South Korean startups are disrupting the market with innovative technologies to widen their reach.
The fashion and beauty industries are poised for a transformation supported by tech. Virtual reality “digital mirrors,” or AI algorithms that predict style trends, along with other tech innovations, are expected to reshape a global fashion industry estimated to be worth USD 3 trillion by 2030, according to CB Insights.
South Korea is at the forefront of innovation in the fashion and beauty sectors. The country has developed an industry that has remained resilient throughout the COVID-19 pandemic by using tech to redefine the online and in-store experience.
The steadfast support from the Korean government and global venture capital firms has contributed to the worldwide expansion of Korean fashion and beauty tech companies. E-commerce fashion platform Musinsa, for instance, joined South Korean cosmetics brands GP Club and L&P Cosmetics on the country’s list of unicorns in late 2019. Other South Korean fashion tech and beauty companies such as Fashionade, Fash\on, Imemine, and The Blessed Moon have also experienced fast growth as they now look to expand to Southeast Asia, a region with over 670 million potential customers.
Tech redefines the online and in-store experience
Augmented reality and virtual reality applications have been applied to the retail sector to create digital experiences in stores. These technologies are also being utilized to recreate the in-store experience for online customers. Usually, consumers face challenges when purchasing clothes online as brands have different sizing for their clothes. This has caused a high rate of returns and reshipping of products, resulting in billions of dollars of lost revenue for companies in the sector.
South Korean startups Imemine and Fashionade are two companies using AI, AR, and VR to respond to these challenges. Their software helps consumers find the correct fit while boosting conversion rates and reducing product returns.
Imemine’s solution, AI sizing app SizeMine, allows users to check different sizing information from various brands and get recommended sizes based on approximated full-body measurements generated by analyzing users’ photos. The company said its process has a 97% accuracy rate. Positioned as a big data and tech enabler of the fashion industry, Imemine draws parallels to multinational apparel brands, including Japan’s leading fast fashion retailer Uniqlo, which also leverages big data to produce clothes.
“In general, fast fashion companies’ production volumes are forecasted based on historical data, and they achieve average sales of 50%” of their manufactured output, Imemine CEO Park Iksoo said. “Uniqlo, however, predicts sales and determines production by utilizing hyper-personalized data, thus reaching sales rates of over 90%.”
Park says that SizeMine can reduce the return rate of products by more than 30%. The company plans to provide its SizeMine platform to more brands and online retailers, targeting to enter the US and Southeast Asia by mid-2022.
On the other hand, Fashionade developed an AI-powered style recommendation software named StyleAI. The platform analyzes customers’ behavioral data and fashion experts’ reviews to offer various style recommendations to online users. Fashionade CEO Jake Baek said that StyleAI has proven “to increase the average consumer’s order amount by 23%” while helping retailers manage their store inventories better and save costs on model photoshoots.
Fashionade is currently partnering with brands such as Umbro and Converse, and is also looking to expand to Southeast Asia and work with small and medium businesses through its partnership with Shopify. Baek said the opportunity in Southeast Asia is “tremendous,” revealing its plan to “partner with an enterprise fashion company to do a proof of concept project” as part of the company’s expansion into the region.
Digital stylists: Up close and personal
AI styling is gaining a foothold in the global fashion industry. For instance, when Prada launched its official online store in China in 2018, it also introduced personalized concierge services powered by virtual assistant chatbots to help customers shop. Amazon is also leveraging AI tech with its StyleSnap feature, which allows customers to upload a photo of an outfit, which will then find listings for each item. In Southeast Asia, e-commerce site Zalora operates Virtual Dressing Room. This tool allows users to compare garments they want to buy with clothes they already own by virtually overlaying the silhouettes of the two.
Fash\on is another South Korean company providing tech innovation for brands, retailers, and consumers via its Digital Closet platform. The tool is touted to be a “smart fashion mirror” for customers that want to regularly update their wardrobe with the latest styles. Users can upload their most recent 20 outfits—including hats, tops, bottoms, and shoes—to the platform, which will then recommend new outfit matches and new products based on the personal closet’s contents.
The company’s CEO, Ko Jong Hyun, said that Digital Closet creates an online-to-offline (O2O) experience by “creating engagement for offline stores from online engagement and vice versa.” He added that the software allows brands and retailers to leverage user data to promote personalized fashion pieces for each individual. Jong also revealed his intention to create a personal styling subscription service. Jong’s vision for Fash\on is to “connect brands to users, and users to users,” while consolidating data for the O2O retail space.
Sustainable fashion and beauty
Sustainability across the fashion and beauty industries has gained momentum in recent years among consumers, investors, and brands. According to a report by First Insight, 73% of Generation Z consumers are willing to pay more for sustainable items. Brands targeting this demographic in the fashion and beauty space are changing their business strategy and product offerings to align with these consumer sensitivities.
Consumers, in particular millennials and Gen Z, are moving away from single-use plastics, according to a McKinsey report that says up to 70% of buyers are willing to pay more for sustainable packaging.
Moon Eun-bin, CEO of South Korean cosmetic firm The Blessed Moon, saw the opportunity to capture a relatively nascent sustainable cosmetic market in 2018. The company develops cosmetics made from natural ingredients that are sustainably sourced. The company also utilizes a sustainable packaging system that allows consumers to refill containers to reduce single-use plastics.
By layering a sustainable model on top of an O2O and direct-to-consumer (D2C) model, The Blessed Moon has scaled rapidly beyond its home market. Starting in South Korea, Moon established a presence in nine countries in Asia, Europe, and the Americas within three years. The brand works with major offline and online retail channels such as Lotte department stores, Shopee, and Lazada.
As the fashion and beauty sectors undergo an extreme makeover powered by tech, key stakeholders such as VCs and governments are also supporting these changes to promote sustainability in the supply chain. Capital and capacity building for startups need to develop in tandem with the ever-evolving fashion and beauty industries.
Quest Ventures is a Singapore-based venture capital firm that boasts a portfolio of more than 90 companies based across Asia and have strong relationships with many community partners across Asia’s ecosystem.
This post first appeared on KrASIA.