Riding high on coral red wave

Arthur Chang, chairman of Chinese skincare e-commerce retailer and distributor U-Cosmetics, said that demand is so strong that his company sells one South Korean beauty product every 18 seconds. This rapid surge has encouraged South Korean companies to establish production bases in China to ensure supply and shorten delivery times.

"Korean cosmetic brands will increasingly localize along the value chain to further improve their positioning in China," Robert Hah, Consumer Business Consulting Managing Partner at Deloitte China, said. "Many of the companies are already beginning to shift manufacturing to China to lower costs and enhance logistic efficiency."

To reflect this, Amore Pacific set up in Shanghai last year its largest overseas manufacturing base and logistics center in China with a capacity to produce 100 million products every year.

Fueling this booming sector in the country is the new generation of trendy customers. South Korean manufacturers have been quick to target consumers in the 20s to 30s age group, especially college students.

This is a segment of the population that is extremely passionate about South Korean pop culture. These beauty brands have quickly expanded their presence here on the back of the Korean Wave, a cultural phenomenon related to the popularity of the country's soap operas, movies and K-pop.

The marketing strategy of these brands relies on celebrity endorsement and product placements in popular TV dramas, especially since young Chinese women are increasingly using South Korean stars as beauty role models.

"There was an enormous supply shortage of coral red color lipsticks in China when the South Korean series My Love from the Star, starring Jun Ji-hyun, stirred up a craze for wearing coral red lipstick in the show," Hah, of Deloitte, said.

South Korean cosmetics manufacturers are also heavily investing in sales channels to keep up with demand. The trend is now for these brands to set up their own speciality stores in shopping malls to attract consumers.

"The single-brand store format is meeting the demand of the new generation, who are looking for niche, professional, personalized products that fit their lifestyle," Chen Wenwen, senior beauty analyst at Mintel China, said.