“A K-Beauty Brand Without the Fluff Targets the ASEAN Market… A Market That’s Every Bit as Good as the Chinese Market”
Erickson Kang, the Man who Blazed a Trail in the Philippine Market with Korean Cosmetics
Erickson Kang, who is a CEO of a cosmetics distribution company, operates a chain of K-beauty multi-stores in the Philippines called BEAUTY IN SEOUL. The stores operate under a concept that is similar to Olive Young, and carry approximately 50 different Korean cosmetic brands. Erickson Kang is leading the charge for K-beauty in Southeast Asia and the Philippines – regions that are sometimes called the third market. All 20 of BEAUTY IN SEOUL’s stores in the Philippines are operating in the black. “The Southeast Asian market is not a difficult market at all. If you correctly target cosmetics for the Philippine market, you can have much more stability and have higher returns than if you went into the Chinese market,” said Kang.
The backlash that South Korea experienced as a result of the THAAD crisis hit the domestic cosmetics industry particularly hard. The recent movements toward improving relations between South Korea and China have increased expectations of recovering the Chinese market, but it is still too early to rest easy. According to Erickson Kang, “the cosmetics industry needs to take the lessons it learned from the THAAD crisis to lessen its dependency on China and develop ‘new markets.’ It’s time to look around just a little and take an interest in the ASEAN market, which includes the Philippines.”
I met with Erickson Kang – the man who succeeded by thinking innovatively and taking on bold challenges – at the headquarters for The Korea Economic Daily on Cheongpa-ro in Jung-gu, Seoul.
Q: How did you end up doing business in the Philippines?
A: My ties to the Philippines go back to when I first went to the country 12 years ago. I went for the first time as a managing director for the Phillipine branch of Hyosung to work on a real estate development project. I was supposed to return to the head office in Korea after the three-year project finished, but I decided to turn in my resignation after seeing the favorable business conditions I would be working with locally, which included my personal connections. After that, I started a consulting business with acquaintances I had made locally. Our main clients were cosmetic companies. We helped launch brands like Etude House, Skinfood, and Tony Moly in the Philippines. As a result, I naturally became drawn to the charm of the cosmetics business, which led me to starting my own business. I thought, “I should open stores like Olive Young in the Philippines.” That’s how I started BEAUTY IN SEOUL, and now we have about 20 stores.
Q: What got you interested in cosmetics?
A: I loved the scent of cosmetics. I also felt attracted to the idea of working with women. More than anything, the margins are good (laughs). For that reason, the cosmetics business is more fun than any other business out there.
Q: It must have been incredibly difficult to go from real estate development to starting a cosmetics business.
A: I used to work for an advertising agency. We had a lot of clients that were in the cosmetics industry, and we did a lot of ads for them.
Q: When you’re doing business in a foreign country, you must face a great deal of cultural differences.
A: The biggest difference is the people. Enjoying life is the top priority of the people in the Philippines. When Koreans get tired while they’re working, they take a momentary break. In the Philippines, people work in order to make money to enjoy themselves. They place the utmost importance on their family affairs, so if something happens, they don’t come to work. Whether it be for entrance ceremonies at school, their uncle’s birthday… (laughs). There’s nothing you can say about that. I think that’s why their happiness index is higher than it is in Korea. I’m learning a lot about this aspect of life.
Q: I’m sure it wasn’t all smooth sailing from the beginning.
A: To be honest, BEAUTY IN SEOUL isn’t my first project. I opened a huge store by the name of LIPSTICK PLEASE. It was a failure. I ran three stores over three years, and then I closed them down. BEAUTY IN SEOUL is my second project.
Q: What was the main factor behind the failure of LIPSTICK PLEASE?
A: I thought the stores had to be big and showy. I was only focused on the external appearance. On top of that, I over-invested in them. This isn’t the type of market where if you look cool, you can increase your sales. Because I focused more on how we looked rather than on efficiency, we couldn’t turn a profit. Now, all 20 of our stores are kiosks. We’re usually situated in the best locations that you can see right away when you go into the entrance of a department store. The stores start from 3.3㎡ in size, to a little more than 8㎡ at most. You have to be small and efficient to increase your sales. These are all lessons I learned through my failures.
Q: The size of your company must have grown quite a bit by now.
A: We have 60 sales associates. If you add in the 20 employees who work at the head office, we have about 80 staff members in total.
Q: Do you have plans to open more stores?
A: Of course. I want to hurry up and get to 50. In the long term, I would also like to launch my own brand. In order to do that, I think we’ll need at least 50 stores.
Q: By when do you think that will be possible?
A: I think it will take about three years. I think it will be possible to reach our goal by 2020.
Q: What do you value the most when it comes to work?
A: I like to enjoy myself while I’m working. I take joy in the thought that I’m educating the people in the Philippines about the advanced business culture of Korea. Of course, it isn’t easy. Most Korean businesses fail in Southeast Asia because they get impatient when they don’t get quick results, and they go back. Of course, this is just what I personally think.
Q: Do you mostly live and work in the Philippines?
A: Yes. I come to Korea about four times a year. Signing contracts with brands, investment meetings, and new business are the things that I usually come for.
Q: If you live in the Philippines, you must need someone to handle the Korean side of the business.
A: BEAUTY IN SEOUL has a Korean branch manager. His name is Tony, and he’s a British man who speaks Korean well. Since I’m in the Philippines for long stretches of time, he deals with the things that happen in Korea on my behalf. He’s a partner that has been with me since the start of the business, and he’s like my right-hand man.
Q: It’s unusual to meet someone from the UK who speaks Korean well. How did you meet him?
A: I was introduced to him through an acquaintance. I feel like his DNA is similar to mine. We clicked from the very beginning. I graduated from a university in France, and Tony was in the UK. In Europe, it’s harder than you would think to meet Koreans. We had similar ideas regarding the cosmetics business, so I suggested that we go into business together.
Q: What were the things that you agreed on?
A: That there’s a limit to how much you can accomplish as a store for a single brand. We realized that it wouldn’t be easy to survive as a “road shop” that sells a singular low/mid-priced brand, unless you’re a global brand. At first, it was hard for us to even get brands to work with us. When we said that we were doing business in the Philippines, everyone ignored us. People were only thinking about China. Now, brands come to us. I’m astonished at how much things have changed.
Q: What’s your criteria for selecting brands?
A: The sample of the products, price, and marketing. The Philippine market isn’t a market where high-end products do well. Products that are designed well and don’t have all the fluff are the ones that sell.
Q: Do people in the Philippines use a lot of cosmetics, too?
A: They started using cosmetics about four, five years ago. Now, they know about skin care. People are now buying toners, essences, and emulsions. I think the market is gradually becoming more interesting.
Q: What are the lines that have the most success?
A: Basic lines. Basic products like BB creams, sunblock, tints, and eyebrow products are steady sellers.
▲A BEAUTY IN SEOUL Kiosk
Q: The weather must also have a huge impact on the types of cosmetics that people buy.
A: Absolutely. Moisturizing creams don’t sell in the Philippines. Moisturizing creams and oily base makeup are popular in countries that have four distinct seasons, but in the Philippines, they only have a dry season and a wet season. People from countries like this enjoy mattifying products. Baby powder is a best seller. People don’t use oily products like lip gloss and lip balm. If you want to target the Philippine market, you have to know these things. If you just try to manufacture and sell products, you won’t do very well. You have to really understand the market and make targeted products.
Q: Is this a know-how you learned from the failure of LIPSTICK PLEASE?
A: Yes. It doesn’t just apply to the cosmetics, but also to the stores. In the past, my stores were large and showy. We got a lot of publicity, but we couldn’t make money. That’s when I realized that the size of the store isn’t important. That’s why all of our stores now are small kiosks. Of course, if our business grows to a certain extent, we’ll need a large store. This would be more for marketing than for sales. But in reality, the small stores are the ones that make the money.
Q: You must have had to put in a tremendous amount of effort to make your comeback with BEAUTY IN SEOUL.
A: I went around on foot in the Philippines to conduct market research. Tony and I would spend the entire day counting the number of people that passed by in order to determine which areas had high transient populations. We even determined their consumption patterns by looking into how much money they would carry around with them. We set our reference point at 50,000 won, and we’d categorize stores according to how much people had in their wallet. If people had 50,000 won or more in a certain area, we’d place grade “A” stores there; grade “B” stores went to areas where people carried around less than that. In the grade A stores, we’d display higher-priced items along with the other products, and in grade B stores, we’d only display the lower-priced products. This strategy proved to be unquestionably effective.
Q: Do people actually buy the higher-priced products at the grade A stores?
A: There’s a brand called S.A.A.T INSIGHT, which is one of the more expensive brands at the grade A stores. The products from this brand are considered to be high-priced in the Philippine market, but they sell well. Their best-selling products include a hair mist that’s used with a straightening iron and a sleeping hair cream.
Q: What do you think is the reason for that?
A: I think the factors that have impacted the sales of their products are that they have differentiated products that are targeted for hair care, and they use a lot of English on their packaging, which makes it easier for consumers to understand what they’re selling. In short, I think that their products are compatible with the Philippine market. I’m also amazed that these high-end products are doing so well.
Q: What’s your goal as a front-runner who introduces K-beauty to the Philippine market?
A: My primary goal is to open 100 stores in the Philippines. I also want to expand our offline and online business models to other regions in Southeast Asia. In order to do that, we have to solidify our position in the Philippines. After that, we plan to gradually expand to Hong Kong, Vietnam, and India.
Q: What’s one word of advice you could give to people in the cosmetics industry that are looking at the Philippine market?
A: I wish they’d rethink the ASEAN markets that they’ve overlooked. If you put all of the nine ASEAN countries together, the population in those countries would equal China’s population. If you make products that are right for this market, you have a high chance of succeeding. I wish a lot of K-beauty brands that are made for the ASEAN market would come out. In order for that to happen, rather than making expensive products with high-quality ingredients, light and effective products without all the unnecessary fluff are what need to be made. Korea is exceptionally good at manufacturing cosmetics. In the end, what’s important is who you target.