A recent in-depth research paper published for the Harvard Business Review has documented the journey of Korea’s largest beauty and health retailer, CJ Olive Young, offering an analysis of the company’s growth strategy, innovative approaches in the beauty market and the challenges it faces as it leaps toward global expansion.

Co-authored by Rebecca Karp, an assistant professor at Harvard Business School and researcher Shu Lin, “Olive Young: Formulating Beauty Innovation” was presented on Feb. 11 for Harvard’s MBA second-year Innovation at Scale course.

According to Olive Young, one-third of students in the class had experienced the brand and showed strong interest in the discussion.

“I became interested in Olive Young when I learned that Sephora had attempted to enter the Korean market and pulled out. I was curious as to why,” Karp said via an email interview.

“I then learned about Olive Young, which has been an incredibly successful company. They have figured out how to shift with the market, cultivating indie brands, developing private brands and creating a dominant online capability as it evolved over time in ways many other companies have failed to do.”

Founded in 1999 with a single store in Seoul, Olive Young expanded to over 1,350 locations across Korea by 2024. While the company’s expansion is noteworthy, its transformation and adaptability in the highly competitive beauty retail sector also stand out.

Karp’s research highlights Olive Young’s strategy of creating immersive “beauty playgrounds” in each of its stores. The spaces, featuring some 10,000 beauty and health products, are designed to offer customers an interactive shopping experience, the paper explained. Such approach has contributed to today’s high traffic, with the flagship store in Myeong-dong, central Seoul, reportedly handling over 5,000 purchases daily.

“What I love the most about Olive Young is the ability to try, discover and search for products. Many products are organized by trend or category rather than by brand. If you want to try and use products for ‘slow aging,’ for example, they are all grouped together, so you can learn about and utilize the full ecosystem of products, not just a particular brand that you might know.”

In 2023, the company reported a 39 percent increase in sales, reaching 3.9 trillion won ($2.9 billion), as net profits grew by 72.7 percent, coming to some 466 billion won. Such performance positioned Olive Young as a dominant player in the market, surpassing the revenues of the country’s two major cosmetics giants, Amorepacific and LG Household & Health Care, for the first time in 2023.

The research also examines Olive Young’s merchandising strategy, in which the company’s merchandisers take on a role beyond traditional buying. They act as “trendsetters,” closely monitoring the market, collaborating with brand partners and curating assortments.

“Being able to both identify trends and shift the market towards that trend is truly Olive Young’s special sauce. I think setting the ‘slow aging’ trend in particular is totally brilliant,” she said. The company’s ability to anticipate and develop trends before they become mainstream has been a key point of analysis.

As the company considers global expansion, particularly into the US market, which accounts for around 70 percent of its total cross-border sales, the research outlines several challenges and potential strategies. The research also mentions Olive Young’s past venture in China, which ended in 2020 due to accumulated losses, offering insights into the company’s global expansion strategy.

While Olive Young’s approach to creating immersive retail experiences, utilizing technology for operational efficiency and leveraging trend forecasting are all strengths, the company’s ability to adapt and maintain these advantages in new markets remains a critical challenge, according to the paper.