Tuesday, February 18, 2020

Why buy when you can rent? - Rental Industry in Korea





Why buy when you can rent?

Mr. K who lives in an officetel (efficiency apartment), wakes up in a bed which includes a monthly steam cleaning service, brews coffee from a coffee machine which was on a rental promotion from his coffee supplier and gets ready for work. K considers his clothes for the day from his air dresser which he agreed to borrow at an online platform he discovered and picks out the luxury fashion outfit he rented at the department store yesterday.    

A major consumer trend is valuing experience more than possessions which is driving the rental services market. Now that everything can be rented, consumers can survive buying only purchasing food while renting everything else. Based on the report for KT Economic Management Research Institute, in 2003 the rental market was KRW 3 trillion which grew to KRW 25.9 trillion in 2017 and is expected to reach over KRW 40 trillion in 2020. Samsung Securities estimates of the 40 trillion KRW market, 17 trillion would be B2C and 23 trillion B2B.

Where did it all begin?




Looking back into history, the rental service system has been in Korea longer than we would generally believe. Book renting dates back to the Three Kingdoms of Korea era (prior to 966 AD) and is still an ongoing business.



However, rental services and the industry started to grow significantly after the 1988 Seoul Olympics. With the massive inflow of foreigners, entrepreneurs saw the potential of car rental services. Interestingly, in the early days of the industry, most users failed to return the products on time and incidents of fleeing with the vehicle happened quite often.   



Along with the car rental service, home electronics were one of the first products to enter the rental business and the most well-known is the water purifier. Coway, a water purifier company, started its rental business in 1998. Coway changed the image of rental service providing a combination of products and also customer service for the products. The service was based on the CODY (Coway Lady) who were coordinators that visited to check the purifier, change filters and provide other needed services. With this attention to consumer care service, Coway has not only maintained the position of top purifier rental service domestically but also expanded overseas.

How did it grow?

With the growing trend of single households, cost efficiency and experience focused consumption, the need and possibility for the rental service industry expanded. As the market grew all types of companies started to enter the market and major conglomerates started to participate since 2015.

While the economy has been slowing down, companies still need to earn a profit. This is especially applicable to luxury products that are at risk for traditional sales in a slow economy. Rental service companies generate a steady income while consumers feel less pressure on purchasing products at the full price. Even though today the B2B market is larger than B2C, the growth rate is higher for B2C.

Technology is developing very rapidly.  A new product today will become outdated sooner than expected. With the shorter lifespan of products, the desire to purchase or own a product is declining rapidly supporting the rental business.  

Although the rental industry started with cars and home electronics, as the market grew, so did the demand for more rental service. Today, rentals are available for children's products, healthcare products and the trend is moving toward entertainment and leisure. Computers, golf clubs, bicycles, cameras and other products have poured into the market and with the development of the internet platforms and smartphone apps, the process is simpler than ever. At a recent ‘home table deco fair,’ there was a booth introducing a system for renting paintings. An artist provides a new piece of art every three months aligned with the style and design of the house.  

The range of the rental services has further expanded with the introduction of a sharing rental system. Real estate sharing services such as Airbnb, which shares places to stay while they are vacant is a major sharing services. Most of these businesses are based on platforms and C2C transactions. The number of these sharing services is increasing. Sharing rental systems have expanded into the entertainment and leisure industry, such as the yacht rental industry. The number of Yachts in Korea is limited and the image of a Yacht is that it is beyond the budget of most consumers.  However, with the sharing rental system, less well-to-do consumers can experience a luxury yacht at an affordable cost.



As the rental service industry has grown, some problems have emerged. Most rental service providers require a long-term agreement with a penalty for cancellation. This is contrary to the experience-focused value.  Also, given a long-term contract, the total price paid is higher than the purchase price if the products are used to their expected lifespan. Also, given the ease of renting luxury products, some consumers spend more than they can afford to lead to excessive debt.



If you would like to identify and capitalize on business opportunities in Korea, let IRC Guide your Way!  www.ircconsultingkorea.comJacob at lsh@ircconsultingkorea.com

Tuesday, February 11, 2020

Korean's Fuel - Coffee



Market Overview 


Based on the OECD statistics, working hours in Korea ranks in the top three on the global ladder. To keep up with the working hours and stay awake, coffee has become a part of Korean society.

In 2018, each person had an average of 353 cups of coffee, which has grown over 30% since 2007. The total coffee market is estimated to over KRW 7 trillion with retail and café industry at a 3.5 to 6.5 ratio.


Unit: KRW Trillion
Source: Hyundai Economic Research institute

One of the main factors of the coffee industry’s’ growth comes from cafés which have been expanding rapidly from 2009. In 2017, the number of cafés registered peaked at over 90,000 and has subsequently declined. Currently, there are about 71,000 cafés in the market.

The image and the function of a café appear to be different from other cafés around the world; they are a place for more than just food and coffee. The largest group of café users are people in their 20s to 30s who study at the café.

The Korean coffee industry had a slower start than most of the coffee leading countries but now Korea has one of the most internationally fast-growing coffee industries. We believe it is because coffee has become a part of Korean culture and the café industry is distinct from other countries.


Coffee the Past and Present  


Coffee was first recorded in the Korean history in the 1890s when King Go-Jong enjoyed the beverage but it was years later that coffee was available to the public.




Unlike the current coffee trend, powder coffee in a pouch was the first common type of coffee in the market. However, as one of the major Korean characteristics is speed (Bballi-bballi or faster and faster)’ there was not enough time to mix the coffee powder with sugar and cream. The first generation of coffee was "mix" coffee, powder coffee mixed with sugar and powdered non-dairy creamer. This was first introduced in 1976 by DongSuh F&B. The small yellow package was not only a must in the office but also a popular gift to buy when visiting Korea from abroad. Most consumers were introduced to coffee through 'mix' and in 2010, 100,000 tons of mix were consumed.




The second generation of coffee was drip coffee and espresso sold at cafes. The need for a place for people to talk created the environment for cafés to grow. The initial target audience for cafés were working women who needed space to talk and were searching for a better coffee which had less sugar and cream. One of the first cafés was Holly’s which provided these needs. New cafés started to focus on large spaces and premium brands such as Caffee Bene, Coffee Bean and others. However, the trend became mainstream as Starbucks entered the market in 1999 and the cafe boom started with the introduction of espressos. The definition for cafes changed over time and it is different from how it is usually defined in a dictionary or in other countries. However, during this café booming era the market for cafés has been divided into two, luxury and price-efficient.




The third generation of coffee is the specialty coffee. Specialty coffee takes account of the coffee bean originality, roasting methods, and brewing process which adds a premium touch. Cafés that target these consumers can be small roasting cafés that roast their own beans or a premium branch of a renowned café such as Starbucks Preserve. The consumers are not demanding any specific coffee but are demanding a unique coffee with added value. This is shown not only by the growth in revenue of the specialty cafés but also the increasing number of premium coffee machines for households.


Definition of Café 

The backbone of the coffee industry is cafés which command the greatest market share in the coffee industry. A report by Hyundai Economic Research Institute reported that the retail market was 2.4 trillion KRW and the café market 4.3 trillion KRW is more than 60% of the market. 

The definition of café first came from coffee but has changed to ‘a place that sells coffee.’ In the dictionary, a café is defined as a usually small and informal establishment serving various refreshments (mainly coffee).




This definition of a café may be different in many places in the world. In Korea, we believe a café is more of a rental service, rather than a place to enjoy a cup of coffee. A café is a place where for the price of a refreshment (or food product), one rents space inside the café for people to meet, talk, study, work, take selfies or just hangout.

The café industry had changed over the years and is segmented into three different sectors: high-end, brand shops and small pick up booths. High-end (specialty) and brand shops usually have a large place or private spaces to sit and talk. Cost-efficient cafés have small pick up counter with a limited number of small seats with less comfortable chairs. The prices range from price efficient cafés are KRW 1,000 - 2,500 per cup while the local brand cafés are KRW 4,000 - 5,000 per cup and the specialty coffee is above KRW 5,000. 


Opportunities


The market is saturated and less popular coffee brands and cafes have been disappearing. However, experts believe that the market still has room to grow and new brands of coffee and cafes concepts are coming in and out of the market. The specialty coffee and brand coffees have been expanding with great success. To enter the market, supply a unique need and support it with a good image and strong brand. 


*18th Seoul Int'l Cafe Show (Cafe Show 2019)





If you would like to identify and capitalize on business opportunities in Korea, let IRC Guide your Way!  www.ircconsultingkorea.comJacob at lsh@ircconsultingkorea.com




Monday, February 3, 2020

18th Seoul Int’l Cafe Show (Cafe Show 2019)


18th Seoul Int’l Cafe Show (Cafe Show)
November 7th to 10th, 2019
Korea Seoul COEX


Exhibits: Coffee, Tea, Bakery, Desserts, Ice-cream, Chocolate, Beverage, Raw Materials, Machinery & Equipment, Interior, Franchise & Start-up, Kitchen Appliances, Food Service Industry

  

Overview


Organized by Exporum, the Café Show is globally known. The Café Show helps visitors and exhibitors to find new potential partners and learn about the industry. There are also a handful of events where visitors can enjoy the experience of coffee. The show expects 600 companies participating and over 160,000 visitors from over 80 countries. The entrance fee is one of the most costly but there was a great amount of coffee, tea and other samples that make up for more than the cost. 



The entrance to the show was full of excitement and felt similar to last year. At the entrance of the show, the organizers displayed Cherry’s Choice which shows products that were nominated as the best products from the exhibition. Unlike what was anticipated, there were fewer products related to coffee and more related to other products.



The exhibition was divided into four exhibition areas.

A: Gourmet to Total Equipment
B: Tea to dessert & Item
C: From bean to cup
D: Unique blending

If my memory serves me correctly the Café show in 2018 was mostly focused on coffee and the coffee industry compared to 2019 where there was more tea, bakery and other types of products.

Entering the exhibition through Hall A, the large equipment catches the eyes.  It appears costly but is one of the essential requirements at a café. Most displays were coffee machines with other products such as auto-beverage mixers, ice-cream makers, ice shredders and others.



There were also a number of disposable products such as straws, lids, cups and other products which are for takeout. The trend for these disposable products seems to be towards environmentally friendly products that can be reused or dissolve naturally. However, there were still many companies that did not emphasize environmentally friendly details.



Other related products were different types of syrup and mixes used to make a beverage more appealing and to provide a unique taste to fulfill the needs of consumers.



An interesting fact was that there were three types of alcoholic beverages that did not seem to be a good match for a café show.

 

Café food products and bakery products also shared a portion of the exhibition space. Most of the dessert products were in final packaging, but bakery products seemed to have bakers making bread and dessert inside the booths promoting their products.




While the first floor was a mixture of all different types of products, the second floor was specialized for coffee. Both halls were related to coffee with Hall C exhibiting beans to coffee and Hall D unique blends. As the exhibition’s focus was coffee, most of the visitors showed more interest in the coffee sections.



We could see a focused group of visitors who were interested in specific types of coffee and beans. We observed long lines for different types of coffee and beans.

 
 

Also, booths provided small sessions inviting renowned baristas offering tips and know-how.







If you would like to identify and capitalize on business opportunities in Korea, let IRC Guide your Way!  www.ircconsultingkorea.comJacob at lsh@ircconsultingkorea.com




Tuesday, January 28, 2020

Home Table Deco Fair 2019 – Premium Home Styling Exhibition



Home Table Deco Fair 2019 – Premium Home Styling Exhibition
December 12th to 15th, 2019
Location of event: Korea Seoul COEX

Exhibits: Home living & deco, kitchen & tableware, Anniversary, lifestyle & culture, home appliances


Organized by the Reed K. Fairs Ltd. the exhibition provided the latest premium home styling trends with over 200,000 visitors at all four exhibitions across Korea, Seoul, Busan, Daegu and Jeju. Attracting the greatest number of professionals, the show is known to be effective in both B2B and B2C.  

Exhibition Overview



The opening of the Home Table Deco Fair 2019 was quite crowded even after lunch hours. As mentioned above, the exhibition was attracting the business sector and also consumers.



The show was divided into two halls and sections. Hall C was focused on home decoration which includes paints, art, kitchenware, furniture, pottery and all different products. Hall D was focused more on interior design which provided not only various interior design concepts but also a better taste to the products which were included in the design.


Personally, Hall D which had quality designed booths with style was more interesting. As most of the booths were designed by interior designers, they stood out compared to other exhibitions in Korea.    


The HTDF also had a collaboration event called the Creator’s Hotel with a Korean online accommodation service (platform) company Yanolja. This event was a large promotion of Yanolja’s services, opportunities and partnered designers.


However, compared to Hall D, Hall C visitors showed more interested in the products. As much as the theme was decoration, it would be hard to categorize products by industry sectors.

  



With the HTDF subtitle as Premium Home Styling Exhibition, Hall C was full of interesting luxury products luring people to the displays. Given the diverse products, it would be difficult to categorize the industry that includes pottery, kitchenware, furniture and arts.


One of the most interesting booths provided a rental system for art. The service provides different types of paintings that match the interior of the house.

Overall the exhibition targets were willing to spend extra on design and appearance usually with more wealth or people who were in the industry. Hall D’s visitors seemed to be more B2B whereas Hall C was more focused on consumer-based visitors.


Industry:


An interesting part of the home decoration market is the interior and remodeling sectors.

Number of buildings 20 years or older
Unit: 1,000
2017
2018
2019
2020
2025
2030
3,381
3,592
4,091
4,886
5,895
 7,642
Source: Shinyoung Securities Co., Ltd.

With the growing number of older buildings, the belief is that the remodeling business will grow. Increasing incomes and customization trends support this belief. The Construction Economy Research Institute of Korea (CERIK) reported that the domestic market size of interior and remodeling was KRW 9.1 trillion in 2000 which increased to 28.4 trillion in 2016 and is expected to reach 40 trillion in 2020.

As much as the industry is growing, the number of competitors is also. As the market reached KRW 20 trillion, the number of new companies has increased rapidly. Moreover, there has been a movement in retail companies to enter the interior and remodeling business. However, as the competition grows, market development will weaken as Koreans can be critically sensitive to price.

The current market is consolidating with companies merging with large conglomerates to survive. These conglomerates are merging all types of companies such as furniture, remodeling, flooring, and other companies to create a ‘Total Living-Interior Solutions’ as a new business model. 



If you would like to identify and capitalize on business opportunities in Korea, let IRC Guide your Way!  www.ircconsultingkorea.comJacob at lsh@ircconsultingkorea.com

Tuesday, January 21, 2020

The 35th BeFe Baby Fair (2019)


The 35th BeFe Baby Fair
February 21st ~ 24th, 2019
Coex Hall A & B


2018 Exhibitions Results
180+ exhibitors
80,639 visitors




Organized by BeFe inc. biannually, the first BeFe Baby Fair was showed in 2000. The BeFe baby fair is the first baby product related exhibition in Asia. This exhibition’s objective is to provide information for pre-mothers and childing to mothers while supporting and promoting the baby-related product industry. About 40% of the exhibitors are from overseas. In 2018, more than 180 exhibitors with over 80,000 visitors attended the show.

Exhibits:  Antenatal related goods, Pre-mother related goods, Pre-mother related services, Childbirth related goods, Baby related service, Safety related goods, Baby related goods, Baby pre-education, Internet Service, Intelligence development program.

Market information:

The baby supplies market includes baby food, diapers, cloth, snacks, character toys and other products targeted for babies. In 2009 the market size was KRW 1.2 trillion which increased to KRW 2.4 trillion in 2015. One reason for the industry growth is parents’ high expectations increasing baby product spending. In 2009, the average cost per baby was KRW 2.7 million and jumped up to KRW 5.48 million in 2015.

The Baby supplies industry has been growing even though the decrease in birth rates. The Baby supplies were selected as one of the top consumer products in 2016 by the Ministry of Trade, Industry and Energy. The development caused interest to the industry which also results in complaints, which for the baby products specified by safety and price issues.

Supplier's marketing methods, which educates consumers that expensive is better, cause price increase. The clarity of distribution also causes the price to increase. Consumer factors of premium baby product development are created by fewer children per family, two-earning couples, average increase income, higher marriage age and non-objective view. For example, the primary aspect of choosing diapers was based on ‘recommendation of a friend or family’ (49%) and ‘parenting blogs’ (24%).

Baby supplies were one of the top categories for direct oversea purchase which 31.8% felt the price difference when the average was 27.7%. However, from 2017 to 2018 stroller/car seat decreased by 37% while dippers 31% and toys dropped 11% even though it was 8th in industries purchased.

Exhibition: 



The baby carriages and the car seats drew most of the attention with their large booth and number of employees explaining and supporting the visitors. The trend was not only safe but also the convenience of the product. 



There were also numbers of consumables booths displaying healthy snacks, diapers, clothes and supporting cloth for the pre-mothers. The consumables were mostly focused on organic and safety, as they are products that will actually be digested or touching the baby directly. 





Lastly, as much as the Korean culture priorities education-related booths also had parents in line to prepare their children’s future.

The overall exhibition seems to be successful, but we felt the exhibition was focused on B2C rather than B2B. We believe, because of the fact that it was a weekday with more consumer visitors and minimal buyers or others searching for business. Events were provided for foreign companies to obtain opportunities to meet companies and the other way around. The exhibition was divided into a few different sectors, but the sectors did not have a distinguishable difference to separate them.


If you would like to identify and capitalize on business opportunities in Korea, let IRC Guide your Way!  www.ircconsultingkorea.comJacob at lsh@ircconsultingkorea.com