Korean Beauty Trends & Industry News: 23-12-08

CJ Olive Young Fined $16 Million Amid Allegations of Unfair Practices

The South Korean Fair Trade Commission has fined CJ Olive Young, a major health and beauty retailer, approximately $16 million (19 billion KRW) for unfair practices against their suppliers. This fine results from the company's alleged monopolization of promotional events since 2019, forcing suppliers to sell products to them at discounted rates without compensating for the price difference.

CJ Olive Young was also accused of unjustly collecting 1-3% fees from suppliers for data processing. However, the commission did not apply the Fair Trade Act violation as it was uncertain whether CJ Olive Young held a dominant market position. Despite this relief for CJ Olive Young, concerns are growing among smaller beauty brands about their increasing dependence on the company.

Meanwhile, CJ Group plans to make strategic personnel adjustments for next year's business operations, reflecting the group's 'Only One' philosophy. These plans include the promotion and role expansion of Lee Jae-hyun's daughter, Lee Kyung-hoo, as CJ ENM's Brand Strategy Director, and his son, Lee Sun-ho, as CJ CheilJedang's Food Growth Strategy Director.

Olive Young has responded to the commission's decision, stating they have completed or will complete internal system improvements, and will transparently share all processes with their partners, emphasizing their role as a collaborator in the growth and global expansion of mid-tier beauty brands.

CJ Olive Young Faces Controversy Amid Changing Beauty Market Dynamics

The Fair Trade Commission's recent sanction against CJ Olive Young reflects a shift in the market paradigm due to the rapid growth of online sales. If only the offline market were considered, Olive Young might have been classified as a dominant market player, potentially facing fines up to $500 million. However, considering the growth of the online market, the Commission found it uncertain whether Olive Young abused its market power.

The Commission also reviewed Olive Young's exclusive brand (EB) policy, which offers economic benefits to suppliers under the condition of not dealing with competitors, but concluded the review without a definitive ruling on its legality. The Commission considered Olive Young's influence beyond offline health and beauty (H&B) stores to the entire cosmetics retail channel.

This decision significantly reduced the expected fine for Olive Young. Had they been recognized as a dominant player, they might have faced a fine based on 6% of the related sales revenue during the period in question. Olive Young has accepted the decision, promising to improve their internal systems and focus on nurturing K-beauty distribution platforms centered around small and medium-sized brands.

However, there is ongoing concern within the industry about the ambiguity of Olive Young's EB policy, with calls for continuous attention from the Fair Trade Commission. Industry experts highlight Olive Young's irreplaceable role in both offline and online markets.

This decision by the Commission is seen as a significant case reflecting the blurring lines between online and offline in the cosmetics market, with keen interest in how the market will evolve in the future.

LG Household & Health Care Achieves 300% Sales Increase in Japan's Online Market

LG Household & Health Care has achieved a remarkable 300% increase in sales within just six months of launching their cosmetics on Qoo10, a leading Japanese online shopping mall. This success signifies their effective branding and solid establishment in the Japanese beauty market through online channels.

LG targeted the Japanese online market by launching their products on platforms like Qoo10 and Amazon since May this year. Their product line includes nine cosmetic brands and nine HDB (Homecare & Daily Beauty) brands.

Participation in Qoo10's 'Megawari' discount event significantly contributed to brand recognition. Products like 'O Hui's Ultimate Fit Longwear & Tone-up Jin Cushion 3 Types' became particularly popular, noted for their unique design and quality. Other products, including Glint's makeup brand highlighter and Yushimall's Whitnic toothpaste, also played a significant role in the sales increase.

A representative from LG Household & Health Care attributed this success to superior quality and reasonable pricing, which significantly influenced Japanese consumer purchasing decisions. Additionally, the company plans to expand its marketing activities through both online and offline distribution channels. This strategy is expected to play an essential role in sustaining growth and strengthening the brand's presence in the Japanese market.