How K-beauty Stays Strong During Coronavirus Pandemic — Interview with CEO of MBX

While the COVID-19 pandemic is hitting hard on many businesses, some startups are making progress — CEO of MBX(formerly Memebox) Corporation explains how MBX is overcoming the coronavirus pandemic and how it is preparing to lead the future as a top brand of K-beauty.

The COVID-19 pandemic is changing life, economic and industrial landscapes. In particular, travel, airline, hotel, concert and food service industries will not be the same as before. What is ‘beauty’ amid stay-at-home order for over 2 months? How will it change after the pandemic? What will happen to ‘K-beauty’ after the pandemic, that has just started to become popular in the U.S.?

Founder & CEO of MBX Corporation, Hyungseok Dino Ha, has the answers to our questions about how he responded to COVID-19 pandemic and how the beauty industry will change in the future. He is a pioneer of the K-beauty market. MBX Corporation headquarter is in Silicon Valley.

Stories of MBX, Overcoming the Pandemic

In the interview with The Miilk, Ha said, “We responded preemptively from the end of January when the coronavirus pandemic first started.” He emailed investors in the U.S. to warn them in advance that “the situation is serious and it must be managed quickly.”

MBX noticed the beauty industry converting rapidly from offline to ‘online’ after the pandemic. MBX’s business through Amazon expanded almost 10 times since January, and it also became the most popular skincare brand on TikTok after setting up a TikTok channel — this only took 2 months.

MBX reacted quickly to create opportunities and exceeded predictions that “beauty companies will have difficult times during coronavirus pandemic.” Ha says, “The pandemic is not a transitory event. New powers will emerge afterwards.”

The following is the Q&A from the interview.

-When did you first see the signal that the coronavirus pandemic will affect the business?
Ha: We didn’t overlook the situation when the pandemic started. We responded quickly. MBX has four offices: San Francisco in U.S., Pangyo in South Korea, Shanghai in China, Taipei in Taiwan. The office in China first showed the signal of the outbreak. It was not “okay.”
We had about 2 major crises in the past 8 years since the start of the business. In 2017, we were affected by the THAAD crisis. China accounted for about 50% of our company’s sales and we experienced a sudden drop. Due to that experience, we reacted fast this time.

-What did you first do?
Ha: First, I prepared a response plan for employees’ safety and health. Second, I wrote emails about the response to the pandemic even before it hit the U.S. We informed the investors at the end of January that we would prepare for the worst by adjusting annual sales and costs. We lowered our sales in Asia by 20%. We cut down unnecessary costs as much as possible and prepared the operation of the company.

-What advice did MBX investors, such as Y Combinator, give?
Ha: We sent emails to all the investors about the pandemic. They asked how much cash the company holds, and how long the company can be operated with that amount of cash. Goodwater Capital wanted to communicate as quickly as possible by texting. We held a CEO session every 2 weeks so that we could continuously check the crisis response issues.

-Did they mention about actions to prepare for the worst situation, such as restructuring?
Ha: Investors always say to prepare for the worst scenario. But a piece of advice that I remember is, ‘there is no investor who will be angry about negative sales in this situation, so just survive.’ Paradigm shift is happening rapidly. I have worries about this, but it is true that I have high expectations.

Online First for Beauty as Well

-In the U.S., work from home and shelter in place have significantly impacted the decline in consumption. Did it influence the sales of the beauty industry?
Ha: We know that the accommodation, travel industries have lost sales by more than -100%. Beauty or personal care is around -8%. Within the beauty industry, it is different by companies. Color cosmetics is definitely declining, but the sales of skincare products are increasing due to growing interest in self-care. In the past 4 weeks, spending on essential products such as food and masks have been high, and now interest in self-care at home is increasing.

-Beauty marketing is also likely to change. Probably online became a base channel after sales from offline shops declined, right?
Ha: When we first started the business it was focused on blog marketing. Then it moved to Facebook and Instagram. Then, we thought TikTok would be a new trend. We transitioned to the mobile market quickly, and at the same time, the mobile market moved to TikTok, which resulted a great outcome. MBX is growing rapidly. We ranked as top 1 beauty brand(‘I Dew Care’ skincare) in global TikTok, excluding China. In 2~3 months, 600k followers increased.
Currently, we are working with Sephora, Ulta Beauty, and Amazon. Among these 3 companies, online-centered Amazon certainly shows the biggest sales growth. Our product sales on Amazon have grown nearly 10 times from January to now. Amazon seems to be positioned as a leader in the distribution industry for the beauty field.

-How much marketing cost did you spend on TikTok?
Ha: We spent none on advertising to have 600k followers. Advertising is active in TikTok China, but it is still disabled in global TikTok. TikTok was also surprised to see 600k followers. They asked us how we did it.

Clean, Vegan Beauty

-How long do you think the pandemic impact will last?
Ha: We discussed with the investors whether this is a blizzard or a start of the Ice Age, and decided that ‘this is the Ice Age.’ New powers will emerge.

-What changes are you referring to, for the new powers?
Ha: There are some very important tasks for the beauty industry to deal with. It is clean beauty and vegan(strict vegetarian) beauty. The fact that the pandemic came from animals is impacting customer consumption behavior and is changing rapidly.
It is becoming very important not to do animal testing and not to use packaging that affects the environment. Consumption is increasing as well as the responsibility for the environment. This trend was actually happening slowly before, but it speeded up due to the pandemic. Our company is planning everything again from raw material to marketing etc.

-Before the pandemic, customers visited offline beauty stores to test the products and get recommendations. What do you think will happen in the future?
Ha: The situation in Asia and the U.S. seems to be very different. It is difficult to predict when the stores in the U.S. will be able to open again. Even if it opens, I wonder if the time will come when the customers test the products and get advice at the offline stores.

K-beauty Will Become Stronger

-MBX also launched ‘Kaja’ brand with Sephora. How will the pandemic affect the K-beauty industry?
Ha: I personally think Korean companies in the beauty industry are strong. K-beauty will become stronger after the pandemic. K-beauty will continuously get positive response because of its reasonable price with good quality.
Looking at how MBX gained a position on TikTok, we differentiated package design, product formula (ingredients), and color. Also, K-beauty is strong online. I think the pandemic will be an opportunity for K-beauty.

-It could be an opportunity for Korean beauty companies that want to enter the U.S. market.
Ha: Yes. In the first 2 months, the company was operated for its survival, but now, we have internal discussions about how customers are changing these days, and what to do with production in line with these changes, and what is happening now. We identified these things and now we are trying to gain a higher position. Due to the pandemic, recognition for ‘made in Korea’ products have become a lot better. Since our company has Johnson & Johnson’s investor, we’ve also been asked whether we can provide hand sanitizers. I would like to recommend to take advantage of this opportunity when ‘made in Korea’ K-beauty records the highest share price.