[Exclusive] Shinsegae Inter's Wing 'VDIVOVICH'... Penetrates Chinese Coupang's 'Tmall Domestic Market'

First Step into China's Online Shopping Market in 2016... Achieved Results in Tmall Domestic Section After 4 Years
Expected to Increase Market Share in China's Domestic Market... Sales Growth Anticipated Through Wanghong Marketing
Full-Scale Launch of In-House Cosmetics Series Marketing... Plans to Enter JD.com and Tmall Global Sections

[Asia Economy Reporter Lee Seon-ae] Shinsaegae International's cosmetics brand VDIVOV has finally entered the Tmall Domestic Pavilion, the No.1 online shopping mall in China. Since entering the Chinese market, the brand has steadily pursued entry into the Tmall Domestic Pavilion, and it has borne fruit after four years. It is being recognized as a new leader of K-Beauty (Korean cosmetics wave) in the Chinese premium cosmetics market, being called the "Goddess Cosmetics" and "Petit Chanel."

Vidivici T-Mall domestic pipe image.

◆Opened Brand Pavilion in Tmall Domestic Pavilion... Wings for Chinese Sales= According to Shinsaegae International on the 10th, VDIVOV officially entered the Tmall Domestic Pavilion, which has the largest sales scale in the Chinese market, on the 2nd of last month, actively marketing to local consumers. Right after opening, it held a broadcast with famous Chinese social media influencer Wanghong Wei Ya, and all prepared quantities were sold out during the broadcast.

The Tmall Domestic Pavilion is a place used by local Chinese consumers like Coupang in Korea. Therefore, the number of customer inflows and sales scale are significantly higher than other online shopping malls. Most domestic cosmetics brands are only listed in the Tmall Global Pavilion, and VDIVOV has also been selling products only in the Global Pavilion. The Tmall Global Pavilion is a kind of direct purchase platform, similar to Coupang's Rocket Direct Purchase. Therefore, it is much smaller in scale than the Domestic Pavilion. As of 2019, total sales in the Tmall skincare category were 90.3 billion yuan, of which sales from the Global Pavilion accounted for only about 7%, or 6.4 billion yuan.

Except for brands of major domestic cosmetics companies, there are almost no brands listed in the Domestic Pavilion. The criteria for entering the Domestic Pavilion are strict, requiring not only brand power but also mandatory acquisition of Chinese hygiene permits. Currently, brands such as Whoo, Sulwhasoo, Su:m37, and Innisfree from LG Household & Health Care and Amorepacific are listed.

Shinsaegae International expects that the entry of VDIVOV into the Domestic Pavilion will accelerate the expansion of its business in China. Currently, it is selling mainly the most popular products in China, including cleansing foam, the Hyaluron7 skincare line, and some color cosmetics. They plan to expand detailed categories of skincare products as well as add makeup product lines.

Since entering the local online market in January 2016 by partnering with VIP.com, a Chinese online shopping mall, VDIVOV opened brand pavilions on Xiaohongshu in January 2019, JD.com in April, and Tmall Global Pavilion in May. Notably, about seven months after opening brand pavilions on JD.com and Tmall Global Pavilion, on Singles' Day last November, they sold a total of 150,000 products across both malls in one day, achieving sales of 2.7 billion KRW.

A Shinsaegae International official explained, "Since entering large-scale Chinese online shopping malls less than a year ago and achieving results beyond expectations, we will now actively increase our market share in the Chinese domestic market through the Tmall Domestic Pavilion."

◆Successful Diversion from Fashion to Cosmetics... Growing Yeonjak= Last year, Shinsaegae International recorded sales of 1.425 trillion KRW and operating profit of 84.5 billion KRW. This represents a 12.9% increase in sales and a 52.5% increase in operating profit compared to the previous year, marking the highest performance ever. This was made possible by a 37% leap in cosmetics sales. In particular, VDIVOV, which accounts for 63% of cosmetics sales, was the top contributor.

The industry evaluates Shinsaegae International's diversion as successful. When Shinsaegae International, originally a fashion company, acquired VDIVOV in 2012 during the fashion industry's boom without strengthening its fashion business but turning to cosmetics, the move was not well received. Especially since VDIVOV had not escaped losses for five years after acquisition, it was considered a reckless challenge.

However, Shinsaegae International continuously invested and renewed the brand to improve product quality, and the market eventually responded. VDIVOV's sales, which were only 1.9 billion KRW in 2012, surpassed 200 billion KRW last year. Sales increased by an astonishing 105 times in seven years since the brand acquisition. The cosmetics industry views the entry into the Tmall Domestic Pavilion as solidifying VDIVOV's position as a rising star in K-Beauty.

Shinsaegae International plans to significantly grow its first in-house cosmetics brand Yeonjak this year alongside VDIVOV to boost cosmetics sales. Launched in October 2018, Yeonjak means "a work made by nature" and is a high-functionality naturalistic cosmetic that maximizes the efficacy of premium herbal ingredients through scientific technology. Mid this month, they will open a brand pavilion on JD.com, the second-largest Chinese online shopping mall, and also enter the Tmall Global Pavilion. They plan to add four channels in the first half of the year, securing seven stores in major online malls in China. Yeonjak first entered the Chinese online market through Xiaohongshu, the largest community-type e-commerce site in China, in February last year.

A Shinsaegae International official said, "Yeonjak plans to firmly establish its position as a luxury herbal cosmetic through Wanghong marketing targeting Chinese millennials and expanding distribution networks this year," adding, "We will nurture strategic products that can represent the brand and rapidly increase market share in China through customized marketing activities."