South Korean cosmetics brand Missha suspended all its outlets in Hong Kong suddenly last week.
It took many people by surprise, as Korean beauty and cosmetic products have been very well received in the city.
Is the brand pulling out of Hong Kong?
Missha’s parent company, Able C&C, said it has no plan to do so.
It indicated that its outlets in the city were closed owing to financial problems of the brand’s Hong Kong agent, the Korean newspaper Joongang Daily reported.
But the incident is a sign of the fierce competition in this business.
In recent years, Korean brands have brought a big change to the landscape of the city’s beauty and cosmetics market.
Many fans of Japanese and European beauty brands switched to Korean alternatives, and Missha was one of their popular choices.
Other big names include Innisfree and Laneige.
Missha was established in 2000 and opened its first Hong Kong outlet in 2004.
It was the first South Korean beauty brand to sell low-priced cosmetic products. In the first few years, all Missha products were priced at 3,300 won (US$3).
Cosmetics brands typically spend a lot on packaging and marketing. The cost of the product itself accounts for about 10 percent of the retail price.
To make its products more competitive, Missha slashed its packaging costs, using plastic bottles instead of glass, and promoted its brand mainly through the internet.
The low-price strategy attracted students and office ladies, who became loyal customers. They described Missha products as satisfying and affordable.
Between 2002 and 2004, Missha’s operating profit shot up about 40 times, from 3 billion won to 120 billion won.
However, like beauty, Missha’s profit surge didn’t last.
The brand’s success attracted many rivals.
The Face Shop, owned by LG Household & Health Care, Etude House and Innisfree, both owned by Amore Pacific — the biggest player in South Korea — were just a few of them.
Missha then turned to the overseas market and expanded rapidly. Its products are available in 27 countries, including China, Japan, Mexico and Poland.
But its rivals all adopted the same strategy.
In last year’s second quarter, the group recorded an operating loss of 2.1 billion won, its first loss in five-and-a-half years, Chosun Ilbo reported.
There are many explanations for the downturn.
The group blamed the disappointing results on stiffer competition, higher fixed costs resulting from the expansion of its retail network, and an increase in marketing expenses.
Others said Missha is aging. As numerous young brands emerge, customers seeking something fresh are leaving Missha for its rivals, Ho Siu-chung, chairman of the Cosmetic and Perfumery Association of Hong Kong, told Ming Pao Daily.
To make matters worse, high rents and wages in Hong Kong pushed up operating costs, which may have dealt its local outlets the final blow.
– Contact us at [email protected]