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Sector Insight... Beautiful skin cuts deep into Japanese wallets
by Glenn Smith 23-Apr-09, 16:15
With 22 per cent of Japanese over 65, the older consumer is a lucrative market for the skincare industry.
Beautiful skin is a national fixation in Japan, and deep-pocketed consumers pay shocking prices for the promise of middle-aged beauty. Skincare priced above 20,000 yen (US$200) saw sales growth of 24 per cent last year, according to Shiseido. Prices scale upwards to ‘super premium’ - those that sell for 100,000 yen. A 40-gram jar of Shiseido’s Cle de Peau Beaute Synergique Cream or rival Kanebo’s Twany Century Cell Rythm Cream both sell for 126,000 yen, while Kose’s 45-gram pack of Cosme Deccorte AQ Cream is a relative bargain at 94,500 yen.
Skincare leads toiletry categories in Japan. Last year, skincare tallied sales of 1.5 trillion yen, or 42 per cent of the 3.5 trillion spent on cosmetics and toiletries, according to Euromonitor. This is nearly matched by ‘premium cosmetics’, a high-end catchall with 41 per cent of sales worth 1.4 trillion. Both categories are mature, and, states Euromonitor, compound annual growth was two and 1.1 per cent respectively between 2003 and 2008.
Two companies - Kao and Shiseido - command a third of industry sales. Euromonitor data shows former number two Kao in the lead with a 17.5 per cent share, a fact made possible by its purchase of third ranked Kanebo in 2005, while Shiseido had 15.8 per cent.
But times are tough even for these giants. The widely reported tales of more-precious-than-gold skin creams obscure a more humble reality. Shiseido’s 2008 annual report states that Japan’s cosmetics market is “essentially not growing” and is a “zero-sum battle” for market share. A leaner and meaner Shiseido has reduced its portfolio of brands from 100 to 21. Kao’s 2008 annual report called growth stable in the high end, sold mostly through department stores, and in low-priced, self-selection brands, while the middle segment between 2,000 and 5,000 yen is shrinking.
Nobue Shirai, from Lux Research Japan, says that income distribution has become less “middle class oriented” while, in contrast, affluent and low-income families grow in number. Sales channels are adapting. “The market is fragmenting,” says Shirai. “Years ago, department stores dominated for premium cosmetics, while drugstores were known for ‘mass’, ‘family’ or ‘cheaper’ products.”
Traditionally, Shiseido was a high-end brand sold in department stores while Kao - often called the Procter & Gamble of Japan - was perceived more as a family brand of soaps and shampoos. Kanebo fitted into high-end drugstores and low-end department stores.
“Now ‘somewhat premium’ brands appear in drugstores, and some ‘mid-level’ brands are available in convenience stores,” says Shirai. “With younger, less affluent customers abandoning them for drugstore products, premium brands have been forced to identify new customer segments. This has led some premium makers to move even further up market.”
These three brands defend their market positions with a combined promotional warchest equivalent to one quarter of Japan’s US$1.4 billion in cosmetics adspend, according to Video Research Japan.
Nireo Okamoto, director, Mindshare Japan, says: “Domestic brands use TV for cosmetic products, while the international luxury brands do not, and this gives them greater share of voice.”
Interestingly, TV is used by the high and low ends of the market. TV ad placements are common in daytime, during serial dramas and 24-hour shopping channels. A common strategy is to set up a ‘club’ system which allows viewers to gain discounts on repeat purchases.
With 22 per cent older than 65, Japan has the world’s oldest population, making older women a key market and anti-aging products a growth sector. Another key target group for the less pricey products is the growing number of women participating in the work force.
“Because they work outside the home, they are more concerned with their appearance than those of the generation that preceded them,” says Shirai. “Women in dual income families - and also single women - have more disposable income and can afford luxuries such as premium skin care.”
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