Brought to you by stage Summit Live, the virtual conference that provides all the highlights of Sage Summit from the convenience of your desk, celebrity entrepreneurs, inciple workshops absolutely free. Register at Stage Summit livestream dot com. You know, this is how the economies of the future are making their mark, right, not with a bang or or remote control, but with some cream on your face. Right? Fair enough, Hi, and welcome back to Bloomberg Benchmark, a show about the global economy.
It's Thursday August. I'm Kate Smith, an editor for Bloomberg News here in New York, and I'm Scott Lanman, an economics editor with Bloomberg News in Washington. So today we're gonna be talking about the economics of beauty and specifically that in South Korea. And to help us do that, we have a couple of really special guests. So first we have Nina Bahador. She's here in the studio with us in New York. Nina is a senior editor at
self dot com, which is a Conde Nast publication. And a bit later on the show, we're gonna be bringing on Alicia Yune and she's the founder of Peach and Lily, which is a Korean beauty company that sells products to US consumers. But more on that later. So here's the background for the show that we're gonna be talking about today.
A few weeks ago, I told the Benchmark team about this idea for an episode, the idea that South Korean women and men for that matter, and they spend as much, way, way more money on their beauty regiments than virtually anywhere in the world. And I'm not talking about things necessarily like lipsticks and eyeliner, but also there's skincare specifically, And everyone thought I was wrong, but when we looked into the numbers, it was actually even more true than we
originally had thought. I'm not even close to anything resembling an expert in this kind of subject, Kate. I have no kind of skincare routine. The only the only product I use, if you can call it that, is shaving cream. So I'm basically started from zero on this topic, and I had to do some research of my own. So I contacted folks at euro Monitor, which is a market
research firm. They were friendly enough to provide some some helpful data statistics to help figure this out, and then my colleague Alex Tanzi, who's kind of our data grew here in d C, helped calculate these these spending figures on beauty and cosmetic products against per capita g d P, and you know, we actually found that South Korea is all the way on top of that list, and they spent almost one percent of their per capita GDP on beauty and personal care, and their figures were up from
five years ago. You compare that to the United States, for example, and the United States was just under half a percentage point, and that was about half of what the Korean spending was as a proportion of per capita spending. And you know, Asia is not just limited to South Korea. Japan and Hong Kong were also two of the other top five spots for the highest amount of perk happen to GDP spend on beauty products. And it's again not just their money that they're spending, but it's also their time.
This is I think one of the most fascinating statistics I've read about this, and it's that the average South Korean woman spends fifty five minutes on her skincare regimen. But I mean it can be also up to two or three hours at day, Scott. And I mean I spent twenty minutes on my skin last night, and I thought I was doing really, really well, but apparently in the global spectrum of things I I did not. But Nina help us out here, and first of all, thanks
for joining us. So what's so different about beauty and Asia that they can spend twice as much money and so much more time? Sure, I imagine there are two things that play here. One is that there are many more steps in your average skincare routine than there are in a Western woman. So for example, people in the US might cleanse, tone and moisturize and think they're doing
a very complex routine. Or they might use an SPF in the morning and a retinal at night, and that seems, you know, high tech, and that seems like they're doing a great job. Whereas well, disclosure, that's exactly what I do, and I think I'm I think I'm really great about that. That's what I do as well, Scott. You don't do that, no retinal, Scott, I have some some SPF. I'll have to send it to you. I'd love to have. But generally speaking, there are more steps involved in a Korean
inspired skincare routine. And then the second thing is that I think the quality of the product is excellent. It's world class. Korean skincare companies are absolutely known for the incredible high quality of their products, which comes with a price. Tech.
So I can talk you guys through a ten step Korean beauty routlain So Nina I so for this is a radio show, right so you can't see what's going on in the studio right now, but there is a there is a pile of products in front of Nina, and apparently this is what Korean women do most nights in their evening. I think I'm counting. Is that? Is that eleven different things? Yeah, some of them are doubles
of the same thing at different things. The fast step is an oil cleans which removes sunscreen and any other oil based products. Then the second step is a foam cleanser, which are double cleansing. Double cleansing says the big thing. So it foam cleanser removes dirt or sweat. Third step would be exfiliation. That's usually a product with a bit more grit in it and it removes dead skin cells. The fourth step is tona, which hydrates and refreshes the skin.
Step five is the essence. And this is a big trend. We're seeing people pick up more and more which you should think of as a primer that helps your skin absorb the products you're layering on next, and that's often described as the heart of real skincare. And people in the US are really learning more about this. And I was that the same as when like Western women think of like a serum. So step six is the syrius.
I'm sorry. The serum is something that contains a few active ingredients that address specific issues, so some some people have one for dark spots or for redness. Step seven is a sheet mosque. You probably wouldn't do this every night, maybe twice a week. And those, just in case you didn't know, are a cotton mosque set or a fabric moss saturated with different products to address different issues. Um, and then your next step would be I cream. There's
more we have not gotten. Step eight is there are only ten steps got you You'll be okay. So the I cream any specific eye concerns you have, so puffiness or under eye circles or fine lines. Um. Step nine would be your face cream, your moisturizer locks in the moisture keeps you looking dewey and young. And then the final and to me and the most important step is
your SPF. So I think this explains probably some of the background to this episode, which is that when we were talking about this episode, everyone assumed all of the latest greatest beauty things were coming out of places in Western Europe. I mean Loreal in Um in France of course, and things like that. I mean that's really shifting though, because South Korea, ever since the mid two thousands, they've they've really been slowly creeping up on those giants, the Loreal,
the landcome Um. You know, some of the most savvy beauty buyers aren't necessarily going to sacks to try to find the next beautiful face cream. They're looking online and
looking in South Korean companies. And I mean some of our listeners are probably more familiar with South Korean government supported companies like Samsung, LG, Kia, things like that, But those were the same over levered companies that actually pulled Korea into a recession in the mid nine nineties, which culminated in a fifties seven billion dollar bailout that came from the I M F. And now, Kate, you're you're starting to speak my language, really fading there, and I
just had no idea what what to say. But you know, finally talking about the Korean economy, all right, I can
I can get involved in that. Of course, you know when we talk about that, now, you know, you still have those those big companies and the Korean economy has been has been rising for some time, but they're not the only game in town for them, and they're the Korean government has turned to its entertainment industry in some way, you know, or or it's developed and it's it's become almost a form of soft power k pop you think of Gangnam style that I can't believe it, but it's
really kind of shifted the focus to skincare and and gotten so many uh you know, people around Asia to want to look like Korean pop stars. There's been tax in seatives for beauty exports, a tax break on beauty companies that are export only, a ten percent tax break on cosmetic procedures aimed at potential Chinese plastic surgery patients. I mean, this is all kind of helped boost the
economy in some way. And turn the attention to Korea, right, yeah, and you know, and all of those incentives it seems to have worked in some sense, I mean for a country. And let's let's also put this in perspective. South Korea is a country that is a little larger than the state of Maine. So the country of that size is
homes to thousands of different beauty companies. And last year, for the first time, the country exported more beauty products that it imported, and overseas sales for those beauty products they rose by seventy three. Now Scott put that in context for us, for our listeners about all others South Korean exports. South Korean exports have been falling pretty precipitously for the last year. I mean most recently in in July, I think there was a ten percent drop from a
year earlier. So overall trade kind of like the rest of the world, is slipping. And you see the the Export Import Bank of Korea has called beauty a quote unquote promising industry, meaning has the potential to post over ten billion worth of overseas sales in the next five to ten years. Now it's only at about UH one and a half billion now, which is you know, well
under one of of overall trade. But you know, if you boost that fair or amount, it does actually become a growth industry for South Korea and engine in its trade and help the economy grow. If say, like Samsung isn't selling enough cell phones at that kind of thing, I mean, what what Maybe maybe Nina can just fill us in and tell us more about what is the over what is the perception of these products? Are our South Korean products the premier products now instead of the
traditional brands? I think for young people and young women like Kate and myself who are always looking for the most advanced in the next big thing, that Korean beauty is absolutely what we want to be looking at. A. Yeah, and it seems like kind of all of the emphasis that the Korean government has put on projecting these to be the most innovative products in the world. It mean, it seems to have worked. Uh, Nina, thank you so much for helping a couple of finance geeks like Scott
and myself figure out where these numbers actually mean. Um, So we're going to take a quick break to hear a word from our sponsors. But when we get back We're gonna dig into the history of these beauty products. Where did this tent set regime come from? And to do that, we're going to bring on Alicia. You know, she's a Harvard Business School grad and the founder of Peach and Lily, which is a Korean beauty company that
brings k beauty to the US. Brought to you by Stage Summit Live, the virtual conference that provides all the highlights of Stage Summit from the convenience of your desk, celebrity entrepreneurs, incipile workshops, absolutely free registered Stage Summit livestream dot com. Alicia, thank you so much for joining us
for our listeners. Alicia founded Peach and Lily in It's a it's a Korean beauty e commerce company, and they actually opened their first brick and mortar store here in New York, the macy'son Flushing last November, and they opened their second physical store near Pasadena and California last year. So congratulations, thank you so much. Yeah, So, Alicia, thank you so much for joining us. Yeah, it's awesome to be here. Alicia, tell us a little bit about your background.
You're you're from Seoul, right, Yeah, so I was born in Seoul, moved to the States, moved back when I was in elementary school, and I was there basically until college. So I grew up in both places. Um and I trained as an esthetician actually in Korea, and a U s licensed as setician as well. So just also interesting to see how on a formal education basis, approach to skincare is actually quite different in the two countries. Um And I actually started off my career in finance and consulting.
I was like Bowman Sax and the Boston Consulting Group for a while. So you're back home in Boomberg, yeah kind of, and then you know, just always having been passionate about skincare and realizing that these amazing carean beauty products weren't available state side. You know, I left BCG
in to start peaching Lily. I'm curious actually, you know, growing up, Alicia, you know, when when were you introduced to this kind of skincare routine or when did the idea of Korean beauty first kind of materialize in your life. That's a really funny question because I can't even remember because it's sort of like in the US, a mother will be teaching their child, how to brush their teeth. It's just a very basic and fundamental part of self care.
And so it's always something you know, I've been taught ever since I was a tiny toddler, and so yeah, just as long as I could remember, it was a part of my life. See that's fascinating to me because in the US, makeup and skincare it's almost taught as if it's this kind of reluctant thing. Your mother will bring you to the department store and you know, get you set up with what you need. But it's not
something like a necessity. It's always considered an indulgence. It seems like that's not the case that in South Korea, not at all. In fact, in the US, people have very open conversations about their fitness their nutrition. In Korea, that's the same thing with skincare. And if you were to say, you know, I don't take care of my skin, you know, people might wonder, you know, why don't you? It's good for you, Right, It's like saying you don't
take a shower every day. It's something like that. Yeah, let's actually talk about Peach and Lily for a moment. Alicia, can you tell us about the economics of the beauty business. I mean, if skincare in Korea is important as showering or brushing your teeth, face cream is actually you know, especially the Korean prance, it's can be a lot more expensive than a tube of toothpaste. Is this the kind of thing that people pay for no matter what it is? Is it price sensitive? Does it depend on how much
income you have? So, first, when it comes to Korean women in Korea spending on skincare, it's not as elastic as other industries and categories. You know, obviously it's not like sustenance, but it is one of those things that you invest in as self care. Having said that, in Korea it's one of the leading countries when it comes to really discerning what products are good. It's no longer the error where just because something is expensive, you would think, oh,
that's a better product. Korean women will dig into the formulations and they'll look for value. So it's not that they're necessarily looking for cheaper products, but they're looking for products that really are priced at values. So you're getting you know, even if you're spending three you're getting something really incredible for that. So Korean beauty brands really can't get away with too much. Just pure marketing doesn't work anymore.
It has to be efficacious. So even lower income customers are spending a lot of money on these kinds of things. For sure, people with higher income are spending more, and not just with products, but with treatment and you know, facials on a weekly basis. But at the same time, you know, there are amazing beauty products that are priced at mass prices. And so when I interview a lot of beauty brands and career one thing they always say is you can make money in any segment. You can
price things low, you can price things high. There are going to be people who gather around those products. The only thing you need to care about is, you know, your pricing strategy really depends on your distribution strategy. But the fundamental thing is just have a great product. At least this has been fascinating. It's really it's a whole
new frontier of beauty products. So thank you so much for kind of putting that into context for us, and Nina, thank you as well for you know, helping us out with exactly putting these, uh these economic numbers into actual products and things. Uh So, Scott this is This has been fascinating, is it is? It's a learning experience. I mean that stuff that women have to go through just to you feel like they're taking care of their skin
is is mind blowing. But I mean, what about the idea that kind of South Korea has pulled themselves out of economically tricky spot and capitalizing on kind of this innate national trend. I mean, what do you think about that? Well, I think I think the jury is still out on that.
I think it will probably take a while for, you know, to truly show whether the you know, the beauty industy tree is having a massive effect on g d P. But it is a fact that you know, a lot of the it has become a significant growth industry, and a lot of the world knows about it. So it's almost like becoming on a par with Samsung phones, l G t vs, Hunda, Kia cars, that sort of thing. It seems like, because I'm wondering, you know, if things get bad in here in the US, are we going
to have to start exporting the Kardashians. I think they've already taken over a lot of the world, do I don't think they need the government's health well, you know this is how the economies of the future are making their mark, right, not with a bang or or remote control, but with some cream on your face. Right, fair enough? Thank you everyone for listening. Bloomberg Benchmark will be back next week and until then, you can find us on the Bloomberg terminal and at Bloomberg dot com, as well
as in ontoons, Podecast, and Stitcher. While you're there, take a minute to rate and review the show so more listeners can find us and let us know what you thought of the show. You can talk to and follow us on Twitter at Scott Laman and at by Kate Smith, and don't forget to follow our guests as well. They're on Twitter. You can find Nina at n Bajador and you can also find Alicia's Peach and Lily at Peach and Lily and I highly recommend checking out their Instagram
page as well. It is fascinating. I'm I'm a little addicted to it now, Scott, I'm going to check it out to you should it's thanks so much, see you next week. Brought to you by Stage Summit Live, the virtual conference that provides all the highlights at Stage Summit from the convenience of your desk. Celebrity Entrepreneurs Inciple Workshops absolutely free. Register at Stage Summit, live stream dot com