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.