers in the
modern era.
Trend in Korea's Cosmetics Production Structure (%)
Basic Skin Care Color Makeup Hair Care Body Cleansing Eye Makeup
Year Cosmetics Products Products Products Products
Others Total
2010 58.6 12.8 15.4 4.2 2.6 6.4 100.0
2011 61.3 11.7 15.3 4.1 2.6 5.1 100.0
2012 60.4 12.5 14.8 6.5 2.0 3.8 100.0
2013 56.7 14.1 15.3 7.6 2.1 4.3 100.0
2014 56.8 15.9 14.5 7.2 2.3 3.3 100.0
Source: Korea Cosmetics Association, Data on Production of Cosmetics, Annual
The cosmetics distribution structure is largely divided into the premium market consisting of department stores,
duty-free shops, and door-to-door sales, and the mid to low-end market including large discount stores, brand
shops, health and beauty shops, and home shopping and Internet shopping malls.
• The recent distribution of the cosmetics industry has been reorganized with the rapid emergence of home
shopping and online malls while brand shops are diminishing. The K-beauty craze, which has enabled new
companies to enter the Chinese market, is also contributing to the change.
• As online and home shopping users are increasing, latecomers, such as Aekyung, L&P Cosmetics, and Cover
Korea, grew sharply with their "hit products" on home shopping channels, threatening existing companies such
as Missha and Nature Republic, among others.
• The sales of Able C&C (Missha), a representative of the brand shops, was estimated to have declined slightly
from KRW 442.4 billion in 2013 to KRW 400 billion in 2016, while Cover Korea (A.H.C) grew rapidly from KRW
30.0 billion to KRW 400.0 billion for the same period.
Cosmetics sales grew at an annual average growth rate of 28.6% because of the impact of the Korean wave such
as K-beauty, while the import declined because of the domestic economic recession, which changed the country
to an exporter of cosmetics from an importer since 2014.
Korea's Export-Import Trend of Cosmetics (USD million, %)
Export Import Trade Balance
Classification
2010 2016 CAGR 2010 2016 CAGR 2010 2016
To Global Market 781 3,971 31.1 1,011 1,371 5.2 −230 2,599
321 1,450 24 49
China 28.6 12.6 297 1,401
(41.1) (36.5) (2.4) (3.6)
61 1221 0.7 6.0
Hong Kong 64.8 43.1 61 1,215
(7.8) (30.7) (0.1) (0.4)
Source: Korea International Trade Association, kita.net
Note: ( ) refers to the share of the total export
• The export of cosmetics, which nearly reached 30% for the past five years, is attributed to the growth of imports
to China, Hong Kong, and Taiwan.31 INDUSTRY OVERVIEW AND LOCATIONAL COMPETITIVENESS • In particular, the export of the Korean cosmetics to Hong Kong grew sharply as the country has no tariffs, VAT, or commodity tax for all imported goods. It is also a tourist destination, with Chinese tourists accounting for more than half of the total visitors, and serves as a gateway to China. Meanwhile, China continues to set stricter standards in granting health certificates. Status of Foreign Direct Investment in the Industry Foreign investors continue to expand their stock holdings for KOSPI-listed cosmetics companies. • The total market value of the stocks held by foreigners for eight cosmetics companies listed on the KOSPI is KRW 15.26 billion based on the closing price on April 18, 2016, which is equivalent to 34.4% of the total market capitalization of the eight companies (KRW 44.39 trillion). -The share of the stocks held by foreigners for the eight companies: Amore Pacific (32.0%), LG Household & Health Care (42.3%), COSMAX (17.0%), Kolmar Korea (46.2%), It’S SKIN (4.6%), TONYMOLY (0.9%), Hankook Cosmetics (0.9%), Dongsung Pharmaceutical (3.8%), and so on. -The aggregate market price for foreign ownership stocks for cosmetics companies listed on KOSPI jumped by 82.4% from KRW 8.29 billion as of January 2, 2015 to KRW 15.13 billion as of January 4, 2016. Industry Competitiveness Share of the Global Market • The world market for cosmetics is expected to reach USD 259.8 billion for 47 countries in 2014, up 4.3% year on year. (source: Datamonitor Personal Care Market Data, 2016) -By country, the US accounted for 14.9% of the total market, followed by China with 10.3%, Japan with 9.0%, Germany with 6.0%, Brazil with 5.9%, France with 5.5%, the UK with 4.6%, Italy with 4.0%, and Russia with 3.1% and Korea with 2.9%, ranking 10th. -The market size of Korean cosmetics is rising from 12th in the world in 2011 to 10th in 2014. Technology Competitiveness • Along with leading domestic brands like Amore Pacific at the frontline, Korean cosmetics are rapidly growing by leveraging the sharp growth of Korea’s one-brand shops, promoting the development of hit items and product innovation, fostering brands, targeting China and ASEAN markets, and improving a fast response to trends. -In addition, Korean ODM companies, such as Kolmar Korea and Cosmax, are also experiencing a rapid growth because of ODM orders from global cosmetics brands, product development, the emerging Chinese market, and growing number of orders for Korean companies. Industry Outlook The global cosmetics market is expected to grow at a CAGR of 6.4% until 2020, while the domestic cosmetics industry is also expected to witness fast growth.
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