Shinsegae Inter's Disappointing Overseas Performance... Initiates Cosmetic Line Restructuring

Overseas Sales and Operating Profit in Cosmetics Sector 'Decline'
'Swiss Perfection' and 'Poare' Target Overseas Markets
'Vidi Vichi', Losing Chinese Customers, Undergoes Renewal

Shinsegae International received a disappointing report card in its overseas business sector last year. Most of Shinsegae International's overseas sales, which focus on fashion and cosmetics, come from cosmetics, but operating profit plummeted by 90% last year. In the 2010s, the company actively targeted overseas markets by leveraging the acquisition of 'Vidi Vici,' but it could not avoid the impact of the economic downturn in its core market, China.

According to the business report submitted by Shinsegae International on the 14th, operating profit in the cosmetics sector last year was 15.2 billion KRW, down 15.2% from the previous year. Sales increased by 4% to 379.7 billion KRW. The drop to double-digit operating profit was due to poor performance in the overseas sector. Overseas sales in the cosmetics sector were 12.8 billion KRW, down about 1 billion KRW from the previous year, and operating profit recorded 29.3 million KRW, a decline of over 90% compared to 4.5 billion KRW a year earlier.

Considering that Jung Yoo-kyung, the General Manager of Shinsegae Department Store, led aggressive overseas market expansion, these numbers are disappointing. Jung has emphasized the overseas expansion of high-margin in-house brands. She judged that the business model of securing overseas brand distribution rights and accumulating commissions has growth limitations. In July 2020, the company acquired 100% of the shares of the Swiss luxury cosmetics brand 'Swiss Perfection,' laying the groundwork for overseas expansion. At the time of acquisition, the company expressed its intention to compete with global cosmetics companies in the US and Europe and establish itself as a world-renowned cosmetics house.

To support Swiss Perfection, the company also promoted 'Poare' and 'Vidi Vici,' acquired in 2015. However, they failed to increase both sales and profits. A Shinsegae International official explained, "Regarding overseas business, restructuring of distribution channels and other adjustments were made, so the performance was not good. We saw the need for facility investment in Swiss Perfection, which incurred significant costs, causing a temporary sharp decline in profits."

The poor performance of Vidi Vici also appears to have contributed to the decline in results. Vidi Vici is a color cosmetics brand acquired by Shinsegae International in April 2012, which gained great popularity among Chinese consumers as a cost-effective brand after 2017. It sold rapidly through daigou (personal shoppers) at domestic duty-free shops and grew into a 'mega brand' with single-brand sales reaching 200 billion KRW in 2019. However, due to the downturn in the duty-free industry and a sharp drop in Chinese demand for Korean cosmetics, sales plummeted significantly from 2020. Last year, judging that it could not wait for duty-free sales to recover, the company directly entered local Chinese online malls to expand sales channels, but the contribution to sales was not significant.

Shinsegae International plans to focus its overseas business strategy this year on 'Swiss Perfection' and 'Poare.' Both brands are high-end luxury brands. The goal for Swiss Perfection is to strengthen its position in the luxury skincare market. Although luxury brands such as 'Guerlain,' 'La Mer,' and 'Sisley' have a solid foothold, the strategy is to leverage the accumulated brand awareness to expand into European, North American, and Middle Eastern markets. The company also plans to adopt marketing strategies used by global major brands that expanded their business through premium spa brands or hotels. Swiss Perfection is determined to grow into a brand with annual sales exceeding 100 billion KRW by 2026.

Vidi Vici is undergoing restructuring. Internally, it is judged that rebranding is more urgent than expanding channels in the Chinese market. The key is to create localized products for the Chinese market. A Shinsegae International official said, "Since Vidi Vici had significant sales in China, we have set a concept and started renewal work. We are internally considering where to position the brand and how to proceed with marketing by going back to basics."