With its reasonably priced costs and princess aesthetic, Etude Home has lengthy served as a haven for younger ladies. Its retailer design is a cross between a fairytale fort and a dollhouse, boasting a dreamy, pink inside, checkered flooring, chandeliers, and even a Cinderella-like carriage. Devoted to fostering a “tradition of Make-up Play” and serving to newcomers “uncover [their] true magnificence,” the Korean label has conquered hearts all over the world.
However now, it joins a listing of manufacturers which have bitten the cosmetic-grade glitter mud: after seven years of working within the mainland, Amorepacific-owned Etude Home is shutting its doorways. In early March, native media reported that the cult-favorite magnificence line had closed all of its bodily areas in China, with multi-brand retailer The Colorist now it’s solely offline channel.
Etude Home’s flagship retailer in Singapore. Photograph: Courtesy of Etude Home
At its peak, Etude Home had 85 retailers throughout 25 cities in China, with tons of extra in Korea and overseas. Although merchandise are nonetheless obtainable on-line (by the model’s flagship shops on Tmall, WeChat, and Little Pink E-book), how did it go from queen of the fort to locking its gates? Under, Jing Each day analyzes the obstacles Etude Home confronted out there, what different retailers can study, and whether or not this alerts a closing chapter for Ok-beauty in China.
Political stress taints model notion
Pushed by comparatively open worldwide change and a rising center class, Korean cultural merchandise turned enormously widespread in China in the beginning of the century, from musical acts like H.O.T. and Shinhwa to movie and TV reveals. It was on the again of this “Korean Wave” that Ok-beauty rose to recognition, with magnificence conglomerates using Ok-pop figures and product placements to spice up gross sales. And it labored, for some time.
“My Love from the Star,” for instance, was so well-received that the YSL lipstick utilized by the feminine lead bought out worldwide after the Ok-drama aired in 2014. As one of many official sponsors of the present, Amorepacific reaped main advantages, seeing gross sales of its skincare merchandise and lipsticks soar 75 p.c and 400 p.c, respectively — largely because of China. That very same 12 months, Korean beauty exports to China elevated 89 p.c year-on-year to succeed in $600 million.
Since then, the tide on Korean merchandise has turned. A part of that is rooted in politics: South Korea’s choice to cooperate with the US to construct the THAAD missile protection system in 2017 resulted in China banning Korean imports for 2 years. Naturally, this had an quick influence on the wonder trade, from native e-commerce websites discontinuing gross sales to fewer Chinese language vacationers in Korea. Nevertheless it’s arguably the lingering results, specifically the anti-Korean sentiment and surging nationalism, which might be proving extra troubling.
From 2013 to 2017, the expansion charge of Korean cosmetics exports to China stood at 66 p.c, however then tumbled to twenty p.c in 2018. Etude Home’s earnings mirrored this drop, with gross sales peaking in 2014, then plunging from $266 million to $177 million in 2017, right down to $88 million in 2019. With this in thoughts, manufacturers ought to be cautious of how worldwide relations can sway client conduct, notably now as China-US and China-EU ties quickly deteriorate.
COVID-19 disrupts magnificence consumption
Ok-beauty manufacturers took an even bigger hit as soon as the pandemic struck. Not solely have been on-line gross sales not sufficient to offset falling foot visitors, however shifting client habits — reminiscent of lowered spending on colour cosmetics — put Etude Home at a drawback.
In line with Amorepacific’s 2020 outcomes, the corporate as a complete suffered. Income for the fiscal 12 months was down 20 p.c to $3.9 billion, with cosmetics, which makes up virtually half of its income, tanking 26 p.c year-over-year. And Etude Home fared the worst, being the only model among the many group’s 37 subsidiaries to face capital impairment. Resulting from cumulative web losses and the prices of restructuring retailers, Etude Home’s whole fairness now stands at minus 6.6 billion gained (minus $5.8 million), Amorepacific lately disclosed to The Korea Occasions.
Thankfully, the wonder trade in China stays resilient, albeit modified. For one, above-the-mask make-up is on the rise, with Tmall information exhibiting a 150 p.c improve in gross sales of eye make-up merchandise in February 2020. Skincare manufacturers like SkinCeuticals and Avène have additionally fared properly within the nation by selling their merchandise as a part of quarantine skincare routines and options for masks irritation. Magnificence manufacturers that need to keep related can lean into these COVID-related tendencies, framing their merchandise as stay-at-home or masks carrying “must-haves.”
Avène highlights its merchandise as options to allergy symptoms and zits ensuing from lengthy intervals of masks carrying. Photograph: Avène’s Weibo
Weak model positioning erodes market share
In fact, not the entire Etude Home’s woes might be blamed on exterior components. Enjoying a bigger function within the model’s downfall, arguably, is its lack of differentiation.
Many Ok-beauty manufacturers that fall within the low- to mid-end value vary have develop into widespread for quick magnificence, shaving the R&D cycle from a 12 months down to only 4 months. Whereas this enables for extra frequent drops (and for manufacturers to hitch the newest fads), it doesn’t essentially imply these merchandise are extra localized or progressive.
“[Innisfree, The Face Shop] and Pores and skin Meals all have the identical traits: pure, wholesome and reasonably priced merchandise. Whatever the blessings of the Korean Wave, these manufacturers are too homogeneous,” mentioned Kathy Liang, a former purchaser at a Korean cross-border e-commerce platform, to Vogue Enterprise. Though Etude Home distinguishes itself with its girly aesthetic, it too affords many merchandise like sheet masks and cleaning oils that blur along with opponents’.
On the similar time, the model has struggled to develop past its starter pack positioning and sustain with shoppers. “The shoppers from its early days have steadily misplaced their pupil standing and upgraded their consumption,” retail trade analyst Yun Yangzi defined to native media. “Nonetheless, Etude Home maintains its reasonably priced make-up positioning, ignoring the wants of previous client teams whereas failing to draw new prospects like reasonably priced native manufacturers Good Diary or Florasis.”
C-beauty rivals trip the “Guochao” wave
Etude Home initially gained large with its cost-effective merchandise, inventive packaging, and fast turnaround, however these traits now not distinguish it in at this time’s aggressive market. Not solely do C-beauty manufacturers additionally provide high quality merchandise at affordable costs, however they’ve an excellent stronger grasp of which advertising and marketing techniques will attraction particularly to Chinese language shoppers.
As Allison Malmsten, market analyst at Daxue Consulting, informed Jing Each day, “Home manufacturers have some great benefits of pulling in Chinese language inventive parts (Florasis, for instance), curating their advertising and marketing techniques to WeChat or different platforms that are native to China (Good Diary), and understanding native skincare wants reminiscent of delicate pores and skin (Winona).”
Left: Florasis’ lipstick highlights Chinese language woodcarving craftsmanship. Proper: Good Diary companions with KOL Li Jiaqi to succeed in totally different communities on social media. Photograph: Courtesy of Florasis, Good Diary.
As such, Chinese language shoppers are exhibiting larger desire for homegrown manufacturers, a pattern generally known as Guochao. World gamers, due to this fact, ought to look to C-beauty for methods to win the market, reminiscent of diversifying co-branding, cooperating with totally different ranges of influencers, incorporating Chinese language design parts and colours, in addition to tailoring content material to every distinctive digital platform.
A brand new chapter for Etude Home?
However the rise of C-beauty doesn’t must imply the top of Ok-beauty, Malmsten mentioned. “Tier-1 cities are the least influenced by the [Guochao] pattern and usually tend to proceed shopping for overseas magnificence merchandise,” she defined. “Tmall’s information reveals solely round 10 p.c of home magnificence model consumption is in tier-1 cities in 2020.”
And that is the place Etude Home’s partnership with The Colorist comes into play. By means of the Chinese language cosmetics retailer, the model continues to be capable of keep a bodily presence within the nation and even penetrate new cities because the chain expands. The Colorists’s recognition amongst younger shoppers — sparked by its social media-worthy decor and immersive experiences — may also assist Etude Home attain new audiences and elevate its notion as stylish and funky by affiliation.
The Colorist’s colourful decor encourages buyers to hang around within the retailer and put up on social media. Photograph: The Colorist’s Fb
Moreover, divesting from brick-and-mortar will assist unlock assets to ramp up e-commerce. Thus far, the model is already taking a web page out of their C-beauty’s e book by collaborating with Hershey Kisses, which it’s selling closely to its 1.5 million followers on Weibo.
So whereas Ok-beauty has plenty of catching as much as do, Etude’s story isn’t over but. Maybe these adjustments are precisely what it must get its fairytale ending.