The United States will fully suspend the tax exemption system that has been applied to small imported goods worth $800 (about 1.11 million won). As a result, there is urgency within the K-beauty industry, which has been strengthening its reverse direct purchase (overseas customers directly purchasing Korean products through platforms) platforms.
According to the industry on the 6th, U.S. President Donald Trump signed an executive order on the 30th of last month (local time) to abolish the 'De Minimis' clause for countries around the world, including Korea. Accordingly, starting from the 29th, all small packages imported into the United States via international postal networks will be subject to tariffs. For six months after implementation, a mixed tariff will apply based on the tariff rate of the country of origin (15% for Korea) or a fixed rate of $80 to $200 (about 110,000 to 280,000 won) per item, and afterward, a uniform tariff will be applied.
◇ K-beauty reverse direct purchase boom… Will tariffs hold it back?
There are concerns that this measure will hinder the growth of the reverse direct purchase market. According to the Statistics Korea, the reverse direct purchase amount last year was 1.7225 trillion won, with the United States accounting for 20% of the total, making it second after China (56.8%). The reverse direct purchase amount from the U.S. had an average annual growth rate of 76% over the past five years since 2019. By item, fashion and cosmetics showed a high growth rate. The average annual growth rates for these two items over the past five years were 90.2% and 61%, respectively.
K-beauty corporations that have strengthened their own reverse direct purchase platforms also showed growth. CJ Olive Young's 'global mall' saw a 70% increase in sales in the first half of the year compared to the same period last year, with more than 40% of the sales increase coming from the U.S. Launched in 2019, the global mall currently serves over 150 countries, with a membership count of 3.35 million as of the end of June.
The reverse direct purchase platform 'Global Amore Mall' launched by Amorepacific Corporation in 2023 had 70% of its total users last year being American. Amore Mall's sales last year increased by 126% compared to the previous year, and the number of visitors rose by 72%.
Previously, as demand for K-beauty products increased in the U.S., the reverse direct purchase market size was expected to grow further. According to the industry, U.S. consumers spent approximately $1.7 billion (about 2.3613 trillion won) on K-beauty products last year, an increase of over 50% compared to the previous year.
However, as the U.S. decides to impose tariffs on all imported packages, there are voices of concern in the K-beauty industry regarding a decrease in sales and customers in the reverse direct purchase malls. In fact, since the U.S. abolished the small tax exemption system for Chinese products starting in May this year, the American operations of the Chinese e-commerce platforms Temu and Shein were severely impacted. According to market research firm Sensor Tower, the daily active users (DAU) of Temu and Shein in May decreased by 52% and 25%, respectively, compared to March before the tariff announcement.
◇ K-beauty efforts to diversify channels and emphasize product strength
Opinions within the industry are divided. First, there are claims that a decline in price competitiveness for K-beauty products, which have been emphasized for cost-effectiveness, will have a negative impact. When purchasing products worth $130 (about 180,000 won) from the Olive Young global mall to be delivered in the U.S., customers only had to pay the product price in the past, but under the new policy, they will now have to pay $149.5 (about 208,000 won). Consumer sentiment is expected to decline.
There are opposing views as well. Some assert confidence in the product quality of K-beauty. A representative from the cosmetics industry remarked, "Unlike Temu and Shein, which are popular for their low prices, K-beauty products are popular because they are of good quality and reasonably priced." They added, "Since this U.S. policy is applied not only to Korea but to the entire world, it is expected to have a limited impact."
However, smaller indie brands with a high percentage of sales to the U.S. are likely to be negatively affected. Another representative from the cosmetics industry noted, "For small brands doing business in the U.S. through large logistics or distribution companies, tariffs are now being imposed on distribution and agency commissions, which may make it harder for them to operate their brands in the future."
Some companies are showing efforts to diversify channels outside the U.S. to minimize risks. Silicon2, which operates the K-beauty reverse direct purchase mall 'StyleKorean,' saw North American sales account for 32% in the first quarter of last year, while Europe accounted for 24%. However, in the first quarter of this year, North America dropped to 18%, while Europe rose to 33%. They are active as K-beauty vendors in European cosmetics channels such as Boots in the UK, Sephora, and Rossmann. The industry expects that non-American regions (Europe, the Middle East, South America) will drive Silicon2's future growth.