Tough on Wrinkles, Soft on Sales

Japanese cosmetics companies are known as some of the most technically advanced in the world, with promises of creams and emulsions that use rare ingredients to stop wrinkles and create a flawless complexion.

But these days, they are finding one problem tough to conquer: the U.S. market.

Shu Uemura, a Japanese beauty brand that’s best-known here for a sophisticated eyelash curler, will soon cease to have a retail presence in America, moving to online-only sales in the U.S. Kanebo, whose pricey Sensai luxury brand featured unusual ingredients such as a rare form of silk, quietly pulled out of 30 retail locations last year and now is sold at only one U.S. store, Manhattan’s Bergdorf Goodman.

Shiseido Co., Japan’s venerable leading cosmetics company, is pushing forward in the U.S., with its recent purchase of the Bare Escentuals brand, but even after 45 years of selling in the U.S., Shiseido still has a relatively minor presence in the market.

The retreat of Shu Uemura and Kanebo represents a surprising comedown for companies that represent an established beauty tradition—Japanese women have long prized ageless, porcelain-white skin—and a national reputation for quality and high-tech prowess. “The Japanese woman is the most sophisticated consumer in the world. These brands are well-respected and well-known in Japan,” says Mark Loomis, the president of Estée Lauder Japan. “When they go overseas, this recognition is not automatic. You have to adjust your strategy.”

The pullbacks come at a time when Japanese and American beauty ideals are closer than they have ever been. The Japanese concept of bihaku, which literally means “beautiful white” and refers to Japanese women’s quest to achieve an alabaster complexion, long carried uncomfortable racial overtones here and was at odds with Americans’ love of tanning.

Recently, however, the aesthetic in the U.S. has shifted, thanks to growing awareness that excessive sun exposure damages skin and causes wrinkles. (Japanese women have always walked around with parasols under the summer sun.) Americans now spend more money than ever on anti-aging products that target wrinkles. And “brightening” products, which have long been popular in Japan, are gaining ground in the U.S. for the purpose of lightening dark spots and evening out skin color.

Japan’s Hits and Misses

• The Shu Uemura eyelash curler became popular with American women.
• Future Solution LX is one of Shiseido’s best U.S. sellers.
• Shiseido White Lucent Brightening Moisturizing Emulsion promises an eventoned complexion.
• Kanebo Sensai Premier “The Cream” (below) retails for $650.

“The brightening/whitening market is becoming as large as anti-aging” in the U.S., says Tomoko Yamagishi-Dressler, Shiseido’s vice president for marketing in the U.S. Shiseido launched its White Lucent intensive brightening serum in the States in 2005, and since then it has achieved double-digit growth.

Despite the growing U.S. interest in anti-aging and skin-care products and Japanese companies’ reputation as global leaders in this segment, Japanese companies have still had a rough time in the world’s biggest cosmetics market. Through aggressive marketing, including cultivating key relationships with beauty editors at magazines, editorial placement and social networking, Shiseido has become the No. 4 prestige brand in the U.S. Ten years ago, it wasn’t in the top ten.

But in the year that ended March 2009, only about 20% of its sales were from the U.S. market, compared with 45% from Asia and 34% from Europe. “We are still weak in the U.S.,” said its chief executive, Shinzo Maeda, in an interview earlier this year.

To bolster its U.S. operations, Shiseido in January bought Bare Escentuals, a San Francisco-based mineral-makeup line, for $1.7 billion, marking the largest acquisition in its history.

Japanese companies “have amazing product formulations,” says John Demsey, group president of Estée Lauder Cos. But so far that hasn’t been enough. “Japan has been so successful at building up their presence in the U.S. in the electronic and automotive industries. There has been a disconnect on the beauty side,” he adds.

The challenges for Japanese brands in the U.S. are myriad. Consumers aren’t familiar with the brands; on Shiseido’s website, it explains: “Shiseido is pronounced “She-Say-Doe.” Also, Japanese companies have high distribution costs for the products they have to ship from Japan, and operating costs are high, because they tend to sell via department stores, where training sales staff and acquiring counter space are costly endeavors.

Shu Uemura is pulling out of U.S. retail stores after failing to catch on.

This is a tough time for high-end beauty brands of all sorts. Sales of luxury beauty products have fallen in the U.S. since the recession started, as Americans have traded down to drugstore products or simply bought fewer cosmetics.

Also, American and Japanese women still take sharply different approaches to skin care. Though skin-care awareness has increased in the U.S., the amount of money and time the U.S. consumer spends on her regimen is still far lower than that of her Japanese counterpart. The average Japanese woman spends 60% of her cosmetics budget on skin care, compared with 30% for American women.

A Shiseido survey found nearly 69% of Japanese women used cleanser, toner and moisturizer religiously at night, compared with only 17% of American women.

Indeed, Shiseido has documented that the average Japanese woman employs a much larger array of products each evening—as many as six products. First, she removes her make-up with an oil-based product. Then comes cleansing the face. This is followed by a lotion—a toner-like skin softener—and then possibly an “essence,” or serum. Finally, she pats on an emulsion, which is less viscous than a cream, and then a traditional cream. All of this is achieved while performing an elaborate facial massage meant to help prevent sagging and wrinkling.

“The psyche of the American consumer is about a quick fix, and not about prevention,” says Ms. Yamagishi-Dressler of Shiseido. “It’s all about, ‘What can this product do for me now?’ We have to adapt to that.”

Kanebo, which entered the U.S. market in 2000, incurred a loss on its U.S. operations every year, according to its spokesman. Kanebo said the costs of operating in the U.S. were very high, since its only retail channel was department stores. It didn’t advertise in the U.S. much, making it hard to build an image for its Sensai line. In the U.S., “achieving profitability was tough,” a Kanebo spokesman said. The company is now focusing on expanding its presence in Asia.

Shu Uemura had several popular items, such as a cleansing oil, but it was too much of a niche brand to achieve the scale it needed in the vast U.S. market. Its parent company, L’Oréal USA, said in a statement that it wanted “to focus on the strength of its strategic brands including Lancome, Ralph Lauren, Giorgio Armani, Yves Saint Laurent, Kiehl’s Since 1851 and other fragrance brands in its portfolio” but declined to comment beyond that.

Shu Uemura’s fans in the U.S. have mixed feelings. Christina Carroll, 32, an attorney who lives in Arlington, Va., first bought Shu Uemura’s cleansing oil in Japan a few years ago. She loved it but switched brands after about a year, searching for “a lower-cost option,” she said.

But she hasn’t given up on Japanese brands as a whole. “I think there is an implicit perception that Japanese beauty brands are luxury brands by default,” says Ms. Carroll.

“It might also have something to do with the fact that it’s an imported product that comes with certain cultural associations—that Japanese culture, by default, prizes quality, elegance, and minimalism.”

Mariko Sanchanta, Wall Street Journal

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Full article and photos: http://online.wsj.com/article/SB10001424052748704250104575238334269862558.html

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