South Korea's retail market for women's wear and cosmetics

Korea

South Korea has often been referred to an economic miracle. This is because the country went from a conquered and impoverished nation to an economic powerhouse. Its close proximity to China, Japan and it is a major trading partner of the United States. This is fueling growth in the last several decades. The result is that the nation has become one of the premier destinations for manufacturing. This is having a positive effect by diversifying the economy and it enables the middle class to develop. ("CIA World Factbook," 2015) For a large international retailer, this presents a unique opportunity for them become a dominant player inside: the women's wear and cosmetic sector. To fully understand what is occurring requires focusing on the retail environment and the impact of the currency. Together, these different elements will highlight the opportunities and challenges they will face inside South Korea.

Retail Environment

South Korea is the ideal opportunity to sell a host of different products to consumers who are becoming wealthier. According to the CIA World Factbook, per capita income is increasing consistently over the past three years. The below chart is highlighting these changes.

Personal Income Levels for South Korea from 2012 to 2014

Year

Personal Income

2012

$33,500

2013

$34,400

2014

Currency

The South Korean Won is currently trading at 1083.25 per U.S. dollar. The biggest weaknesses are the fact that the exchange rate is so high. This is problematic, as it makes American goods more expensive. However, there are other trading partners with much lower rates. This means South Korea can import other products from these regions in order to keep prices low. For example, China is one of their largest trading partners. What helps to increase commerce, is 172 exchange rate for the Yuan Renminbi (China's currency). This makes their products more affordable to consumers. As a result, retail prices are low with inflation averaging 1.1% annually. ("South Korean Won," 2015)

Overseas, the higher rates make South Korea's products more competitive. This is offering them with a strategic advantage because of their affordability to consumers in these markets. This increases South Korea's standard of living and it keeps unemployment low (i.e. 3.3%). ("South Korean Won," 2015) These factors provide multiple sources for purchasing, exporting and importing products. This kind of strategy helps to make the company more competitive in a market that is continually expanding. (Standard and Poor's, 2015)