Sephora to exit Korea after surrendering to Olive Young

Sephora will shut down its entire operation in Korea, in the wake of its snowballing losses since the French firm entered the Korean market in 2019, according to the LVMH-owned beauty product retailer, Wednesday.

Its latest decision has been attributed mainly to CJ Olive Young’s dominance over the domestic beauty market and the foreign firm’s failure to understand the needs of local consumers.

In a message posted on Instagram, Sephora Korea said it will start closing its online mall, mobile app store and offline shops on May 6.

“Sephora heavy-heartedly decided to stop doing business in Korea,” the message reads. “We are deeply grateful to our customers who have supported us.”

In October 2019, Sephora opened its first Korean store in Parnas Mall in southeastern Seoul, attracting thousands of customers to line up for its cosmetics products. It expanded its presence in the greater Seoul area by opening additional stores in major shopping districts.

The COVID-19 pandemic, however, immediately made it impossible for Sephora to attract consumers because it could no longer allow them to apply cosmetics products at its stores. In addition, the mid-luxury cosmetics seller has lost luster, as Korean consumers tend to prefer buying expensive makeup products at each brand’s stores in department stores or via online.

As a result, Sephora Korea faced a capital impairment in 2021, causing speculation that it would soon leave the Korean market. Its operating loss reached 17.6 billion won ($13.1 million) in 2022, up from 14.5 billion won a year earlier.

“The size of its deficit and debt shows that uncertainties remain over its viability,” Deloitte Anjin said in its audit report published last April regarding Sephora Korea’s business in 2022.