J-beauty in China: istyle and Alibaba launch direct export model to boost brands’ expansion

istyle is the parent company of @cosme, a Japanese beauty retailer and popular online beauty community that aggregates and rates cosmetic products.

The company has been operating in China since 2012 and launched @cosme’s online flagship store on Tmall Gobal in 2015.

The Tmall Global x @cosme China Direct Export Project was announced on October 20.

Unlike its direct-to-consumer (D2C) cross-border channel, inventory for the direct export model will be based on consignment.

It will be managed in a Japan-based warehouse, making it easier and more flexible for smaller brands to manage.

“By managing inventory in the Japanese warehouse and sending products directly to users in China, it will be easier to manage product loading and unloading and only requires a small amount of inventory to be managed at the warehouse,” ​explained Yoshihisa Kaneko, president and representative director of istyle Trading Inc.

Overcoming market challenges

While the expansion of the beauty and personal care market in China means more opportunities, it has also presented several challenges for the Japanese company and its brand partners.

For instance, the huge investments in marketing required to build the brand’s presence in the market is a massive barrier for many beauty brands.

According to istyle, this initiative will allow its brand partners to test its marketing strategies for the Chinese market before putting own major investments.

Kaneko told CosmeticsDesign-Asia​ being able to solve these issues would give the company a big advantage in China.

“The problem was that new products and existing products could not be sold without investing a large amount of money, and it was not possible to conduct test marketing easily. For the brand side, there was also the problem of not being able to enter the market without funds. We believe this project will solve both problems.”​

Additionally, istyle will provide comprehensive support for market entry, such as free warehouse usage for 90 days, export work on behalf of customers, and marketing platforms such as live commerce.

This model would help the company overcome the impact of China’s E-Commerce Law which came into effect in January 2019, which resulted in a decrease in social buying, or diagou.

“As this law directly affects the tax rate and sales rules, each change has an impact on us here at istyle. Since the current system regulates the personal transaction market, it has had a great impact on the inbound and ‘Taobao market’ in the country,”​ said Kaneko.

Additionally, the company has suffered from the decline in inbound demand brought about by the novel coronavirus (COVID-19) pandemic. With this new model, it aims to be able to replace that demand.

Last month, istyle announced that it was establishing Over The Border, a new Multi-Channel Network (MCN) company created to connect with Chinese consumers.

Kaneko said such new initiatives would help the company adapt quicker to the shifts in the large Chinese market.

“In China, the change of pace is very fast. We believe that grasping the scope of these changes as soon as possible and anticipating their impact will lead to greater opportunities for our business.”​