Daiso Soars Above Rising Prices... Retinol Cosmetics for 5,000 Won Included [Chosun Price Records]

(20) Daiso and Beauty Brand Collaboration... Word of Mouth on Cost-Effectiveness

Every cosmetic product released by Asung Daiso is experiencing sell-out situations. The favorable perception of Daiso cosmetics has increased as they sell a wide range of cosmetics from basic to functional and color cosmetics at an affordable price of up to 5,000 won, and release products reflecting the latest makeup trends through collaborations with various cosmetic brands.

A Daiso store located in Jongno-gu, Seoul. Photo by Yongjun Cho jun21@

Functional cosmetic prices up 24%... Daiso gains popularity as customers seek cost-effectiveness

On the 1st, some items such as VT Cosmetics' VT Little Shot, Son & Park's Arty Spread Color Balm, and certain products from Bonsep Retinol line sold on Shop Daiso, a mobile application operated by Daiso, are out of stock. As inflation thins wallets, more consumers are turning to cost-effective cosmetics at Daiso.

Cosmetic prices tend to rise faster than the overall consumer price inflation. According to the National Statistical Portal by Statistics Korea, the quarterly consumer price index for all cosmetics (2020=100) was 113.41 in Q4 2023 and 114.35 in Q1 2024, showing an upward trend. During this period, the overall consumer price index was 112.88 and 113.62, indicating that cosmetic prices rose more than the general price index. In particular, the price index for functional cosmetics was 123.68 and 123.85, higher than that of general cosmetics.

However, Daiso sells all cosmetic products at a uniform price of 1,000 to 5,000 won regardless of inflation. Not only trendy color cosmetics but also functional cosmetics containing high-priced ingredients are priced up to 5,000 won. Domestic cosmetic brands partnering with Daiso, such as Tony Moly, Nature Republic, VT Cosmetics, and Son & Park, are increasing.

Recently, Daiso and Tony Moly collaborated to launch Bonsep, a Daiso-exclusive brand, attracting attention with affordable retinol cosmetics. Retinol is a representative ingredient with strong anti-aging effects but is generally expensive due to its difficulty in handling. Many products popular as "luxury affordable" items have emerged. Son & Park's Color Balm, released on the 7th of last month, caused a sell-out frenzy as word spread that it was a cost-effective alternative to Chanel's Lip & Cheek Balm.

VT Leadershot from VT Cosmetic, Arti Spread Color Balm from Son & Park, and some items from the Bonsep Retinol line sold on Shop Daiso, a mobile app operated by Daiso, are out of stock. Photo by Shop Daiso

The secret to low prices: "Owning manufacturers and affiliates, not OEM"

The reason why domestic cosmetic companies can offer low prices through collaboration with Daiso is due to utilizing existing technology and manufacturing lines. A Tony Moly representative explained, "Other companies outsource product container and content development through Original Equipment Manufacturing (OEM), which leads to higher cosmetic prices. However, Bonsep owns manufacturers and affiliates related to containers and contents, enabling fast production of high-quality products at reasonable prices."

Consumer satisfaction with Daiso cosmetics is also high, leveraging the know-how of existing brands. According to Mezzomedia's "2024 Consumer Trend Series - Ultra-Low Price Consumption" report, 41% of female consumers aged 19 to 49 responded that they have purchased Daiso cosmetics, and among them, 72% expressed satisfaction. The main reasons for purchasing Daiso cosmetics were "good cost-performance" at 69% (multiple responses allowed), followed by "low price" (48%), "quality not inferior" (32%), "good reviews and ratings" (32%), and "good accessibility due to many stores" (25%).

Daiso is standing out in the beauty market and increasing its presence. Sales have steadily increased, with Daiso's revenue reaching 2.4215 trillion won in 2020, 2.6048 trillion won in 2021, 2.9457 trillion won in 2022, and 3.4605 trillion won in 2023. The number of stores nationwide is about 1,500.

The cosmetics industry is also seeing improved profitability through diversified distribution channels by cooperating with Daiso. For example, Tony Moly targeted its existing retinol products mainly at people aged 40 to 60 concerned about skin aging, but considering that Daiso's main consumer base is younger generations, they are focusing on "low irritation" and "daily care" to expand the consumer base. Although the main ingredient retinol is the same, the product characteristics differ according to customer traits due to different distribution channels. VT, the manufacturer of Little Shot, recorded record-breaking results with sales of 105.5 billion won and operating profit of 24 billion won in Q1 this year. Tony Moly also maintained a profit trend this year, following a turnaround to profitability last year with sales of 41.8 billion won and operating profit of 2.3 billion won in Q1.