For Shinzo Maeda, Shiseido’s president, there is no alternative to growing abroad, mainly in China and Asian emerging markets. The company can no longer wait for the waking up of the Japanese market and actually does not believe its home market would ever bring the dynamism that international competition now requires. “Japan is a mature market with a decreasing population,” Mr Maeda explains.

To increase overseas business

Shiseido wants to increase the share of overseas markets in its turnover from 35% today to 50% by 2017, with the aim to become “a global player representing Asia with its origins in Japan.” During the year 2009, Shiseido has expanded its sales channels in Egypt, Morocco, Laos and Azerbaijan.

Shiseido’s strategy for overseas development features three main axes:

  “Innovating the Shiseido global brand” with the aim to integrate the image of the brand as high quality, highly functional and global prestige cosmetics along with strengthening communication capabilities. Additionally, efforts are being directed toward improving the counselling skills of the brands approximately 9,000 Beauty Consultants worldwide, excluding Japan.
 “Development of the City Concept strategy”, whereby the world’s major markets are considered as city-based rather than country-based units, and whereby management resources are concentrated on target cities.
 “Expansion of operations in new and emerging markets.”

Consolidating operations in mature markets

Measures for innovating the Shiseido global brand include initiatives such as augmenting the product line-up, remodelling the functions and design of counters and strengthening the customer service skills of Beauty Consultants (BCs).

The company underlines the importance of BCs’ training in order to expand in-store share in mature markets. According to Shiseido, BCs must communicate brand value and deepen the relationship with customers, “which the brand has cultivated over the years in the Japanese market underpinned by omotenashi (hospitality) activities.”

In certain countries, such as Switzerland, the new strategy implied to being able to manage business via direct operations, and company announced last month that it would took over its sales agent in the country,

China and emerging Asian markets

As other for many major players, such as French cosmetics giant L’Oréal, Shiseido considers China and Asian emerging markets as the areas with the main potential for growth in the next years.

Asia, and particularly China, will remain the engine of our growth enabling us to achieve our goal of globalisation by 2017,” says Shinzo Maeda.

According to Beijing’s official statistics, the Chinese cosmetics market should grow from 60 million users in 2009 to 200 million by 2015 and 400 by 2020. With regard to China, Shiseido anticipates a growth of more than 20% of its sales over 2010-2011, a figure to compare approximately 15% upwards expected this year. The company’s share of the Chinese market would be around 10%, similar to Procter & Gamble and L’Oréal, its main global competitors.

The Japanese group intends to capitalize on the good image and the high quality reputation of its products in Asia, where the group enjoys 50 years of experience. However, its Shiseido brand, which has been sold only in department stores and at specialty retailers in China to date, may remain too expensive for most of the Chinese population. In order to increase its market share and to tap into the increasing demand, the company has scheduled the launch of a new line of “affordable luxury cosmetics” in March 2010.

Under the name DQ, the line will be put up on the shelves of around 600 drugstores in major cities like Shanghai, Beijing, and Guangzhou in the first year. “Although the channel currently comprises roughly 10% of the market, it is continuously achieving double-digit growth and is expected to grow further in the future,” the company says in release.

After their debuts in China, DQ-branded products should be introduced in other Asian countries that the Japanese group considers as a natural extension of its home market.

Shiseido, which intends to be present everywhere in Asia, started the activities of its wholly owned Vietnamese subsidiary in December. Historically, Shiseido commenced sales of its prestige products via a distributor in Vietnam in 1997. As competition is becoming more intense, Shiseido made the decision to establish a new company in order to further enhance its presence in the market by developing marketing activities. In addition to its high-end Shiseido and Clé de Peau Beauté brands, the Tokyo-based manufacturer intend to expand regular users of its products through developing the Za brand targeting the expanding middle-income group in Asia.

Shiseido had carried out the best results of its history in 2007-2008 with an operating profit of 63 billion yens for a turnover of 723 billion. However, its turnover dropped by 4.6% and its operating profit of 21.4%, over 2008-2009. With its Three-Year Plan (FY2008 - FY2010), the company pledged to get back to record results as of 2011-2012.