Cosmetics stores in the popular shopping district of Myeongdong in downtown Seoul. (image: Yonhap)
SEOUL, Nov. 23 (Korea Bizwire) — Managers of brick and mortar cosmetics shops are taking to the streets amid cutthroat competition with online stores.
Some twenty managers staged a rally in front of the LG office building in Gwanghwamun on Thursday, complaining that online price competition is making their business intolerably difficult. “We want to live in a world without special sales,” they said.
They also held a rally last month in front of the LG Twin Tower at Yeouido urging for coexistence and cooperation.
“Headquarters have sought to increase sales and generate profits for member stores through special sales, but this strategy is now backfiring on us as it has now turned into excessive competition among companies,” said Si Jong-pil, president of The Face Shop-Nature Collection Store Association.
“Online prices are cheaper than the ones at member stores, and this is leading to financial difficulties.”
“Then there are the headquarters which, driven by excessive competition, are offering discounts of up to 70 percent, which is even cheaper than online prices,” he added.
“This not only undermines the market, but also hurts store managers who are constantly falling victim to unattainable sales goals and competition led by the conglomerates.”
Managers have even voiced the possibility of requesting an investigation by the Fair Trade Commission and filing a lawsuit against the companies for compensation.
Financial difficulties among brick and mortar cosmetics retailers became evident when Skinfood filed for corporate rehabilitation last month.
Managers of Skinfood member stores filed a lawsuit against Skinfood, criticizing the company for “not being responsible for bad management.”
“They insisted when we signed our contract that the deposit we paid in millions would be kept safe, but now there is no way for us to get our deposit back,” said one manager.
President Si vowed to take collective action jointly with Innisfree and Etude next year to urge for better coexistence.
The issue surrounding the conflict and bad management of retail shops began to surface in the last couple years as the number of stores expanded to over 7,000 across the country.
Only counting the number of one-brand stores, such as Innisfree, the Faceshop, Nature Republic Co., Misha, Etude Corp., It’s Skin Co., the Saem Co., and Skinfood, there are more than 5,860 stores across the country.
There are additional 1,476 stores including Health and Beauty (H&B) stores such as Lotte LOHB’s, CJ Olive Young, and others.
Cosmetics stores began to suffer when Chinese tourists vanished from the streets following the THAAD(Terminal High Altitude Area Defense) dispute with China.
They have since been subject to overwhelming competition with online and duty-free stores.
The rise of H&B shops led by large conglomerates only made the situation worse, driving one-brand brick and mortar retailers to take the inevitable choice of restructuring.
“The increasing number of H&B stores along with online, duty-free shops is putting heavy pressure on other cosmetic brands,” said a source familiar with the industry.
H. M. Kang (hmkang@koreabizwire.com)
