Kentaro Fujiwara reflects on the last decade in China: “Over the past 10 years, consumption has been boosted by the rapid and accelerated digitalization of people’s lives, which has supported GDP growth.
“It was based on stable employment and rising incomes, and consumers, especially young people, became confident about China’s future and boosted consumption.”
Against this background, Chinese consumers have relied on price to determine product quality, which has promoted the preference for high-end cosmetics from overseas brands, he said.
“Consumer preference for imported products has led to rapid expansion of the prestige cosmetics market, and growth has been driven by the rise of e-commerce centered on Tmall as a new consumption channel.”
However, repeated shutdowns and higher unemployment rates have cast great uncertainty over Chinese consumers. This pushes them to moderate their consumption and refocus on savings.
“The changes are so dramatic in China with a resurgence of COVID-19 this time around, consumer sentiment has changed so much,” he said.
Luxury and functionality
At the same time, he observed that it also makes Chinese consumers value long-term effects and well-being.
“As a result, they place more importance on the effects and effectiveness of skin care products and start buying local brands if they are worth the price. Young people are becoming more selective and also oriented towards low prices,Fujiwara said.
In this environment, the company anticipates a rise in local beauty brands, especially skincare brands backed by scientific research. On the other hand, Fujiwara highlighted the opportunities for Shiseido in the luxury beauty segment.
“When it comes to import brands, growth is clearly in high prestige. The market will transition to stable growth from the rapid growth recorded in the past. As consumers focus on essentiality and real value, I think this gives us a great opportunity for growth.
With this in mind, the company plans to drive growth from “consumer-oriented brand and product communication”,rather than large-scale promotions like in the past, Fujiwara said.
“We will evolve communication centered around the effects and efficacy of products and expand online touchpoints for communication. We will also provide an all-new experience for consumers to deepen their understanding of our products and brands.
In addition, the company will expand the online touchpoints of its premium brands, such as Clé de Peau Beauté recently launched on JD.com.
In the medium to long term, the company will establish a solid foundation based on its portfolio of prestige brands with a focus on function and efficiency. “We are going to postpone the investments of the second half with a view to developing them”, Fujiwara said.
Overall, the company’s goal is to position itself as the Asian beauty expert in China.
New growth poles
Fujiwara also stressed the importance of being proactive in creating new growth categories. He pointed to the company’s expansion into categories such as men’s cosmetics and beauty supplements in China.
In July this year, it launched the SIDEKICK in China via e-commerce. The brand targets Gen Z male consumers. Earlier in June, it launched INRYU, a beauty supplement brand developed in China. through cross-border e-commerce channels.
Additionally, the company will partner with medical-aesthetic skincare company Trautec Co., to jointly develop new functional skincare for the mass market as well as professional channels.
“While promoting transformation and structural reform to achieve sustainable growth with existing brands, we are proactively working in new growth categories aimed at achieving growth in the evolving Chinese market,” Fujiwara said.