The encyclopedia · Finance & Accounting · Strategic decision · 2006–2021
Tony Moly had four years of operating losses and closed a third of its stores
The K-beauty road-shop pioneer saw its store count fall from 679 to 457 and its debt ratio rise to 183.5%.
Tony Moly · 2020
What happened
Tony Moly was founded in 2006 with backing from Tae Sung Industry and grew rapidly as a K-beauty road-shop brand, expanding to 825 stores in 15 countries by 2016. Its cute, character-driven packaging and affordable pricing made it a favorite among young consumers across Asia. At its peak, the brand operated 679 road-shop stores in Korea alone.
The decline began after the 2016 THAAD diplomatic row, which triggered a Chinese consumer boycott of Korean brands. Tony Moly's operating profit turned negative in 2017 and stayed negative for four consecutive years: a loss of 1.9 billion won in 2017, 5.1 billion in 2018, 300 million in 2019, and a catastrophic 25.5 billion won loss in 2020. The COVID-19 pandemic dealt the final blow to its offline road-shop model, as foot traffic evaporated and consumers shifted to online shopping.
Tony Moly's road-shop store count fell from 679 in 2017 to 517 in 2019 and 457 by 2021 — a 33% reduction. Its debt ratio more than doubled from 74.9% in 2017 to 183.5% in 2020. The company was forced to raise 27.9 billion won through a paid-in capital increase, using 18.7 billion won for debt repayment and 9.2 billion won for operating funds.
Why it happened
- The 2016 THAAD diplomatic row triggered a Chinese consumer boycott that crushed Tony Moly's overseas sales.
- COVID-19 eliminated foot traffic to road-shop stores, which were Tony Moly's primary sales channel.
- Competition from cheaper C-beauty brands and faster product cycles eroded Tony Moly's mid-market positioning.
- The road-shop model required high fixed costs for rent and staff, leaving no flexibility when sales declined.
The lesson
A road-shop brand that depends on foot traffic from one demographic is a lease on a trend, not a business. When the trend moves online, the rent still comes due.
Aftermath
Tony Moly raised emergency capital and continued operating with a reduced store footprint. The brand shifted focus to online channels and overseas markets including the US and Southeast Asia, but its Korean road-shop network never recovered to pre-2017 levels. The company remained profitable on a smaller scale but lost its position as a top-tier K-beauty brand.
Sources
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