By Zsarlene B. Chua, Reporter
February was quite a busy month for online beauty as two international stores set up shop in the Philippines — one which has a solid fan base in the west and another which has just started and wants to make a name for itself as a repository of all things Korean beauty.
Yet, the presence of these two new players in the market is not enough to rattle local online beauty stores, in the words of one store’s executive.
“[We weren’t rattled]. Not really, because we anticipated that they (Sephora) would come. We’ve been hearing that they would enter the Philippines, it was just a matter of time,” J. Alfonso A. de Dios, CEO and co-founder of Calyxta.com, told BusinessWorld in a March 10 interview.
“In general, the beauty sector in the Philippines is still underdeveloped — from skincare to cosmetics to health and all that. More so online. The entry of players — whether local or international — can help build the category. It’s just a matter of who has the best brand and who can develop the brand better,” he added.
Calyxta is a local beauty e-commerce site which launched late 2014 and currently carries more than 50 brands, many of which are less well-known Western brands such as California-based Besame Cosmetics.
Sephora, a 70-year-old French brand under the Moet Hennessy Louis Vuitton (LVMH) luxury conglomerate, is known for its wide range — it carries an estimated 200 brands (and its own private label), ranging from cosmetics and skincare, to fragrances and the like — and for having a sizeable following in the west because of its loyalty programs.
Last year, the brand acquired Singapore-based beauty e-commerce site, Luxola, in “an eight-figure deal,” thus making it “the largest start-up acquisition deals in the last three years,” according to a July 15, 2015 The Straits Times story. This buyout enabled the brand to enter the Philippine market barely a year after the deal was signed.
Sephora launched on Feb. 1 in the Philippines, much to the surprise and delight of its Filipino customers, but the quiet — almost sneaky — launch was followed by an even quieter existence as a month after it launched no news nor grand launches were heard of, something that didn’t surprise Mr. De Dios.
“I’m really not surprised… that right there is an example of how, globally, they are a big brand but locally maybe they don’t know how the market works. You don’t launch and leave, you launch and leverage… they may know beauty, [but] even if you’re a global brand, each market is different,” he said.
Sephora did not respond to BusinessWorld’s requests for interview as of press time.
Two weeks after Sephora arrived, another international e-commerce beauty site entered the Philippines — Althea — which, by all accounts is the total opposite of Sephora.
Althea Korea, which came to existence in the last quarter of 2015, introduced itself to the Southeast Asian market by way of Malaysia and Singapore. It officially opened in the Philippines on Feb. 15.
It currently has around 40 brands on its Philippine site, all of which are from South Korea (Althea is the national flower of South Korea) and includes brand staples such as Laneige, Tony Moly, and Innisfree, among others.
Frank Kang, Althea’s CEO and co-founder, bared the company’s plans to enter three more SEA markets within the year: Vietnam, Indonesia, and Thailand, during the store’s Philippine launch on March 8.
Mr. Kang said that the company has raised “around $4 million” in funding from Silicon Valley venture capital firm 500 Startups last year.
“The reason [why we’re here] in the Philippines is because we’ve done market research and we couldn’t find a direct competitor to us,” Mr. Kang said, before pointing out that current e-commerce sites in the country do not have “the extensive assortment of Korean beauty brands.”
Althea Korea has admitted that they are still learning about the Philippine market, as evidenced by the site crashing on its debut. Mr. Kang told BusinessWorld shortly before the March launch that they did not anticipate the country’s slow internet speeds which prompted the crash.
But the crash also signaled the level of interest the Philippine market has for this newest entry in the beauty biz.
“It’s hard to disclose numbers but the Philippines is growing much faster than Malaysia and Singapore. Actually, on the second day of the launch, orders from the Philippines exceeded the other countries,” he said.
Mr. Kang also said that they are going to add Cash-on-Delivery (COD) payments on site in a few months as they have realized that their customers in this country prefer this mode of payment over other payment channels (PayPal, bank deposits, etc.) He added that they may have to offer COD payments to other countries, such as Thailand, as well.
“We will offer it if the market demands it,” he said.
Currently, Sephora only allows credit card payments via PayPal and Dragon Pay.
Calyxta functions quite differently from Sephora or Althea, as the site — which offers a COD option, with Mr. De Dios saying COD comprises “60%-70%” of payments made — also functions as an online magazine complete with articles (product reviews, tips, etc.) and videos (how-to’s) with content updated for every category — hair, makeup, etc. — every week. (Althea does offer some tips and tricks for some of its products on the product page.)
This strategy is aimed towards Filipinas whose makeup knowledge might be limited.
“In terms of cosmetics and makeup, there’s still an opportunity to educate the Filipinas on makeup — it’s underdeveloped unlike South Korea, mainland China, Hong Kong and Taiwan,” Mr. De Dios said.
He noted that for Calyxta, the point-of-market entry are women in college and women aged 40 and above.
“There’s a lot to be taught and to be learned,” he said, as many Filipinas still don’t know how to apply makeup as evidenced by the gap in the point-of-market entry.
Another local beauty site, Beauty MNL, functions much the same way as Calyxta does, offering makeup tutorials and beauty reviews.
Much like Calyxta, Althea — according to Mr. Kang — is not threatened by Sephora’s entry into the market because the two sites are different, especially in brand offerings as Althea is positioning itself as a repository of everything Korean beauty.
Similarly, both Calyxta and Althea reached the conclusion that the Philippines can afford to have multiple online sellers in the beauty category as Mr. Kang described the market as big because online retail as an industry is still new to the Philippines. Mr. De Dios described the online e-commerce infrastructure as “very nascent” and is banking on mobile (smartphone) penetration to improve the e-commerce industry.
“Once mobile penetration improves, we expect better e-commerce business in general,” he said, as smartphone penetration in the country has been predicted to reach 40% by the end of 2015 according to the Ericsson Mobility Report quoted in BusinessWorld.
