ecade since K-beauty rose to global prominence, this Korean export is now struggling to stay relevant as beauty trends begin to shift. The rise of ‘skinimalism’ – a less-is-more approach to skincare – has rendered Korea’s popular 12-step skincare routine obsolete. Many Korean brands are also being edged out on formulation as more Western brands now offer similar, if not better, ingredients in their products.The pandemic has also been a major factor in K-beauty’s decline. Domestically, brands that relied heavily on South Korea’s tourism were devastated by low foot traffic. After two years of lockdown, Etude House had closed nearly half its stores in South Korea and shuttered nearly every outlet in China and Southeast Asia. Revenue dipped 20 per cent to US$3.9 billion, with cosmetics, which makes up almost half of the revenue, tanking 26 per cent year on year.Last year, Etude House entered capital impairment. Its total equity stood at minus US$5.7 million after its total liabilities of US$49.6 million exceeded its total assets of US$43.8 million, as reported by AmorePacific group, the conglomerate that owns Etude House and 37 other subsidiaries.Etude House is the only brand to have suffered such a fate but hardly the only one struggling. Innisfree, another AmorePacific subsidiary, had its sales plunge by 37 per cent, year-on-year, to US$307 million in 2020 and also pulled the plug on all of its stores in China at the start of last year. Other K-beauty titans that have exited China since the pandemic began include The Face Shop and 3CE.Which raises the question, how did beauty’s fastest-growing sector burn out so easily?The perfect stormWhile it’s easy to pin K-beauty’s downfall on the pandemic, signs of its imminent demise began in 2017. South Korea’s political tensions with China over a US-Korean joint THAAD missile defense system resulted in China banning Korean imports for two years.China was the largest consumer of K-beauty products. The growth rate of Korean cosmetics exports to China was an average of 66 per cent from 2013 to 2017. Even for conglomerate AmorePacific, more than 70 per cent of its Asian revenue could be attributed to Chinese customers. However, after the ban, 2018 export figures dropped to just 20 per cent of total amorepacific exports going to China.After recovering slightly to 25 per cent in 2020 when the ban was lifted, K-beauty took an even bigger hit as the pandemic began. Strict lockdowns throughout Asia eliminated foot traffic to stores and the demand for colour cosmetics plummeted.The landscape of the beauty industry also changed drastically during this period. With the majority of K-beauty brands occupying the overcrowded mid-tier market, increasing competition from local Chinese, Thai, and Malaysian brands have oversaturated this beauty market.Unable to compete with prices of local brands or with the formulation of luxury products from the West, K-beauty was left in a tough position. It also did not help that the wider consumer trends were now rejecting K-beauty’s overzealous multi-step skin routines and its outdated maximalist packaging.Luxury survivesWhile K-beauty’s entry-price level brands have struggle, its high-end market is faring much better. Tapping into Asia’s high-net-wealth individuals, premium brands like Sulwhasoo, History of Whoo, and Su:m37 have mostly done well.During last year’s ‘618 Shopping Festival’ – China’s mid-year sale in June, the LG Lifestyle group reported that six of its luxury cosmetics brands, including History of Whoo, Su:m37, and O Hui, achieved US$77.9 million in sales on Tmall. This marked nearly a 70 per cent jump from the previous 618 festival.History of Whoo, in particular, has enjoyed a consistent performance during the past two years. The brand not only topped Chinese TikTok analogue Douyin’s beauty sales list, it was also the featured brand in over 300 livestream sessions during Tmall’s 11.11 shopping festival in 2020, which raised a total of RMB500 million (US$78.6 million) in sales within 15 minutes.Just in the first half of 2021, LG Lifestyle was able to achieve 10.3 per cent sales growth, year-on-year, totalling US$3.5 billion in sales, which was largely attributed to its premium brands.But the fight to get into China’s top 10 skincare brands is still an uphill battle, as competition from SK-II, Lancôme, Estée Lauder,and La Mer remains tight. During Q4 of 2021, Coty China’s prestige beauty grew six times in just a single quarter. No brand from AmorePacific or LG Lifestyle was able to crack the top 10 last year, Euromonitor data shows.Trying to stay relevant The steady demand for luxury brands like History of Whoo and Sulwhasoo proves the appetite for K-beauty is not completely over. Lessons that mid-tier brands can learn to win back the market include doubling down on online sales and livestream commerce.Video commerce is now considered an indispensable sales channel in China. Lancôme reported more than US$1.5 million in sales after just 10 days of opening a store on Douyin. During History of Whoo’s 300-plus livestream sessions in 2020, the brand had a star-studded roster of celebrity hosts to help attract viewers. The highly successful livestream was centred around the brand’s seven-piece, water-milk gift box set (priced at US$240) and reached US$110 million over the course of the 11.11 promotion period.Part of History of Whoo’s success lies in the specificity of its products. A criticism of Innisfree’s business strategy in China was that its products reflected too much homogeneity compared with competitors in the same price range. Without continuously having new ‘It’ products to push, consumers quickly grew disinterested with Innisfree’s products, which mainly revolved around volcanic ash, camellia, and green tea.However, since shuttering the majority of its international bricks-and-mortar stores back in 2020, Innisfree has already managed to free up its resources for R&D and e-commerce efforts. And AmorePacific’s first-quarter results after re-scaling its physical operations showed a 90 per cent recovery year-on-year, to US$159.2 million, from a US$52.8 million net loss in the previous quarter.Potential opportunities for K-beautyBeing spoilt for choice, it is not easy for Asian consumers to remain loyal to just one brand. Product effectiveness and results often trump loyalty and as soon as a product is proven to be effective on social media, consumers will rush to try it out.That makes niches particularly important. And one development that could create a bright opportunity for K-beauty is China’s changing stance on animal testing. As most Korean products are certified cruelty free, more of them can finally be exported to China and set the new standards for ethics and sustainability within Asian brands. This can be the basis for more K-beauty brands shifting their brand positioning and adjusting prices – so they can finally escape the overcrowded mid-tier market.