Health Supplement Drugstore 'Jeongmol'
1st Branch Opens in Euljiro... Offline Market Strategy
Exclusive and Popular Products to Attract Visits
KGC Ginseng Corporation has opened the first store of 'Jeongmol,' a specialty health functional food store, marking its entry into the drugstore market. Amid the slowdown in the health functional food market caused by the COVID-19 pandemic and economic downturn, the company is pioneering new sales channels by launching a health supplement-focused brand that differentiates itself from existing drugstores centered on cosmetics. KGC Ginseng Corporation plans to increase offline store visits and create synergy with online channels by expanding exclusive products and securing price competitiveness.
According to industry sources on the 5th, KGC Ginseng Corporation opened and began operating the Euljiro flagship store of the drugstore 'Jeongmol' last month in Euljiro, Jung-gu, Seoul. Jeongmol is a health food-centered drugstore where customers can purchase not only KGC Ginseng Corporation’s flagship brands such as 'CheongKwanJang' red ginseng, deer antler, and mushroom products but also health functional foods from other companies.
A drugstore is a general store that sells over-the-counter medicines, cosmetics, health foods, and other items without a doctor's prescription. In Korea, drugstores have mainly established themselves as retailers of beauty products such as cosmetics.
At Jeongmol, in addition to KGC Ginseng Corporation’s flagship products, health functional foods from 22 well-known domestic and international brands such as 'Korea Eundan,' 'Selex,' 'CJ Bio Core,' 'Ahafit,' and 'Comvita' are available. The company highlights that unlike existing CheongKwanJang offline stores, which only handled CheongKwanJang products, Jeongmol offers the unique advantage of allowing customers to experience and purchase products from multiple companies all at once.
Currently, the ratio of in-house to other companies’ products is about 50:50. KGC Ginseng Corporation plans to broadly expand the range of products from well-known domestic and international brands and provide differentiated purchasing experiences to meet diverse customer demands.
KGC Ginseng Corporation’s challenge to the drugstore market comes as the boundaries between online and offline distribution channels disappear. Although online distribution is expanding, consumers’ desire for tangible experiences and face-to-face communication is growing stronger. As diverse consumer experiences become more important, the company’s strategy is to create differentiated offline experiences and connect them to online channels to expand synergy.
In particular, Jeongmol is expected to focus on attracting young consumers in their 20s to 40s as the core customer base. According to KGC Ginseng Corporation, the online and offline sales proportions of CheongKwanJang among consumers in their 20s and 30s are 50% and 13%, respectively, indicating a relatively low offline sales ratio among younger generations. However, the company recognizes that interest in health functional foods among these age groups is gradually increasing and plans to strengthen various online-offline linked marketing efforts to expand their influx.
Amid the recent slowdown in the health functional food market, attention is focused on whether Jeongmol can serve as a new sales channel and lay the foundation for performance recovery. KGC Ginseng Corporation’s sales, which were 1.4689 trillion KRW in 2019, declined to 1.3961 trillion KRW in 2022, and operating profit shrank from 202.1 billion KRW to 74.2 billion KRW, about one-third of the previous level during the same period.
Last year, sales through duty-free channels recovered compared to the pandemic period due to an increase in domestic and international travelers, but sales at road shops and online channels are expected to slightly underperform the previous year due to weakened consumer sentiment caused by inflation.
However, a challenge lies in the nature of health functional foods, as it is difficult for consumers to directly experience various products or immediately feel their effects on-site. Existing drugstores like 'Olive Young' have been successful partly because they focus on cosmetics, perfumes, and hair products, maximizing the experience of trying products before purchase.
Since comprehensive health functional food stores are also operated in department stores and large supermarkets, attracting customers requires more than just offering a variety of products. Additionally, the company intends to increase stores through new openings rather than converting existing CheongKwanJang stores into Jeongmol stores, raising concerns about cannibalization due to overlapping trade areas.
Therefore, the key to Jeongmol’s successful establishment will be how well it can provide differentiated experiences and benefits compared to existing online and offline stores. KGC Ginseng Corporation plans to increase store visits by introducing exclusive products and private brand (PB) items available only on-site and by expanding the range of products from well-known domestic and international health functional food brands categorized by ingredients and efficacy. Currently, Jeongmol has started selling exclusive products such as 'Everytime Balance,' 'Jjin Saeng Hong Sam Gummy,' and Jeongmol’s first PB product, 'Jeongmol Choice Glutathione.'
A KGC Ginseng Corporation official said, “KGC Ginseng Corporation’s core asset, differentiation, and competitiveness lie in having more than 1,000 offline stores alongside the online mall. We will strengthen competitiveness by expanding exclusive sales products leveraging purchasing power, securing price competitiveness, and enhancing customer convenience through establishing same-day delivery systems based on nationwide offline stores.”
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