Scores of Korean startups are wooing local consumers with a new business model: receive a new set of cosmetics or other products for the cost of a prepaid subscription fee

2013-07-23

ShoeDazzle-like firms spring up

By Choi Kyong-ae

Scores of Korean startups are wooing local consumers with a new business model, monthly online subscription services. The business model offers a simple message to consumers: sign up, and once a month you’ll be able to receive a new set of cosmetics or other products for the cost of a prepaid subscription fee. The concept began in the U.S. where companies such as Butch Box, ShoeDazzle and Wittlebee deliver cosmetics, shoes and clothes for children, respectively, each month via mail to the doorstep of their subscribed members.  In Korea, GLOSSYBOX was the first subscription service provider when it entered the “most dynamic” market among Asian countries in June 2011. The German company made inroads into Japan and China later.“We chose Korea over Japan and China as our first target marketplace in Asia because it is an important test bed market for global players,” GLOSSYBOX Chief Marketing Officer Jun Park told The Korea Times.

As of Tuesday, GLOSSYBOX has 15,000 people signed up for its subscription service in the Korean market valued at 30 billion won ($27 million). The company posted 3.5 billion won in sales last year, sharply up from 900 million won earned for the seven months since its launch in mid 2011.

Park expected the domestic market will continue to grow, though not at an explosive rate because the new type of consumption is becoming particularly popular with trend-sensitive women in their 20s and 30s.

In fact, “it is risky to buy a luxury cosmetics item at retail stores for more than 100,000 won without having a testing period,” Park said. “The biggest merit of the subscription service is for consumers to have a chance to test miniature-sized products at much lower prices before they make a final decision.”

Shin Tell-him, a manager at Galleria department store, said young male customers showed a strong response toward memebox’s products when Galleria temporarily ran pop-up stores for the brand in May. “There are still many who have yet to make their choices,” he said.

Analysts say the local subscription market is expected to double next year in terms of size due to rising demand in one of the world’s most wired countries.

Challenging GLOSSYBOX, memebox, which represents homegrown startups, is rapidly catching up to increase its paid membership to 25,000 as of Tuesday. Its sales stood at 1.2 billion won last year.

Kim Do-in, director of memebox, said the company is targeting to report sales of 5 billion won this year on the back of e-commerce, or business-to-customer, trade at its online shopping mall. GLOSSYBOX also plans to launch an e-shopping mall here late this year.

GLOSSYBOX and memebox run the same subscription plan which costs 16,500 won a month and will provide their customers with a set of five “beauty products” selected by in-house merchandisers.

The two companies partnered with hundreds of cosmetics brands to offer their products to customers. They conduct promotional activities and market research for the cosmetics firms in return for receiving cosmetics products free of charge.

Currently, with Germany leading the market, global subscription shopping membership has reached 500,000 to 600,000, said GLOSSYBOX’s Park.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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