Missha Takes Low Cost Approach to Cosmetics

Mar 27, 2006
George Anderson

By George Anderson

Missha is out to convince American consumers that they needn’t pay a lot for top quality cosmetics and beauty care products.

An article in The Village Voice equates the Korean retailer with Trader Joe’s, preferring to source products directly, eliminate expensive packaging and build its business on word-of-mouth rather than investing large dollars in advertising.

“Consumers are misled that they have to spend a lot of money to buy foundation and cosmetics,” said Michael Fong, Missha’s director of retail development. “As far as raw-material costs for all these products, it’s quite low.”

The company, which now operates three New York stores with locations in Manhattan and Queens, sells products at $5 and $6 price points that The Voice says is comparable to items selling at four or five times that amount in other stores.

The article’s author, Corina Zappia, writes: “Missha’s success here will depend on how comfortable consumers feel paying so little for cosmetics and skincare. After years of successful marketing indoctrination from the beauty industry, most of us don’t just hope that an expensive face cleanser will be better – we trust that it will. We really want to believe that if we pay more we’ll get more. But are the colors really that much more appealing? The consistencies and textures so much smoother? The chemicals truly less harsh? Let’s face it: It’s no huge secret that you’re paying out because Scarlett Johansson has been hired to promote the brand and a top industrial designer brought in to re-envision the packaging.”

Moderator’s Comment: Do American consumers equate the price they pay for cosmetics with the product’s quality? How
does a chain such as Missha convince them otherwise?

George Anderson – Moderator

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6 Comments on "Missha Takes Low Cost Approach to Cosmetics"

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Ryan Mathews
14 years 11 months ago

Depends on which consumers you’re talking about. There are a fair number of wine hobbyists who revel in Two Buck Chuck AND a $35 a bottle burgundy. There are consumers who don’t feel the need to pay a brand tax. There are consumers who can’t afford to pay high-end prices, but still want to look good. At the end of the day, it all comes down to the product. If the cosmetics are of good quality, income constrained consumers and consumers who like to see themselves as smart shoppers will buy. Those who like to pay for a name or believe brand rhetoric won’t. It’s that simple.

Mark Lilien
14 years 11 months ago

Cosmetics are blind items. Their value is based upon belief, since there can be no objective standards. The market has infinite possible positionings, since the price point variety is infinite. There is very easy entry, since anyone can hire a packager to make a short run. Anyone with enough patience and/or money can hire spokesmodels, actresses, or just hire commissioned salespeople. Anyone can rent locations of any size and anyone can buy advertising. The key is staying power. There are a few major brands that have lasted more than 20 years. There are some niche brands that have lasted more than 20 years. As long as Missha’s store leases are reasonable, the brand can last at those locations, certainly. I doubt that the Estee Lauder management team stays late at the office worrying about brands like Missha.

Bernice Hurst
14 years 11 months ago

Corinna Zappia has pretty much said it all, I think, when she talks about the power of marketing where cosmetics is concerned. In this celebrity-crazed era, even when we know that product price reflects the amount spent on getting a big name to promote a product, too many people trust that the star is honest and credible rather than just earning a buck. If a celebrity says the quality is good then people tend to believe it. That’s what they’re paying for.

Rochelle Newman-Carrasco
Rochelle Newman-Carrasco
14 years 11 months ago

It will depend upon a good PR plan and word of mouth. There are enough consumers who don’t subscribe to the “high price means quality” line where make up is concerned – particularly younger consumers. Image will be important. Then, if the product is a quality product and doesn’t flake off or create skin problems, there should be enough trial turning into repeat purchase to make the venture interesting from a business perspective. A lot of variables have to fall into place, but there’s no reason why they can’t. We shall see.

Carol Spieckerman
14 years 11 months ago

“Masstige” has affected cosmetics much as it has apparel and housewares; it’s just taken a bit longer as women held self consciously onto their department store habit in this one category. Brands such as Neutrogena and Oil of Olay have upped their marketing and R&D and are now regularly featured in fashion magazine must-have trend sections. It’s cool and smart to recommend Maybelline great lash (the best selling mascara of all time and a model favorite for years) right along side premium brands and the increasingly sophisticated and upscale cosmetic presentations in mass retail stores don’t disappoint. I predict that this last bastion of department store destination shopping will take a major hit as Target, Wal-Mart and others lure women to their upscale apparel offerings. Cosmetics are after all only a few steps away (literally).

13 years 9 months ago

If the Missha focus can remain on a quality product that is inexpensive, it has a built-in mystique on which to capitalize. Other than cars and heavy machinery, we have not welcomed any major shakers and movers from Korea in our general merchandise mix.

For many Americans, we have not explored how very sophisticated and attuned the Koreans are about western markets and our fashion and style ideas.

Is the US ripe for a product whose major referral can be internet “word of mouth” on an international basis? Perhaps. And those marketers at Estee Lauder might well start staying up at night. As the boomers are getting older and cosmetics are not able to make us feel and “be” younger (even if we don’t look as worn out as our parents did at 60), will we keep spending big bucks on lotions and foundations? The next generation may be less gullible.


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