Which Stocks Will Ride the K-Beauty Growth Train [Click eJongmok]

Expansion of Consumption Channels: Medical Aesthetics, Multi-Brand Shops, and Pharmacies
Focus on Cross-Channel Brands and Distributors with Dominant Channel Presence

The consumption channels for K-beauty products are expanding to include dermatology reservation services, multi-brand shops, pharmacies, and overseas distribution networks. As a result, analysts believe that the real investment opportunities lie with brand companies and B2B (business-to-business) distributors that have secured bargaining power within these channels.

On June 25, Samsung Securities suggested an 'overweight' stance on the medical device and cosmetics sectors in light of these trends. The company explained that the simultaneous expansion of medical aesthetics reservation services and both online and offline distribution channels is creating a cycle for K-beauty consumption, thereby opening up investment opportunities.

The domestic medical aesthetics reservation service market has grown since the launch of Babitalk in 2014, followed by Gangnam Unni and Goddess Ticket. The combined monthly active users (MAU) of these three services have increased from about 200,000 in 2015 to nearly 500,000 this year. Since 2023, as the number of foreign tourists has started to recover, spending on dermatology services has accounted for more than 50% of total medical tourism expenditures.

Jung Donghee, a researcher at Samsung Securities, stated, "As the main customers are diversifying from China and Japan to the United States, Southeast Asia, and other regions, the export competitiveness of K-dermatology services is being demonstrated. The experience of undergoing procedures leads to a preference for leading products in the category, which in turn connects to the consumption of cosmetics with the same ingredients."

Samsung Securities also highlighted the expansion of K-beauty distribution channels from multi-brand shops to pharmacies. Olive Young, the leading domestic beauty retail company, saw its sales per store grow more than 2.5 times compared to 2019, thanks to inbound growth and the strategic relocation of stores in key commercial districts. The company’s sales are projected to reach around 5.8 trillion won in 2025, with its market share in the domestic beauty retail sector now exceeding 20%.

Overseas expansion is also gaining momentum. Olive Young is entering the global market by launching shop-in-shop locations at Sephora and opening a direct online mall in the United States. Domestically, Daiso and Musinsa are entering the market, mainly focusing on color cosmetics and second brands, while large pharmacies are emerging as new K-beauty distribution channels amid a surge in pharmacy spending by foreigners.

However, not every company will benefit simply because distribution channels are increasing. The expectation is that bargaining power will be concentrated among essential brands that consumers actively seek out—regardless of the channel—and among distributors capable of supplying the entire K-beauty pipeline.

Jung emphasized, "The beneficiaries will be brand companies with strong customer loyalty that all distribution channels prefer, and B2B distributors capable of responding to the overall surge in demand for K-beauty. Attention should be paid to Pharmaresearch (medical devices), APR (cosmetics), and Sillicontwo (B2B distribution platform), which enjoy high customer brand loyalty."

Risks were also mentioned. Expanding from the U.S. online market into U.S. offline, European, and Middle Eastern markets could slow growth, as the marketing leverage of a single country diminishes. Additionally, cutthroat competition among domestic distribution channels may undermine potential profit margins. Jung noted, "Key challenges include expanding loyalty for a brand’s flagship products to other items and enhancing the distributor’s own curation and inventory management capabilities."

This content was produced with the assistance of AI translation services.