User Generated Content Strategies

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Shoppers produce an immense amount of user generated content (UGC) every day, with 54% of adult internet users taking and sharing photos. As such, UGC is a large portion of the content people see on a day-to-day basis. This content can be used to drive brand equity and sales because it tells genuine stories about brands and products, which resonate with consumers and incites trust. In 2017, companies are taking UGC even further by creating unique products to specifically attract Instagram-attention (and are “instagrammable”) and building companies that are centered and fueled around UGC and user-community.

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Blockchain

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The internet transformed business and society by allowing people to leverage the platform to quickly engage with people all over the world. New companies and business models were created, disrupting old giants and creating new structural foundations for society.

Blockchain takes the powers of the internet even further and proposes a new model for society and commerce. Trust is built between separate actors through an immutable, shared ledger that records transactions and actions. Although the technology is still in its very early stages, it’s already making inroads in finance, technology, and global trade.

Blockchain gives the new, purpose-minded consumer peace of mind since it can provide accurate information on how products are sourced, the materials that went into making the product, and how the labor that made the products was compensated. It also gives actors the ability to create smart contracts, ensuring they will have authentic and verified business transactions.

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The Korean Beauty Market in the United States

The Korean Beauty Market in the United States

Executive summary

Korean beauty (known as K-beauty) products have been traditionally difficult to find in the United States, unless one is a cutting-edge shopper. Most of the time, these products have to be individually shipped from faraway Seoul, South Korea—a place that is quickly transforming into one of the most innovative beauty capitals in the world.

K-beauty products are traditionally difficult for U.S. shoppers to purchase and use because of the language barrier. Originally made for and marketed to Koreans, U.S. shoppers find the packaging and directions inscrutable. However, when the Korean entertainment wave arrived in the United States between 2000-2010, K-beauty products became more accessible. K-pop boy and girl bands, with songs like “Gangnam Style,” were suddenly popular and mainstream. This led to a higher demand and interest for these products. With the B.B. cream and sheet mask obsession that started in 2011, Korean manufacturers began to make their products available at U.S. retailers. Currently, the leading U.S. beauty companies are creating their own versions of popular K-beauty products.

Market Impact/Sales

Korean Beauty products grossed $225 million in U.S. sales in 2016, up 30% from 2015. They are the fourth largest cosmetics exporter in the world, after France, the United States, and Germany. K-beauty exports from Korea have increased at an average of 37% each year since 2011. The Korean government expects two Korean beauty companies to reach the top 10 beauty companies (by revenue) in the beauty industry by 2020.

Definitions/Key Terms

Korean Skincare Routine

The Korean beauty and skincare routine is a multi-step process with around 7-10 steps. The goal is to create a flawless complexion. Each of the steps targets a specific issue with a ritual and each ritual is thought to have a double cleansing process (e.g. washing one’s face twice, once with an oil-based cleanser and once with a foam-based cleanser). Additional steps utilize serums, toners, moisturizers, face mists, and other products. While U.S. skincare routines focus on correction, the Korean skincare routine is built around prevention and perfection. Korean skincare products incorporate ingredients that “nurture” and boost the skin, while U.S. products tend to lean heavily on spot-treatments and makeup-looks to hide flaws.

Korean Beauty Products

Buyers celebrate Korean beauty products for their high performance, efficacy, innovation, quality, and affordable prices. With an American audience in mind, they commonly come in fun packaging with large, clear typography and clever names. The most popular products in the U.S. are:

  • BB cream—a mix of foundation and moisturizer that provides everyday, easy, natural-looking coverage and some added skin benefits like antioxidants.
  • Sheet Masks—a beauty treatment that involves placing a sheet mask on one’s face for a few minutes. People started taking sheet mask selfies and posting them on social media which helped to ignite the trend.
  • CC cream—a new-and-improved BB cream that is more “color-correcting” and lighter on the skin than BB creams.
  • Cushion technology—a new way to put on makeup and skincare formulas. It helps even out the application of makeup for a matte, consistent look.

Korean beauty ingredients

Korean beauty products have unusual and unique ingredients in them, most notably snail guts, chia seeds, wine, and starfish. Each ingredient does something very specific for the skin. For example, one popular ingredient is propolis, which is extracted from the walls of honeycombs. It keeps moisture out and discourages bacterial growth. In skincare, this translates to a potent ingredient that results in less acne and provides a dewy glow.

K-Pop

K-Pop is the music genre that started the Korean Wave in the United States in 2008. These music acts have rabid followings in the United States. Fans attend their concerts and consume their music videos on YouTube. The trend peaked—at least popularity-wise—in 2012 with Psy’s “Gangham Style.

History

The rise of Korean entertainment and beauty

After World War II, the Korean government started helping domestic companies export valuable items across the world in search of more financial stability. They originally focused on electronics and cars, building up the LG, Samsung, and Hyundai-Kia brands. However, in the 1990s, the country ran into trouble. The International Monetary Fund had to bail out Korea with a $57 billion package, the largest in history. At this point, South Korea had to diversify its economy. They began to export and encourage Korean media and entertainment, which ultimately gave way to K-Pop and K-Dramas. The Korean Wave of entertainment paved the way for other products to succeed. Beauty products were showcased in movies, TV shows and music videos.

Coming to the United States and where it’s headed now

By the early 2000s, the Korean market was saturated with beauty brands (there are around 1,800 to 2,000, which is staggering for such a small country) and the country began looking to increase exports. China, Hong Kong, the U.S. and Japan became their largest importers. In 2014, South Korea exported more beauty products than it imported for the first time ($1.8 billion in exports compared to $1.04 billion in imports), an important milestone. The country continues to encourage beauty product manufacturers who export by offering perks like complete tax breaks in Korea and assistance suing overseas brands that infringe on their patents.

Many countries, including the United States, began to see the value in Korean beauty products. Additionally, beauty bloggers started showing people the Korean 10-step beauty process and the high-value Korean beauty products.

The B.B. cream was the first popular Korean beauty product in the U.S. After witnessing the cream’s growth in popularity for five consecutive years in Korea, U.S. beauty brands were inspired to make their own versions of the product (now a staple for many U.S. skincare manufacturers). The Korean cushion face compact was yet another example of U.S. companies incorporating Korean ideas into their own marketing and production strategy. As a testament to K-beauty’s impact, skincare expert and entrepreneur Peter Thomas Roth stated that, “In the past, France was considered the global leader in beauty, but now all eyes are on Korea.”

As innovation around Korean beauty products continues at a rapid pace, it increasingly mirrors fast-fashion brands like Zara, who are now looking to expand into other products and countries. K-beauty is now growing in India and Latin America as these countries start consuming their entertainment and begin demanding these products. This is especially important since K-beauty’s dominance in China is receding.

Lifecycle

CUTTING EDGE

EARLY ADOPTER

GROWTH

The Korean beauty market is still on an upward growth trajectory and should continue growing as more companies start making these highly-coveted items available to their customers. In the United States, the trend started when companies began formulating their products to match the B.B. cream craze in South Korea. We will continue to see growth as K-beauty products start becoming more mainstream and Korea continues to build new innovative formulations that catch on abroad.

MATURITY

DUE FOR DISRUPTION

How big is the K-beauty opportunity?

SMALL

MEDIUM

LARGE

Depending on your company’s goals, consider either hopping on this trend or learning from the marketing, product, and logistical steps they took to bring a product from a flourishing context (South Korea itself) to a new context (China, The United States, and now India and Latin America).

Demographics/psychographics of companies

The companies that play into the Korean Beauty trend range from retailers who carry the products, to the brands that make the products in South Korea and then sell them in the United States, as well as manufacturers and brands in the U.S. who use K-beauty trends and innovations to come up with their own products. For example, after noticing the popularity of B.B. cream, a large portion of makeup manufacturers selling in the U.S. started creating their own versions of B.B creams and then C.C. creams—Estee Lauder recently launched their new featherweight cream, which took cues from Korean beauty innovations.

Korean beauty manufacturers have a reputation for constantly innovating and reformulating their products, which go through a large variety of testing and design processes in order to keep their savvy and die-hard buyers engaged. Priya Venkatesh, Sephora’s vice president of merchandising for skincare and haircare, has called Seoul the “Silicon Valley” of beauty because of their intense focus on the beauty market.

Additionally, companies market Korean beauty products as playful and fun—they use cute packaging featuring large typography, which makes the products easy to use and understand. Companies change their tactics depending on their target audiences; upping the cuteness-factor for their Japanese buyers while touting items that have the popular “snail” ingredients for their American customers.

The Korean government is extremely involved in the production and advertising of K-beauty and product experiences risk becoming cold and sterile when the government gets too involved in the creative side of the business. The Korean government ultimately had to shutter its NYC Soho flagship store.

Demographics/psychographics of buyers

Millennials (mostly women) are interested in K-beauty products because of their exposure to accessible Korean exports and their social media habits. Korean beauty products often form an entry-point into the world of premium skincare for these buyers thanks to their easy-to-use formats, fun packaging (with names like “Jelly Pudding”), and clear benefits. Buyers are commonly introduced to the products by way of social media influencers who show-off their favorite products and multi-step beauty routines. Additionally, many younger women in the U.S. who enjoyed K-Pop and K-Dramas in their youth are excited to purchase the products their favorite stars use. This is especially true for shoppers in India and Latin America who are now increasingly exposed to Korean entertainment.

Recent Opportunities and Challenges

Opportunities

There is ample room in the Korean beauty space for companies to enter the market and make the dissemination, marketing, and product development process easier and more seamless for American buyers.

  • Koreans have sensitive skin and K-beauty brands create formulations that are widely usable. How can you create products with a specific issue in mind? How will this help to come up with new innovations and even better products?
  • Korean products mix skincare products and makeup into one. How can you rethink your products to make them more effective for your buyers?
  • Playful, oversized visuals and clear benefits bring tons of attention capture the attention of the shopper. Even Sephora has learned from Korean beauty—the way it communicates product benefits and keeps products fun and engaging is directly lifted from K-beauty marketing strategy. Korean beauty has taught it that teaching people about skincare is a huge opportunity. How can your product, packaging, and marketing educate buyers on how and in what context to use your products?
  • With the influence of social media, Korean skincare companies have come up with “beauty hacks,” and have marketed the notion that it is possible to achieve a specific look with specific products. This results in people buying the products to achieve the looks. Which one of your products is ripe for creating hacks? How can you change things about your products to make them more exciting for influencers to use as hacks?
  • Lancome has recently praised Korean beauty’s advancement in feather-light foundation and cited Korean beauty products as inspiration for the creation of its Miracle Cushion Foundation. Are there any stagnant products in your lineup that are ripe for research and development? How can you learn from others companies’ research and development processes?
  • People in the U.S. like the unique ingredients in Korean beauty products. Is there an opportunity for you to make any of your products with different ingredients to add variety and personalization?
  • Right now, many Korean companies market their products to Koreans only, which makes them hard to find and use. How can you take part in finding Korean innovations and making their integration seamless in the U.S.?

Challenges

U.S. companies will face challenges as the Korean skincare market ushers in new trends they will have to keep up with.

  • With Korean skincare, the notion of “knowledge empowerment” is trending as buyers are becoming increasingly choosy in regard to product ingredients. What can your company do to focus on putting natural and great quality ingredients into products while keeping the prices low and taking profit margins into account?
  • As U.S. beauty companies lose market share to Korean competitors and products, they’ll have to ensure that their products are just as alluring and innovative as Korean products. What can beauty companies do to mitigate this loss? How can they become more innovative?
  • With the proliferation of K-beauty products hitting the U.S., saturation is imminent. What can companies do to stand out in this crowded marketplace?
  • The Korean beauty market is receding in China because of the lack of variety in the type of looks Korean beauty products are capable of achieving. If you are investing in Korean beauty, how can you focus on ensuring that the buyer can create a variety of looks with the products?
  • Many Korean beauty companies market their products to the “kidult” segment of the population, adults who like to act like kids. How can these companies continue to innovate as this segment ages and changes their preferences? How can they start reaching other demographics?

Interesting companies

Sephora

In 2015, Sephora started marketing its Korean beauty products more heavily, even introducing a dedicated section in many of its stores. Its K-beauty product sales grew 70% from 2015 to 2016.

Peach & Lily

Peach & Lily is an extremely popular Korean beauty site that boasts an industry high of 25% repeat purchase rates within 90 days and has historically seen 500% month-to-month growth.

HwaHea

HwaHea is a popular app in Korea that shows beauty product ingredients. It is a watchdog app for ingredient-obsessed Koreans who want to ensure that the products they use are good for them.

Tony Moly

Tony Moly is a cool and fun Korean beauty brand that only takes six weeks to design, develop, and distribute new products. They consistently bring innovation, playfulness, and novelty to their products. They distribute their products in the United States through Ulta and other retailers.

Memebox

Memebox is the first Korean brand that received funding from Y-Combinator. The president of Korea was so pleased with their progress, he sent rice cakes to the founders to offer his congratulations. They are known for their themed boxes, which range from studying to spa days, etc.

CVS/Peach Slices Collab

CVS has recently started to sell affordable Peach and Lily products dubbed Peach Slices. The products are sold in American drugstores at a lower price point than normal Peach and Lily products.

Interesting people

Michelle Phan

Michelle Phan is an important and popular vlogger who is credited with bringing more awareness to K-beauty products. Her videos have gotten more than a billion views and she is one of the most successful beauty vloggers ever. Ipsy, her subscription box company, is worth over $500 million.

Charlotte Cho

Charlotte Cho is a popular Korean-American beauty vlogger that has brought attention to the K-beauty movement. She founded Soko Glam, which has turned into a popular Korean beauty destination.

Priya Vinkatesh

Priya Vinkatesh is a Sephora K-beauty buyer. She focuses on bringing Korean beauty products into U.S. retail stores and ensuring that Sephora’s decision to incorporate K-beauty products is a profitable and long-lasting venture.

The Korean Government

As mentioned above, the Korean government has been a large driver of the international growth of the Korean beauty movement. They’ve helped to promote the Korean Wave of entertainment all over the world and give advice and mentorship to Korean beauty companies.