CEO COLUMN

Published
Subject May-2019, [No.240] Daiso Released New Products.



I visited Japan Drugstore Show with my employees in March. It was held in Tokyo, Japan. The show has been held for twenty years. Unlike Korea, drugstores in Japan supply cosmetics and gargle as well as drugs and medical supplies.  They distribute many products related to hygiene functioning like a supperette. Therefore, companies which are trying to expand their consumer group or launch new hygiene products in Japan must participate in this fair to take advantage of. This is quite appropriate way for successful results. A  lot of major companies like Lion, Kano and Sunstar have been participating in this fair. In the fair, Pieras presented as many products as other major companies, even though it is a small- sized business. They also showed twenty different propolinse products. They held a tasting event using our Disperser and did their best to promote and advertise its products. I was impressed by the passion of the CEO, Hina, who continues to develop propolinse gargle as a luxury brand by keeping participating in these exhibitions even after the product was developed and released. I respect her for showing herself that if small and medium-sized companies try their best, they can create and nurture "luxury brands" in Mass Market.



The gargle products which manufactured and released by her company have sold an accumulated 22 million units in Japan, China and Taiwan over the past five years and are expected to be successfully sold in the Korean market. The products are being sold offline through Olive Young and online through Kakao commerce, drawing tremendous attention from consumers. Ninety to ninety five percent of their reviews mention "satisfied" or "very satisfied". They says that the users are able to see black and red scum, they are happy to remove bad breath, and they experienced gum disease cured because of the propolis effect. Their online sales, which began in early March, are selling out every time, and the new non-alcoholic "Cherry Blossom Gargle" is also expected to grow into a luxury brand as it did in Japan.

In August 2009, I announced that I would give up production of LG OEM products that I had devoted 24 years to and received much help from my juniors in the early stages of the business. Although we failed to achieve our goal of 3 billion won in annual sales, we were very sorry that its profits were helpful in terms of fixed cost recovery. It was also the saddest thing to say good-bye to my colleagues who shared their youth and shared the same hope with me. We paid about 70 million won in fines for running the business, our buyers forced us to be paid unreasonable unit prices, and had been audited like tax audits. The financial and mental pain we, OEM contractors, are suffering from big businesses was hard to bear, and we ended up deciding to stop the deal. In addition, we decided that OEM-produced corporate management would not be able to realize our vision of a long-term company, so we developed and sold our cosmetics in the "ORIOX" brand.



If a company develops and sells its cosmetics, it must have a laboratory to develop many things such as scents and components, have a sales network to sell them, and have the financial resources to withstand the initial deficits before advertising and promotion. The bottom line is that large enterprises already have huge sales networks and research and development facilities, so it needs to utilize the Niche Market instead of the Mass Market that requires marketing power. However, the sauna cosmetics we produce and sell were monopolized by large companies such as LG and the Pacific Ocean even in niche markets. Because there were few places for small and medium-sized ORIOX to squeeze in, we relied on the sale of low-cost products to earn millions of won in monthly sales and we could not even afford office rent. But as words spread among consumers that our products are "equal to quality and competitive to enterprise products", sales of ORIOX, which had been just an unpopular product, began to soar. Although saunas are currently declining in Korea, our sales are increasing as the products from large companies are replaced by our ORIOX products on the shelves. Now, you can find ORIOX in any sauna. Finally, with quality and price competitiveness, we achieved the image of good sauna cosmetics.



The small success of the niche market in which our Sauna cosmetics products defeated large enterprises led me to make a decision that we should not just run OEMs and ODMs, but expand the brand of our LCCs. The desire to make the ORIOX Brand led to the development and expansion of another Niche Market, Disperser Gargel, and the initial 7-8 years of deficit was also converted to surplus. The various quality Claims, such as leakage design were solved by manufacturing new molds and the problems such as cosmetics flavouring were solved by mixing foreign substances. This journey led us to the construction of our fourth gargle plant. We have also developed and replaced a clean paper cup with a 400 million won facility investment that we used to produce using plastic. We are also committed to establishing strong trust with retailers by abolishing "no retail business at headquarters," which is the biggest complaint. Our flawless Disperser's quality innovation has enabled exports to the United States, a foreign market, and we are now exporting Slim Type (thicker than 100m/m) in bulk, tailored to the American Disability Act. In the domestic market, we compete with LG and Yuhan-Kimberly, maintaining our market leadership of 80% with absolute advantage in quality and price competitiveness.



Another reason for the success of Sauna Cosmetics and Dispens Gagle at the Niche Market is the close trust which we had built with the agencies Except for bulk buyers such as department stores and casinos, most products are distributed through dealerships. We invite the presidents who run cosmetics and goggles dealerships to our company every fall to introduce our innovation activities, corporate culture and export status to show our passion and commitment to realizing our vision. They look around the nation's largest gagle factory, Asia's largest L/C plant, BDF and Unilever's body lotion plant, and admire the price competitiveness through automation and productivity gains and the quality competitiveness of the product. After the company introduction and factory tour, we have a party on the green grass. I invite the president who runs the Gagle dealership in spring and the presidents who run the cosmetics dealership regularly in autumn to listen to them. I listen to their difficulty and sometimes get the new Idea from them. Also, on their birthdays, we send cards saying "Wishing for the CEO's Health and Business Expansion" with congratulatory flower pots, and LCC Magazine continues to post interviews with the agency presidents to show mutual WIN-WIN and community awareness. Each year, we combine new and exported products with a package to give them an interest and affection for the products.



Unlike the success of Dispens Gagle and Sauna Cosmetics at the Niche Market, the launch of products into convenience stores and large supermarkets went through a lot of trouble and ended in failure. Small or urgent deliveries, inconspicuous product shelves, and delays in payment have harmed sales figures, making production and supply management difficult. In the end, we came to the conclusion that convenience stores and large markets were not places for small businesses to enter. In a timely manner, we suggested to supply several products to Daiso stores. I thought we may find the right place for our ORIOX. In other words, Daiso stores are a market where we can win at any rate if we have quality and price competitiveness, and where we can grow our brand without friction with OEM and ODM, our customers with mass market distribution.



Starting with Mouth Wash, we introduced bubble soap for the first time in the domestic market. Right after that, we released shampoo, Body Cleaner, Hello Kitty hand sanitizer, L/C and Body Lotion in succession. By continuing Daiso new products development conference and package renewal every month, ORIOX has become the dominant player in the market and expanded to more than 50 items due to new product and quality improvement efforts. Sales also began at 75 million won in 2008 and surged to 4.2 billion won in 2019, 12 years later, proving LCC's price and quality competitiveness. The Bible has a story of two men's fight. That is "The Battle of David and Goliath". The mad named David was small and not strong. However, the other, Goliath, was 2 meters tall and unbelievably strong. The key point of the story is that the weaker one beat the stronger one with his speed and wit. This story gives us a lesson that we can achieve anything impossible if we have a good strategy. Also, I can say that small business is David and big business is Goliath. Therefore, small businesses should avoid direct competition in Mass Market, where they have to confront against large companies directly, and should only compete with price and quality competitiveness and speed management in Niche Market.

 

More and more people recognize our ORIOX products in Daiso and our sales figure is expected to reach fifty to sixty billion Korean won in 2020. Daiso, the niche market which we accomplished the great success, is wide open to anyone so our potential competitors can show up any time soon. Besides, if we stop investing and trying to improve our products or develop new products or if we neglect our duties of managing quality and price competitiveness, our sales would definitely decrease. As the new policy raised the minimum wages, it gives harm to the unit price of the products sold in Daiso. It seems that some companies are hesitating the release of their new products and others consider withdrawing their products from Daiso. In this time, only our, LCC, products are being sold on the Daiso shelves with no worries. We, LCC, are planning to newly release our major products which are three different body lotions and four different types of lip care products to prosper our brand. Focusing on OEM and ODM manufacturing, exporting to various countries and our own brand, we are going further to realize our vision, long-lasting company. I am really appreciate my employees for their devotion and support. I hope the day when our products are all over the shelves in Daiso comes.               

 



CEO BAIK, SUNGCHUN

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