The emergency declaration abruptly announced on Dec. 3 of last year sharply cooled consumer sentiment. Both self-employed individuals and domestic retailers, including department stores and consumer goods sellers, suffered from poor sales during the holiday shopping season.
According to related industries on the 5th, the consumer sentiment index (CCSI) published by the Bank of Korea recorded a drop of 12.5 points to 88.2 in December of last year, down from November's 100.7. This is the largest drop since March 2020, at the start of the COVID-19 pandemic. The index itself was also the lowest in 2 years and 1 month since November 2022.
This has cast a shadow over the K-beauty boom, which was thriving at the time. During the same period, cosmetics retail sales amounted to 3 trillion won, a decrease of 2.1% compared to the same month last year. Although online sales increased, it was difficult to offset the decline in offline sales.
In the beauty industry, it is said that the biggest victim of this emergency is CJ Olive Young, a representative of K-beauty. Olive Young holds the largest sales event of the year at the end of the year, but this year's event coincided with the emergency declaration, hitting them hard. Olive Young held its 'All Young Sale' from Dec. 1 to 7 of last year.
Typically, the fourth quarter is a peak season for maximizing sales for Olive Young. November and December are periods marked by demand for year-end gifts and events for Christmas and New Year, leading to an increase in cosmetics consumption. Even last year, when growth was slowing, fourth-quarter sales accounted for 26.5% of total sales.
However, with the emergency declaration occurring during the year-end sale period, it has been reported that visitations to offline stores noticeably dropped. Brands had ambitious plans for their sales events, but due to a lack of foot traffic, year-end sales performance was reportedly the worst. A representative from a brand, speaking anonymously, said, "Olive Young told us to prepare thoroughly for the sales event, so we worked hard on it, but because of the emergency, we couldn't sell even 80% compared to the year-end season in 2023."
Indeed, while CJ Olive Young recorded its all-time high fourth-quarter sales of 1.2686 trillion won, the growth rate compared to the same period last year slowed to 19.2%, down from 23.4% in the third quarter. Earlier, the fourth-quarter sales in 2023 were 1.0641 trillion won, an increase of 38% compared to the same period last year. In the same period, net profit also increased to 73.1 billion won, up 31.7%. The slowdown in growth in the fourth quarter of last year is significant.
Recently, concerns about Olive Young's decline in growth have emerged. Although Olive Young has firmly established itself as the 'representative platform of K-beauty' leading the domestic health and beauty (H&B) market in recent years, it faces the dual burdens of intensified distribution competition and sluggish domestic economic conditions.
In particular, Daiso, which focuses on daily necessities, has rapidly expanded its cosmetics category, absorbing low-cost beauty demand primarily from the 10s and 20s age groups, posing a threat. E-commerce companies like Coupang, Musinsa, and Market Kurly are also strengthening their own beauty brands, heightening online competition. The continued contraction in consumer sentiment could also contribute to stagnation in growth.
A source from the beauty industry noted, "While Olive Young's fourth-quarter sales themselves recorded an all-time high, it is clear that the growth rate has declined. In a situation where consumer spending is contracted, there is a possibility that price sensitivity will increase, leading to customer outflows to Daiso or e-commerce."
A representative from Olive Young stated, "We are maintaining a solid growth trend based on our omnichannel strategy and the increase in foreign visitors."