**, ***, ****, ***** Yonsei Univ.攀攀Specialty stores, which have been major channels of Korean cosmetic industry, are bringing out a lot of problems in current distribution channel systems because of its repeated depression of sales. Especially, inefficiency in distribution channel systems is caused by cannibalistic price-off competition between specialty stores, too many launchings of new products, excessive sales promotion, absence or surplus of stock, and so on.Using qualitative methods such as in-depth interview and group discussion, the authors attempt to diagnose fundamental problems of the cosmetic specialty store distribution channels in three viewpoints; achievement of goals, marketing flows in channels, and relationship management. In addition, this paper suggests core strategies for building up the competitiveness of both of the maker and the retailer. The competitive strategies are mainly about securing profitability of retailers, smoothening of marketing flows in channels, and building-up trustful relationships between distribution channel members.