Charles Kao shapes South Korean cosmetics firm's China strategy to exploit online sales

What slowdown? The cosmetics industry, notably people's craving for foreign beauty brands, is in the midst of an apparent boom, bucking the slowing economic growth.

Eclipsing lackluster spending tides in sectors like food and beverages, makeup sales revenue from imported lipsticks to eyeliners this year rose 28 percent year-on-year, outstripping the nearly 10 percent growth rate of the overall fast-moving consumer goods sector, according to latest figures by consultancies Bain and Kantar Worldpanel.

Charles Kao, 58, China president of South Korean cosmetics group Amorepacific, will likely welcome the trend: the company recorded staggering sales during the Nov 11 online shopping carnival.

Ten of its brands participating in the gala saw sales surge 62 percent from a year ago, with its Sulwhasoo, Laneige and Innisfree brands each netting over 100 million yuan on that day.

But in the eyes of Kao, who has worked with major international beauty brands for over 20 years, the 11-11 extravaganza represents more than product discounts－it is a unique opportunity to tap into the vast Chinese consumer market that has seen increasing sophistication in the past few years.

"It is an occasion where brands find their positions and enhance customer engagement," he said, referring to the 2.6 million new customers the company enlisted, thanks to the 24-hour e-shopping festival.

China accounted for about one-fifth of Amorepacific's 6.78 trillion won ($5.84 billion) revenue last year, and a lion's share of its overseas sales outside of home turf. The shifting needs and preferences of local digital-savvy consumers found reflection in their product research and purchases done online.

Kao, embraced China's burgeoning e-commerce back in 2013 when he took the helm of Amorepacific's China business. He oversaw the opening of the official online stores of its multiple brands at a time when digital shops were not perceived as a prerequisite to success but seen as potentially eroding the premium image of established brands.

"Digitalization has been an ongoing area of investment for us in the past several years," said Kao. "E-commerce is an avenue we value a lot and will be our business focus from now on."

Today, Amorepacific's digital push isn't confined to registering record sales－it aims to implement the "In China for China" ethos through customized product co-creation powered by consumer insights.

This is best exemplified by the recent setup of a dedicated office with Chinese internet giant Alibaba in Hangzhou. The aim is to incubate new products tailored to the Chinese market, facilitate online-to-offline sales, gain precise consumer insights and explore opportunities in overseas markets.

"For new product launches in China, we are moving from 'intuition-driven readiness' to the employment of data that depicts the clear preferences of customers," said Kao, under whose leadership the group has seen nearly 30 percent of revenue generated through online channels.

Ideally, the Amorepacific-Alibaba office is designed to shorten the average length for new product introduction to six to nine months, from the typical 24 months taken by many Japanese and South Korean cosmetic companies, said Hu Weixiong, general manager of fast-moving consumer goods practice at Alibaba's Tmall site.

"In the early stage, the office can enhance coordination between Alibaba and Amorepacific's headquarters and hopefully speed up the decision-making process for the introduction of new products in China," said Hu.

Under such an initiative, the first batch of two co-created skin care products, banking on data feeds that track people's favored formula and packaging, is scheduled to debut in China early next year, Kao noted.

Navigating the world's second-largest consumer market has never been easy. The CEO highlighted the dual focal points for the next phase of growth: deployment of both high-end and mass market products.