Latest / Trumponomics / 51: Fancy Face Cream, South Korea's Next Economic Engine

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51: Fancy Face Cream, South Korea's Next Economic Engine · Trumponomics

0:00
Speaker 1: Brought to you by stage Summit Live, the virtual conference
0:03
Speaker 1: that provides all the highlights of Sage Summit from the
0:05
Speaker 1: convenience of your desk, celebrity entrepreneurs, inciple workshops absolutely free.
0:11
Speaker 1: Register at Stage Summit livestream dot com. You know, this
0:15
Speaker 1: is how the economies of the future are making their mark, right,
0:18
Speaker 1: not with a bang or or remote control, but with
0:21
Speaker 1: some cream on your face. Right? Fair enough, Hi, and
0:31
Speaker 1: welcome back to Bloomberg Benchmark, a show about the global economy.
0:35
Speaker 1: It's Thursday August. I'm Kate Smith, an editor for Bloomberg
0:38
Speaker 1: News here in New York, and I'm Scott Lanman, an
0:40
Speaker 1: economics editor with Bloomberg News in Washington. So today we're
0:43
Speaker 1: gonna be talking about the economics of beauty and specifically
0:47
Speaker 1: that in South Korea. And to help us do that,
0:49
Speaker 1: we have a couple of really special guests. So first
0:52
Speaker 1: we have Nina Bahador. She's here in the studio with
0:54
Speaker 1: us in New York. Nina is a senior editor at
0:56
Speaker 1: self dot com, which is a Conde Nast publication. And
0:58
Speaker 1: a bit later on the show, we're gonna be bringing
1:00
Speaker 1: on Alicia Yune and she's the founder of Peach and Lily,
1:03
Speaker 1: which is a Korean beauty company that sells products to
1:06
Speaker 1: US consumers. But more on that later. So here's the
1:09
Speaker 1: background for the show that we're gonna be talking about today.
1:12
Speaker 1: A few weeks ago, I told the Benchmark team about
1:14
Speaker 1: this idea for an episode, the idea that South Korean
1:17
Speaker 1: women and men for that matter, and they spend as much, way,
1:22
Speaker 1: way more money on their beauty regiments than virtually anywhere
1:25
Speaker 1: in the world. And I'm not talking about things necessarily
1:28
Speaker 1: like lipsticks and eyeliner, but also there's skincare specifically, And
1:33
Speaker 1: everyone thought I was wrong, but when we looked into
1:36
Speaker 1: the numbers, it was actually even more true than we
1:39
Speaker 1: originally had thought. I'm not even close to anything resembling
1:43
Speaker 1: an expert in this kind of subject, Kate. I have
1:46
Speaker 1: no kind of skincare routine. The only the only product
1:49
Speaker 1: I use, if you can call it that, is shaving cream.
1:51
Speaker 1: So I'm basically started from zero on this topic, and
1:54
Speaker 1: I had to do some research of my own. So
1:57
Speaker 1: I contacted folks at euro Monitor, which is a market
2:01
Speaker 1: research firm. They were friendly enough to provide some some
2:05
Speaker 1: helpful data statistics to help figure this out, and then
2:09
Speaker 1: my colleague Alex Tanzi, who's kind of our data grew
2:12
Speaker 1: here in d C, helped calculate these these spending figures
2:16
Speaker 1: on beauty and cosmetic products against per capita g d P,
2:20
Speaker 1: and you know, we actually found that South Korea is
2:23
Speaker 1: all the way on top of that list, and they
2:26
Speaker 1: spent almost one percent of their per capita GDP on
2:30
Speaker 1: beauty and personal care, and their figures were up from
2:35
Speaker 1: five years ago. You compare that to the United States,
2:38
Speaker 1: for example, and the United States was just under half
2:41
Speaker 1: a percentage point, and that was about half of what
2:44
Speaker 1: the Korean spending was as a proportion of per capita spending.
2:50
Speaker 1: And you know, Asia is not just limited to South Korea.
2:53
Speaker 1: Japan and Hong Kong were also two of the other
2:56
Speaker 1: top five spots for the highest amount of perk happen
3:00
Speaker 1: to GDP spend on beauty products. And it's again not
3:04
Speaker 1: just their money that they're spending, but it's also their time.
3:07
Speaker 1: This is I think one of the most fascinating statistics
3:10
Speaker 1: I've read about this, and it's that the average South
3:12
Speaker 1: Korean woman spends fifty five minutes on her skincare regimen.
3:17
Speaker 1: But I mean it can be also up to two
3:18
Speaker 1: or three hours at day, Scott. And I mean I
3:21
Speaker 1: spent twenty minutes on my skin last night, and I
3:23
Speaker 1: thought I was doing really, really well, but apparently in
3:25
Speaker 1: the global spectrum of things I I did not. But
3:29
Speaker 1: Nina help us out here, and first of all, thanks
3:31
Speaker 1: for joining us. So what's so different about beauty and
3:36
Speaker 1: Asia that they can spend twice as much money and
3:39
Speaker 1: so much more time? Sure, I imagine there are two
3:42
Speaker 1: things that play here. One is that there are many
3:44
Speaker 1: more steps in your average skincare routine than there are
3:47
Speaker 1: in a Western woman. So for example, people in the
3:50
Speaker 1: US might cleanse, tone and moisturize and think they're doing
3:53
Speaker 1: a very complex routine. Or they might use an SPF
3:56
Speaker 1: in the morning and a retinal at night, and that seems,
3:59
Speaker 1: you know, high tech, and that seems like they're doing
4:01
Speaker 1: a great job. Whereas well, disclosure, that's exactly what I do,
4:04
Speaker 1: and I think I'm I think I'm really great about that.
4:06
Speaker 1: That's what I do as well, Scott. You don't do that,
4:09
Speaker 1: no retinal, Scott, I have some some SPF. I'll have
4:12
Speaker 1: to send it to you. I'd love to have. But
4:15
Speaker 1: generally speaking, there are more steps involved in a Korean
4:18
Speaker 1: inspired skincare routine. And then the second thing is that
4:22
Speaker 1: I think the quality of the product is excellent. It's
4:25
Speaker 1: world class. Korean skincare companies are absolutely known for the
4:29
Speaker 1: incredible high quality of their products, which comes with a price. Tech.
4:32
Speaker 1: So I can talk you guys through a ten step
4:35
Speaker 1: Korean beauty routlain So Nina I so for this is
4:39
Speaker 1: a radio show, right so you can't see what's going
4:41
Speaker 1: on in the studio right now, but there is a
4:43
Speaker 1: there is a pile of products in front of Nina,
4:45
Speaker 1: and apparently this is what Korean women do most nights
4:49
Speaker 1: in their evening. I think I'm counting. Is that? Is
4:51
Speaker 1: that eleven different things? Yeah, some of them are doubles
4:54
Speaker 1: of the same thing at different things. The fast step
4:59
Speaker 1: is an oil cleans which removes sunscreen and any other
5:02
Speaker 1: oil based products. Then the second step is a foam cleanser,
5:06
Speaker 1: which are double cleansing. Double cleansing says the big thing.
5:09
Speaker 1: So it foam cleanser removes dirt or sweat. Third step
5:13
Speaker 1: would be exfiliation. That's usually a product with a bit
5:15
Speaker 1: more grit in it and it removes dead skin cells.
5:18
Speaker 1: The fourth step is tona, which hydrates and refreshes the skin.
5:22
Speaker 1: Step five is the essence. And this is a big trend.
5:25
Speaker 1: We're seeing people pick up more and more which you
5:27
Speaker 1: should think of as a primer that helps your skin
5:30
Speaker 1: absorb the products you're layering on next, and that's often
5:33
Speaker 1: described as the heart of real skincare. And people in
5:36
Speaker 1: the US are really learning more about this. And I
5:38
Speaker 1: was that the same as when like Western women think
5:40
Speaker 1: of like a serum. So step six is the syrius.
5:43
Speaker 1: I'm sorry. The serum is something that contains a few
5:47
Speaker 1: active ingredients that address specific issues, so some some people
5:51
Speaker 1: have one for dark spots or for redness. Step seven
5:55
Speaker 1: is a sheet mosque. You probably wouldn't do this every night,
5:57
Speaker 1: maybe twice a week. And those, just in case you
6:00
Speaker 1: didn't know, are a cotton mosque set or a fabric
6:04
Speaker 1: moss saturated with different products to address different issues. Um,
6:07
Speaker 1: and then your next step would be I cream. There's
6:10
Speaker 1: more we have not gotten. Step eight is there are
6:16
Speaker 1: only ten steps got you You'll be okay. So the
6:20
Speaker 1: I cream any specific eye concerns you have, so puffiness
6:24
Speaker 1: or under eye circles or fine lines. Um. Step nine
6:28
Speaker 1: would be your face cream, your moisturizer locks in the
6:31
Speaker 1: moisture keeps you looking dewey and young. And then the
6:35
Speaker 1: final and to me and the most important step is
6:37
Speaker 1: your SPF. So I think this explains probably some of
6:41
Speaker 1: the background to this episode, which is that when we
6:44
Speaker 1: were talking about this episode, everyone assumed all of the
6:49
Speaker 1: latest greatest beauty things were coming out of places in
6:52
Speaker 1: Western Europe. I mean Loreal in Um in France of course,
6:56
Speaker 1: and things like that. I mean that's really shifting though,
7:00
Speaker 1: because South Korea, ever since the mid two thousands, they've
7:02
Speaker 1: they've really been slowly creeping up on those giants, the Loreal,
7:05
Speaker 1: the landcome Um. You know, some of the most savvy
7:08
Speaker 1: beauty buyers aren't necessarily going to sacks to try to
7:11
Speaker 1: find the next beautiful face cream. They're looking online and
7:14
Speaker 1: looking in South Korean companies. And I mean some of
7:16
Speaker 1: our listeners are probably more familiar with South Korean government
7:21
Speaker 1: supported companies like Samsung, LG, Kia, things like that, But
7:26
Speaker 1: those were the same over levered companies that actually pulled
7:29
Speaker 1: Korea into a recession in the mid nine nineties, which
7:33
Speaker 1: culminated in a fifties seven billion dollar bailout that came
7:37
Speaker 1: from the I M F. And now, Kate, you're you're
7:39
Speaker 1: starting to speak my language, really fading there, and I
7:43
Speaker 1: just had no idea what what to say. But you know,
7:46
Speaker 1: finally talking about the Korean economy, all right, I can
7:48
Speaker 1: I can get involved in that. Of course, you know
7:51
Speaker 1: when we talk about that, now, you know, you still
7:53
Speaker 1: have those those big companies and the Korean economy has
7:56
Speaker 1: been has been rising for some time, but they're not
8:00
Speaker 1: the only game in town for them, and they're the
8:02
Speaker 1: Korean government has turned to its entertainment industry in some way,
8:06
Speaker 1: you know, or or it's developed and it's it's become
8:09
Speaker 1: almost a form of soft power k pop you think
8:12
Speaker 1: of Gangnam style that I can't believe it, but it's
8:16
Speaker 1: really kind of shifted the focus to skincare and and
8:19
Speaker 1: gotten so many uh you know, people around Asia to
8:23
Speaker 1: want to look like Korean pop stars. There's been tax
8:27
Speaker 1: in seatives for beauty exports, a tax break on beauty
8:30
Speaker 1: companies that are export only, a ten percent tax break
8:34
Speaker 1: on cosmetic procedures aimed at potential Chinese plastic surgery patients.
8:40
Speaker 1: I mean, this is all kind of helped boost the
8:43
Speaker 1: economy in some way. And turn the attention to Korea, right, yeah,
8:47
Speaker 1: and you know, and all of those incentives it seems
8:50
Speaker 1: to have worked in some sense, I mean for a country.
8:53
Speaker 1: And let's let's also put this in perspective. South Korea
8:55
Speaker 1: is a country that is a little larger than the
8:58
Speaker 1: state of Maine. So the country of that size is
9:01
Speaker 1: homes to thousands of different beauty companies. And last year,
9:06
Speaker 1: for the first time, the country exported more beauty products
9:09
Speaker 1: that it imported, and overseas sales for those beauty products
9:13
Speaker 1: they rose by seventy three. Now Scott put that in
9:17
Speaker 1: context for us, for our listeners about all others South
9:19
Speaker 1: Korean exports. South Korean exports have been falling pretty precipitously
9:24
Speaker 1: for the last year. I mean most recently in in July,
9:27
Speaker 1: I think there was a ten percent drop from a
9:30
Speaker 1: year earlier. So overall trade kind of like the rest
9:34
Speaker 1: of the world, is slipping. And you see the the
9:38
Speaker 1: Export Import Bank of Korea has called beauty a quote
9:43
Speaker 1: unquote promising industry, meaning has the potential to post over
9:47
Speaker 1: ten billion worth of overseas sales in the next five
9:49
Speaker 1: to ten years. Now it's only at about UH one
9:52
Speaker 1: and a half billion now, which is you know, well
9:55
Speaker 1: under one of of overall trade. But you know, if
9:59
Speaker 1: you boost that fair or amount, it does actually become
10:01
Speaker 1: a growth industry for South Korea and engine in its
10:05
Speaker 1: trade and help the economy grow. If say, like Samsung
10:10
Speaker 1: isn't selling enough cell phones at that kind of thing,
10:13
Speaker 1: I mean, what what Maybe maybe Nina can just fill
10:16
Speaker 1: us in and tell us more about what is the
10:18
Speaker 1: over what is the perception of these products? Are our
10:21
Speaker 1: South Korean products the premier products now instead of the
10:24
Speaker 1: traditional brands? I think for young people and young women
10:28
Speaker 1: like Kate and myself who are always looking for the
10:31
Speaker 1: most advanced in the next big thing, that Korean beauty
10:34
Speaker 1: is absolutely what we want to be looking at. A. Yeah,
10:38
Speaker 1: and it seems like kind of all of the emphasis
10:40
Speaker 1: that the Korean government has put on projecting these to
10:43
Speaker 1: be the most innovative products in the world. It mean,
10:46
Speaker 1: it seems to have worked. Uh, Nina, thank you so
10:48
Speaker 1: much for helping a couple of finance geeks like Scott
10:51
Speaker 1: and myself figure out where these numbers actually mean. Um,
10:55
Speaker 1: So we're going to take a quick break to hear
10:57
Speaker 1: a word from our sponsors. But when we get back
11:00
Speaker 1: We're gonna dig into the history of these beauty products.
11:03
Speaker 1: Where did this tent set regime come from? And to
11:06
Speaker 1: do that, we're going to bring on Alicia. You know,
11:08
Speaker 1: she's a Harvard Business School grad and the founder of
11:11
Speaker 1: Peach and Lily, which is a Korean beauty company that
11:14
Speaker 1: brings k beauty to the US. Brought to you by
11:21
Speaker 1: Stage Summit Live, the virtual conference that provides all the
11:24
Speaker 1: highlights of Stage Summit from the convenience of your desk,
11:27
Speaker 1: celebrity entrepreneurs, incipile workshops, absolutely free registered Stage Summit livestream
11:34
Speaker 1: dot com. Alicia, thank you so much for joining us
11:38
Speaker 1: for our listeners. Alicia founded Peach and Lily in It's
11:43
Speaker 1: a it's a Korean beauty e commerce company, and they
11:46
Speaker 1: actually opened their first brick and mortar store here in
11:49
Speaker 1: New York, the macy'son Flushing last November, and they opened
11:53
Speaker 1: their second physical store near Pasadena and California last year.
11:57
Speaker 1: So congratulations, thank you so much. Yeah, So, Alicia, thank
12:00
Speaker 1: you so much for joining us. Yeah, it's awesome to
12:03
Speaker 1: be here. Alicia, tell us a little bit about your background.
12:05
Speaker 1: You're you're from Seoul, right, Yeah, so I was born
12:08
Speaker 1: in Seoul, moved to the States, moved back when I
12:10
Speaker 1: was in elementary school, and I was there basically until college.
12:13
Speaker 1: So I grew up in both places. Um and I
12:18
Speaker 1: trained as an esthetician actually in Korea, and a U
12:21
Speaker 1: s licensed as setician as well. So just also interesting
12:24
Speaker 1: to see how on a formal education basis, approach to
12:27
Speaker 1: skincare is actually quite different in the two countries. Um
12:31
Speaker 1: And I actually started off my career in finance and consulting.
12:34
Speaker 1: I was like Bowman Sax and the Boston Consulting Group
12:36
Speaker 1: for a while. So you're back home in Boomberg, yeah
12:39
Speaker 1: kind of, and then you know, just always having been
12:43
Speaker 1: passionate about skincare and realizing that these amazing carean beauty
12:47
Speaker 1: products weren't available state side. You know, I left BCG
12:50
Speaker 1: in to start peaching Lily. I'm curious actually, you know,
12:54
Speaker 1: growing up, Alicia, you know, when when were you introduced
12:57
Speaker 1: to this kind of skincare routine or when did the
13:00
Speaker 1: idea of Korean beauty first kind of materialize in your life.
13:05
Speaker 1: That's a really funny question because I can't even remember
13:08
Speaker 1: because it's sort of like in the US, a mother
13:12
Speaker 1: will be teaching their child, how to brush their teeth.
13:16
Speaker 1: It's just a very basic and fundamental part of self care.
13:20
Speaker 1: And so it's always something you know, I've been taught
13:22
Speaker 1: ever since I was a tiny toddler, and so yeah,
13:26
Speaker 1: just as long as I could remember, it was a
13:28
Speaker 1: part of my life. See that's fascinating to me because
13:31
Speaker 1: in the US, makeup and skincare it's almost taught as
13:34
Speaker 1: if it's this kind of reluctant thing. Your mother will
13:37
Speaker 1: bring you to the department store and you know, get
13:40
Speaker 1: you set up with what you need. But it's not
13:41
Speaker 1: something like a necessity. It's always considered an indulgence. It
13:45
Speaker 1: seems like that's not the case that in South Korea,
13:47
Speaker 1: not at all. In fact, in the US, people have
13:51
Speaker 1: very open conversations about their fitness their nutrition. In Korea,
13:55
Speaker 1: that's the same thing with skincare. And if you were
13:58
Speaker 1: to say, you know, I don't take care of my skin,
14:00
Speaker 1: you know, people might wonder, you know, why don't you?
14:03
Speaker 1: It's good for you, Right, It's like saying you don't
14:05
Speaker 1: take a shower every day. It's something like that. Yeah,
14:09
Speaker 1: let's actually talk about Peach and Lily for a moment. Alicia,
14:12
Speaker 1: can you tell us about the economics of the beauty business.
14:15
Speaker 1: I mean, if skincare in Korea is important as showering
14:19
Speaker 1: or brushing your teeth, face cream is actually you know,
14:23
Speaker 1: especially the Korean prance, it's can be a lot more
14:25
Speaker 1: expensive than a tube of toothpaste. Is this the kind
14:28
Speaker 1: of thing that people pay for no matter what it is?
14:32
Speaker 1: Is it price sensitive? Does it depend on how much
14:34
Speaker 1: income you have? So, first, when it comes to Korean
14:37
Speaker 1: women in Korea spending on skincare, it's not as elastic
14:44
Speaker 1: as other industries and categories. You know, obviously it's not
14:47
Speaker 1: like sustenance, but it is one of those things that
14:51
Speaker 1: you invest in as self care. Having said that, in
14:54
Speaker 1: Korea it's one of the leading countries when it comes
14:58
Speaker 1: to really discerning what products are good. It's no longer
15:01
Speaker 1: the error where just because something is expensive, you would think, oh,
15:05
Speaker 1: that's a better product. Korean women will dig into the
15:08
Speaker 1: formulations and they'll look for value. So it's not that
15:11
Speaker 1: they're necessarily looking for cheaper products, but they're looking for
15:14
Speaker 1: products that really are priced at values. So you're getting
15:17
Speaker 1: you know, even if you're spending three you're getting something
15:19
Speaker 1: really incredible for that. So Korean beauty brands really can't
15:23
Speaker 1: get away with too much. Just pure marketing doesn't work anymore.
15:26
Speaker 1: It has to be efficacious. So even lower income customers
15:29
Speaker 1: are spending a lot of money on these kinds of things.
15:32
Speaker 1: For sure, people with higher income are spending more, and
15:36
Speaker 1: not just with products, but with treatment and you know,
15:39
Speaker 1: facials on a weekly basis. But at the same time,
15:42
Speaker 1: you know, there are amazing beauty products that are priced
15:46
Speaker 1: at mass prices. And so when I interview a lot
15:49
Speaker 1: of beauty brands and career one thing they always say
15:52
Speaker 1: is you can make money in any segment. You can
15:55
Speaker 1: price things low, you can price things high. There are
15:57
Speaker 1: going to be people who gather around those products. The
16:01
Speaker 1: only thing you need to care about is, you know,
16:04
Speaker 1: your pricing strategy really depends on your distribution strategy. But
16:07
Speaker 1: the fundamental thing is just have a great product. At
16:10
Speaker 1: least this has been fascinating. It's really it's a whole
16:13
Speaker 1: new frontier of beauty products. So thank you so much
16:15
Speaker 1: for kind of putting that into context for us, and Nina,
16:18
Speaker 1: thank you as well for you know, helping us out
16:20
Speaker 1: with exactly putting these, uh these economic numbers into actual
16:24
Speaker 1: products and things. Uh So, Scott this is This has
16:28
Speaker 1: been fascinating, is it is? It's a learning experience. I
16:33
Speaker 1: mean that stuff that women have to go through just
16:35
Speaker 1: to you feel like they're taking care of their skin
16:37
Speaker 1: is is mind blowing. But I mean, what about the
16:41
Speaker 1: idea that kind of South Korea has pulled themselves out
16:44
Speaker 1: of economically tricky spot and capitalizing on kind of this
16:49
Speaker 1: innate national trend. I mean, what do you think about that? Well,
16:52
Speaker 1: I think I think the jury is still out on that.
16:53
Speaker 1: I think it will probably take a while for, you know,
16:56
Speaker 1: to truly show whether the you know, the beauty industy
17:00
Speaker 1: tree is having a massive effect on g d P.
17:02
Speaker 1: But it is a fact that you know, a lot
17:05
Speaker 1: of the it has become a significant growth industry, and
17:08
Speaker 1: a lot of the world knows about it. So it's
17:10
Speaker 1: almost like becoming on a par with Samsung phones, l
17:14
Speaker 1: G t vs, Hunda, Kia cars, that sort of thing.
17:17
Speaker 1: It seems like, because I'm wondering, you know, if things
17:19
Speaker 1: get bad in here in the US, are we going
17:21
Speaker 1: to have to start exporting the Kardashians. I think they've
17:27
Speaker 1: already taken over a lot of the world, do I
17:29
Speaker 1: don't think they need the government's health well, you know
17:32
Speaker 1: this is how the economies of the future are making
17:34
Speaker 1: their mark, right, not with a bang or or remote control,
17:38
Speaker 1: but with some cream on your face. Right, fair enough?
17:41
Speaker 1: Thank you everyone for listening. Bloomberg Benchmark will be back
17:44
Speaker 1: next week and until then, you can find us on
17:46
Speaker 1: the Bloomberg terminal and at Bloomberg dot com, as well
17:49
Speaker 1: as in ontoons, Podecast, and Stitcher. While you're there, take
17:53
Speaker 1: a minute to rate and review the show so more
17:54
Speaker 1: listeners can find us and let us know what you
17:57
Speaker 1: thought of the show. You can talk to and follow
17:59
Speaker 1: us on Twitter at Scott Laman and at by Kate Smith,
18:03
Speaker 1: and don't forget to follow our guests as well. They're
18:06
Speaker 1: on Twitter. You can find Nina at n Bajador and
18:09
Speaker 1: you can also find Alicia's Peach and Lily at Peach
18:13
Speaker 1: and Lily and I highly recommend checking out their Instagram
18:16
Speaker 1: page as well. It is fascinating. I'm I'm a little
18:19
Speaker 1: addicted to it now, Scott, I'm going to check it
18:21
Speaker 1: out to you should it's thanks so much, see you
18:25
Speaker 1: next week. Brought to you by Stage Summit Live, the
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