[Edaily Reporter Han Jeon-jin ] The “formula for success” in K-Beauty distribution is changing. During the era of street shops, brands were the driving force; during the Olive Young era, product variety and discovery were key. Now, “reasons to trust”—such as consultations with pharmacists, pharmaceutical companies’ technical expertise, and skin diagnostics—are emerging as new competitive advantages. At the center of this trend is “derma-beauty,” which combines dermatology and beauty to emphasize ingredients and efficacy. The new battleground is shifting to the question: “What do you trust when making a choice?”

◇Retailers and Pharmaceutical Companies Join Forces… 1.5 Trillion Won Dermabuty Market “Booms”

According to industry sources on the 20th, “Musinsa Beauty Hongdae”—Musinsa’s first standalone beauty store, which officially opened on the 11th—features a beauty-specialized pharmacy spanning 176 square meters (approximately 53 pyeong) on the B1 level. A pharmacist is on-site to consult on skin and scalp concerns and recommend relevant products. The pharmacy is operated as a separate business by a pharmacist affiliated with Onnuri Pharmacy. HYUNDAIDEPARTMENTSTORECO.,LTD(069960)also opened “Khode,” a specialized derma-beauty curated shop, at its Pangyo location on the 18th. While each company’s approach differs, they share the common goal of leveraging derma expertise to gain a competitive edge in the offline beauty market.

It’s not just retailers that are emphasizing expertise. Notable examples include “Madecapharmacy,” a brand by DongKook Pharmaceutical Co.,Ltd.(086450), and “EasyD,” by DN Cosmetics—an affiliate of DAEWOONGPHARMACEUTICAL(069620) —which leverage pharmaceutical know-how. Additionally, products developed with the participation of medical specialists are on the rise. Pharmacies are also emerging as new K-Beauty sales channels. This shift reflects how purchasing decisions are now driven not just by sales volume, but by who manufactures the product and what evidence supports its efficacy.

The reason derma-beauty is attracting attention is that the market is growing rapidly. According to market research firm Euromonitor, the domestic derma-beauty market nearly doubled in just five years, growing from 789.3 billion won in 2020 to 1.5557 trillion won last year. During the same period, while the overall skincare market grew at an average annual rate of 2.1%, the derma-skincare segment expanded by 15.7% annually. Last year, derma products accounted for 17.1% of the skincare market. Analysts attribute this growth to consumers who carefully scrutinize ingredients and efficacy and seek to manage sensitive skin or maintain their skin barrier as part of their daily routine.

Growing demand from foreign tourists is also driving distributors and pharmacies to enter the market. This is because K-Beauty consumption, which used to be concentrated in high-street stores or Olive Young, is expanding into specialized areas such as derma beauty. In fact, according to BC Card, spending by foreign visitors to South Korea at pharmacies in the first half of this year increased by 1,176.9% year-over-year, while spending on skin care treatments rose by 109.8%. This reflects the growing trend of foreign K-Beauty consumers seeking specialized services, driven by the simultaneous rise in dermatological procedures and pharmacy shopping.

◇High-Street Stores → Olive Young… Will K-Beauty See Another “Change of the Guard”?

This shift is drawing attention because the throne of K-Beauty distribution has changed hands every time consumer behavior has shifted. From the mid-2000s through the 2010s, high-street stores such as Missha, Innisfree, The Face Shop, and TONYMOLY Co., Ltd. dominated the market. Each brand opened its own stores and attracted consumers by promoting hit products. A brand’s popularity and customer loyalty determined a store’s competitiveness. This was a time when the streets of Myeongdong and Hongdae were lined with roadshop signs. Back then, the key question when shopping for cosmetics was, “Which brand should I buy?”

Olive Young capitalized on that gap. While it was difficult to compare options at a single-brand store, multi-brand stores allowed customers to compare prices, ingredients, and reviews all in one place. Olive Young’s revenue grew more than sevenfold over the past decade, from 760.3 billion won in 2015 to 5.8335 trillion won last year (on a standalone basis), and its share of the domestic H&B (Health & Beauty) market is estimated to be over 90%. In contrast, high-street stores have shrunk rapidly. ABLE C&C, which opened Misha—Korea’s first street-side beauty store—announced the withdrawal of its domestic company-owned stores last December and has since wound down that business.

Attention is now focused on whether cracks will appear in Olive Young’s formula for success. Currently, there are over 3,000 brands carried by Olive Young. While there is plenty of choice, knowing what to trust when making a selection is a separate issue. This is the backdrop against which expertise—such as consultation, diagnosis, and pharmaceutical technology—is emerging as a new competitive factor. Olive Young, too, launched “Advanced Derma,” developed in collaboration with a pharmaceutical company, in late March and expanded its dedicated displays to 650 stores nationwide within just four months—roughly half of its total stores. Sales for the line in June increased by more than 260% compared to April, when it was first launched.

Of course, it is still too early to view this as a generational shift on the scale of the one that saw the market leadership shift from high-street retailers to Olive Young. However, there is no guarantee that the current market leader will retain its throne in the face of new trends, including derma products. An industry insider noted, “Olive Young may actually solidify its dominance by quickly absorbing these new competitive elements,” but added, “Ultimately, the key lies in how well it combines this expertise with its existing product assortment and ability to help customers discover new products.”