Tourist trap: Shiseido aims to restore growth in Japan without overreliance on travellers
After a tough 2020 bogged down by COVID-19, Shiseido is laying the groundwork to return to its pre-pandemic form. The beauty company is aiming for a full recovery by 2023 and achieving a record-high operating profit margin of 15%.
In 2020, Shiseido struggled in Japan as net sales decreased 29.7% year-on-year and operating profit fell 86.3% year-on-year.
“In 2018 and 2019, we saw a sudden increase in inbound demand and our counters were overflowing with consumers. Last year, because of COVID-19, it became difficult for consumers to visit our stores and we could not demonstrate our counselling skills, which is our greatest strength,” said Norio Tadakawa, COO, Japan region, during the Group’s 121st Ordinary General Meeting of Shareholders.
For the largest cosmetics firm in Japan, returning to form in its home market was an imperative objective. “It's critically important to restore growth in Japan, which is the root of Shiseido,” said representative director, president and CEO Masahiko Uotani.
Tadakawa said the company was aiming to recover its growth in Japan without depending on demand from inbound tourists.
Instead, it would focus on strengthening its relationship with consumers and its business partners while responding to the changes in consumer lifestyle and habits triggered by COVID-19.
“We are promoting collaboration with our business partners, to further enhance the trust of loyal customers who have continued to use our products… We will work with our business partners this year to develop a strategy to make the most of two contact points with consumers, which are stores and digital,” said Tadakawa.
Among its partners, Shiseido highlighted the importance of reinforcing its partnerships with Japanese cosmetic speciality stores, multi-brand cosmetic stores such as @cosme.
“What we aim to be in the cosmetic specialty store business is to be a beauty partner… we want to service consumers throughout their lifetimes with our business partners,” said Kiyomi Horii, SVP, prestige business division, Japan region.
Most recently, the company relaunched its cosmetic speciality store-exclusive brand, Benefique, to help meet its aims.
“[With Benefique,] we incorporated ingredients of high efficacy to create a product line for consumers to enjoy throughout their lifetime at every age,” said Horii.
Furthermore, the company just launched a dedicated e-commerce site, Omise+, to support its cosmetic specialty store partners.
The Omise+ platform supports its partners by offering more convenience for consumers in purchasing items, especially repeat purchases, which are increasing being done online than in-store, said Horii.
“This is a way for cosmetic specialty stores to conveniently connect and deepen relationships with consumers by delivering more personalised services and information. Omise+ has already been supported by more than 500 specialty stores, and we plan on expanding further.”
Personal care potential
In early February, Shiseido announced that it was selling off its personal care division which consists of a portfolio of low-cost brands available largely in Japan, to CVC Capital Partners.
This decision, said Tadakawa, was aimed that restoring growth for the business, which has faced increasing competition in the market. On the other hand, Shiseido was unable to provide enough resources to grow the business.
“We faced a reality that we could not give the personal care business high priority. And now unfortunately could not invest enough in product development, and advertising due to limited resources at the management level.”
Tadakawa noted the strong potential of brands that were “loved by many consumers” at the hands of a company with the resources to enhance the business.
“The new company will continue to develop these important brands, accelerate product innovation, in-house marketing and sales, including digital, and invest into people to the fullest extent.”