With over 2700 stores across 35 countries and a booming e-commerce presence worldwide, Sephora is one of the leading omnichannel beauty retailers in the industry.So, it came as a surprise to some when the LVMH-owned retailer announced on its Korean social media accounts that it would be gradually terminating all its operations in South Korea, including its app, online store, and physical stores, beginning May 6.Sephora launched in South Korea in 2019 with a flagship location in the shopping-centered Gangnam District in Seoul.The retailer has five stores currently operating in South Korea, having previously shut down two other locations. When Sephora launched in South Korea, there were doubts about how the retailer would compete in one of the leading beauty capitals of the world. According to the International Trade Administration, South Korea’s beauty market was worth $3.9 billion in 2022, making the country one of the top 10 beauty markets in the world.Sephora had to work against local competitors including CJ Olive Young, duty-free outlets, department stores, and the high number of beauty shops located on the streets, dubbed road shops. CJ Olive Young, typically called Olive Young, is a beauty retailer with over 1300 stores across the country, selling a diversified range of prestige and mass beauty brands. In addition to American brands like Maybelline, Olive Young has built a cult following with locals, tourists, and international consumers alike for its regular deals and specials on South Korean brands such as 3CE, Skinfood, and Jungsaemmool. Those doubts were born out as Sephora was unable to gain traction in the highly competitive beauty retail market of South Korea, after years of heightening losses.In 2020, the vendor had failed to reach profitability and posted losses of 12.4 billion won ($9.26 million), 14.5 billion won ($10.6 million) in 2021, and 17.6 billion won ($12.9 million) in 2022.Where did Sephora go wrong?Kimber Maderazzo, an adjunct professor at Pepperdine Graziadio Business School, and a longtime executive who has consulted for more than 25 for top businesses, including LVMH, L’Oréal, and Proactive, told Inside Retail that Sephora failed to properly set itself up for success in the South Korean market. Maderazzo explained that Sephora, a French-based corporation, went in with a Western approach to beauty retail in a country known for its strong interest in certain products and specific approach to the shopping experience, but still expected immediate success.“I think when Sephora went to plop themselves in South Korea, the consumers were like ‘no way, it is not a concept that we want’, and consumers were not interested in it especially since it wasn’t unique to their culture,” stated Maderazzo. She elaborated that a large part of K-beauty’s appeal, both locally and globally, is linked to it  uniquely dewy and innovative product formulations and beauty brands’ aesthetically appealing packaging that varies significantly from that of Western-founded companies. Maderazzo also pointed out that Sephora came to South Korea distributing mostly American or French beauty brands, but hardly any South Korean brands. “If you think about it, it’s not a bad thought,” Maderazzo mused, “because these brands are so big in the beauty industry. But South Korean consumers are so dedicated to their skincare, they’re not going to switch to French or American skincare. Traditionally, they are going to stay with what’s made in their country.”One way the retailer could have set itself up for success was by stocking a larger variety of South Korean beauty brands to appeal to its local consumer base.Another way Sephora could have gotten a leg up on the competition was by introducing new, niche K-beauty brands in stores, both locally and globally. Globally, Sephora only carries a limited stock of products from South Korean brands, including, currently, Laneige, Dr. Jart+, Sulhwhasoo, and Belif. Maderazzo believes that Sephora would have found more success in the long run if it helped introduce more K-beauty brands in its global locations, in addition to stocking South Korean brands in their country of origin. When asked if Sephora could ever have a successful comeback in the South Korean market, the beauty expert expressed her disbelief.“I think it would be very difficult for them to come back into the market and be successful even if they tried a new business model,” Maderazzo said.  Sephora isn’t the only Western beauty retailer that has struggled to integrate into the competitive South Korean retail market. In 2017, UK-based beauty and lifestyle retailer Boots opened branded stores in South Korea but shuttered all 33 locations in the country just a few years later due to sluggish profitability. When discussing mass beauty retailers that could succeed in the South Korean market, Maderazzo mused that Ulta Beauty could thrive in the country. “I think if they adopted some of the things we talked about,” she said, referring to stocking more K-beauty brands and better-known Western brands, “they could be [more] successful.“I think the difference between Ulta Beauty and Sephora is that Ulta Beauty really focuses on both mass and prestige brands and mass beauty products might do better in South Korea than prestige products,” she elaborated.For the time being, Olive Young continues to reign supreme in the South Korean beauty retail game. In 2023, the retailer reported 3.86 trillion won ($2.88 billion) in sales, spiking 40 per cent in profit compared to the year prior, outpacing the nation’s other two beauty giants, Amorepacific and LG Healthcare & Beverage that same year.