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Korea's top beauty firm seeks expansion in North America
By Kim Jae-heun
AmorePacific, Korea's largest cosmetics maker, will increase investments to boost its online sales and expand its reach in North America, in a bid to reduce its reliance on China and other Asian markets, according to company officials Thursday.
"Our plan to reinforce our online business is still valid in 2022," an AmorePacific official said. "Currently, our online revenue takes up some 30 percent of overall sales and we expect it to rise up to 50 percent in the next year or two."
In Korea, AmorePacific will focus on collaborating with local e-commerce firms like SSG.com, Ably and Musinsa, with which it can expand its retail channels. Last year, the cosmetics firm established partnerships with IT giants like Naver, Coupang and Kakao to help it achieve a turnaround in the fourth quarter of 2021.
The cosmetics firm will not open any more franchise stores for its affiliate brands here, but instead introduce one or two flagship shops in Seoul to promote its brands by offering customer experience at the shops with its high-end brands such as AmorePacific and Sulwhasoo.
In North America, AmorePacific will focus on the clean beauty market with its skincare brands such as Laneige, AmorePacific and Sulwhasoo. Clean beauty refers to skincare products that are "clean of harmful ingredients."
"We already collaborated with K-pop star group BTS last year to promote our brand in the United States. We also plan to beef up our partnership with Amazon, which local customers are fond of," the official added.
Currently, AmorePacific's sales coming from China take up 70 percent of Asian sales, which comprises nearly 95 percent of its overseas revenue. The company wants to cut its reliance on the Chinese market but it will be a challenge.
AmorePacific has been witnessing a decline in overseas sales lately due to the decreasing popularity of its luxury brand products in China. Several of its stores have been closed there due to poor sales amid the prolonged COVID-19 pandemic.
Its overseas revenue in the fourth quarter of 2020 dropped by 3 percent. AmorePacific managed to improve its sales in the North American market by 29 percent but its performance in China decreased by 6 percent.
In 2021, its sales rose to 5.32 trillion won from 4.93 trillion won a year earlier, while operating profit jumped to 356.2 billion won from 150.7 billion won.
KB Securities and Yuanta Securities expect the cosmetics firm's business will improve in the second quarter of this year.
"With the end of pandemic restrictions looking not too far away, the company's business will rebound in the second quarter thanks to its restructuring," KB analyst Park Shin-ae said.
Yuanta analyst Park Eun-jung also predicted AmorePacific's overseas business to grow, as quarantine measures are expected to ease off in Western countries like the United States and England.
"AmorePacific is accelerating the restructuring process for its Innisfree brand in China, which will improve its profitability there. There will also be increased demand for AmorePacific in North America as the country decided to try living with the virus," Park said.
