Shiseido TR exceeds ¥18.5bn goal powered by unification

By Charlotte Turner |

NARS-Audacious-lipstick-set-leadThe newly-created Shiseido Travel Retail division was tasked with achieving sales of ¥18.5bn/$169.6m in the last financial year. Elisabeth Jouguelet, Shiseido Travel Retail Vice President – Marketing tells TRBusiness that not only was the division able to meet this expectation in terms of the sales target, but actually surpass it.

 

For the fiscal year ended 31 December 2016, Shiseido’s travel retail division, created on 1 May 2016, generated ¥24.8bn in sales (excluding Japan and fragrance for TR), surpassing the ¥18.5bn target (see the group’s website for more details: http://www.shiseidogroup.com/ir/pdf/ir20170209_332.pdf).

 

“Including the Japan travel retail business, we achieved sales growth of over +28%, outperforming the market (+8.4%) by more than three times,” Jouguelet told TRBusiness last month. “We also gained market share.”

 

RECENT SUPPLIER CONSOLIDATION

Recent consolidation in the beauty market – including Shiseido taking on the Dolce&Gabanna license and Coty taking on 41 beauty brands from P&G Prestige – is putting greater negotiating power in the hands of suppliers; at least in this category, as Jouguelet concurred.

 

Elisabeth-Jouguelet-Shiseido-large

Elisabeth Jouguelet, Shiseido Travel Retail Vice President – Marketing.

“Having greater negotiating power is one of the key reasons for the unification of STR,” she said. “We have had to respond to retailer consolidation in travel retail and the fact that consumers are becoming increasingly global and connected, by bringing together our previously separate fragrances and cosmetics businesses to become stronger as a whole.”

 

Jouguelet mentioned that the division’s unification was a actually a response to retailer consolidation. “With retailer consolidation creating global operators and digital and mobile technology giving rise to global shoppers, we needed to become a more agile organisation that can stay abreast of the markets, especially in the fast-changing travel retail channel.”

 

One of the key changes following the unification process was the introduction of a key account management approach to support the sell-through and relationships with retailers, she added.

 

MOVING UP THE RANKS

“With retailer consolidation, it was important for us to adapt to the new travel retail landscape by actively providing value-added key account management services to our partners,” added Jouguelet.

 

“We have also enhanced collaboration with our partners and this has resulted in a significant improvement in our ranking as a supplier in the latest Advantage Report, from No. 12 in 2015 to No. 9 in 2016.”

 

Shiseido Masahiko Uotani

Shiseido Group’s CEO, Masahiko Uotani.

In Shiseido Group’s Vision 2020, the company’s CEO, Masahiko Uotani said that the aim of the the new strategy (set out originally in December 2014) was to rejuvenate Shiseido and generate operating income of ¥100bn/$917m in FY2020.

 

“We have definitely witnessed a turnaround in the business under Uotani-san’s leadership,” added Jouguelet. “The global (non-Japan) business made up more than 54% of our sales in FY2016 and we have also seen a positive change in the way our core Shiseido brand is perceived by consumers.

 

BUSY YEAR FOR ACQUISITIONS

“Shiseido underwent a branding innovation last year and this has been supported by a comprehensive digital and social media strategy to increase engagement with the hyper-connected, millennial generation.”

 

Although the Shiseido travel retail division is certainly very pleased with the progress its made and the sales it has achieved in its first year as a unified entity, its biggest obstacle to growth, at least in the short-term, will be the drop in spend from Chinese travellers, particularly in South Korea.

 

Beauty consultants at Shiseido

Shiseido Travel Retail recently partnered with King Power International Group (Thailand).

“With Chinese travellers making up a big part of our business, anything that affects their propensity for travel and spending is a concern,” admits Jouguelet.

 

“The impact of the South Korea situation is very real*. According to Air4casts, the number of Chinese tourists to South Korea fell -40% in March 2017, second to the -44.6% decline to Taiwan. We are expecting an improvement in the second half.

 

*The Chinese Government has banned group tours to South Korea over the controversial location of the US Thaad missile system.

 

SURGE IN CHINESE TRAVELLERS TO VIETNAM

“Japan, Hong Kong and Thailand are amongst the most popular countries for the Chinese to visit and visitor numbers have been growing/recovering. These markets will not be 100% substitutes for the South Korean business, but they will soften the landing. We are already seeing Chinese travellers flock to other countries, notably Vietnam, which saw a +39.2% growth in March.” (Source: Air4casts)

 

“In terms of business performance, cosmetics has been doing tremendously well in South Korea, while the acquisition of Dolce&Gabbana has revitalised our outlook for fragrances. Overall, the business in South Korea might see a slowdown, but extremely strong consumer demand will help us to maintain steady and robust growth.”

 

Last year, Uotani also made it clear that he wanted to lift the fragrance weighting of the overall business – which is dominated by skincare at 78%, followed by make-up at 18% and fragrance at only 4% – to 10%, by 2020. TRBusiness asked Jouguelet if this means that additional fragrance acquisitions are in the pipeline.

Shiseido-DNG-Narciso

New fragrances from D&G and Narciso Rodriguez.

“Last year was a rather busy one on that front, with the Gurwitch Products acquisition and Dolce&Gabbana licensing deal, so I think we are good for now,” she said. “Currently, our focus is on integrating the new brands – specifically Laura Mercier and Dolce&Gabbana for travel retail – and leveraging synergies.”

 

For Dolce&Gabbana, Shiseido says it has focused on leveraging the existing portfolio with new advertising campaigns and product initiatives. In May, the company will launch the new Light Blue Eau Intense. Later this year it will launch a major campaign starring the new fragrance faces of The One, Emilia Clarke and Kit Harington [stars of the award-winning HBO Game of Thrones television series.]

 

‘BEAUTIFYING THE WORLD’

The second half of this year will also see the launch of new fragrances from Issey Miyake, Elie Saab and capsule editions from Zadig & Voltaire. Shiseido is also looking to further develop its Laura Mercier cosmetics brand in 2018.

 

TRBusiness asked Jouguelet to outline some of the travel retail division’s other goals for 2017 and 2018.

 

“’Beautifying the world’ is the basis of our four key goals for 2017 and 2018. Our first goal is to capture the global shoppers by developing a more in-depth understanding of them. The Chinese travellers are, without a doubt, the driving force of our travel retail business.

 

“The biggest opportunities lie in China’s outbound tourism and with millennials making up half of China’s outbound tourists, they are definitely an important group to watch.

 

SHISEIDO Top Beauty Specialist Mika Kadoya is invited to perform skincare and makeup demonstration for the first time at the DFS & SHISEIDO event at T Galleria Beauty by DFS in Causeway Bay on 16 February 2017 in Hong Kong, China. Photo by Marcio Rodrigo Machado / studioEAST

Top Beauty Specialist, Mika Kadoya, was invited to perform skincare and make-up demonstrations for the first time at the DFS Shiseido event at the T Galleria Beauty by DFS store in Causeway Bay on 16 February 2017 in Hong Kong.

 

“Secondly, we want travel retail to be a powerful showcase for our brands on the world stage. Thirdly, we want to offer global shoppers a distinct and memorable travel retail shopping experience (animations) and products (travel retail exclusives). Lastly, we want to become a sustainable growth engine for Shiseido Group.”

 

SHISEIDO’S ‘SOCIAL COUNTERS’

From Q2 2017 the company will roll out Shiseido’s Social Counter concept at more than 110 travel retail doors across Asia, Europe and the Americas. These counters are designed to express the Japanese concept of ichigo ichié which means ‘treasuring every encounter as it will never recur’.

 

“As for animations, from May to July we will support the launch of the new NARSissist #Jetsetter collection with animations at Changi Airport, downtown Hong Kong and Bangkok Airport,” added Jouguelet. “These will include make-up demonstrations by Roland Choong; a leading professional make-up specialist at NARS.”

 

Make-up is certainly picking up for Shiseido as well as the beauty industry as a whole in Asia. Beauté Research has revealed that make-up sales in the domestic markets of China, South Korea, Thailand, Taiwan, Hong Kong, Japan, and Singapore grew by +23% in Q4 2016, accelerating to +27.5% in Q1 2017.

 

In fact the category outstripped the sales growth of skincare (+5.4% in Q4 2016; +7.3% in Q1 2017) and fragrances (+13.5% in Q4 2016; +17.8% in Q1 2017).

 

“We see a similar trend in the overall TR beauty sector with make-up being the fastest-growing of the three axes,” added Jouguelet.

 

Shiseido NARSissit Jetsetter collection with KPIG in Thailand.

Shiseido says consumers are requesting make-up products that integrate skincare benefits.

THE RISE OF ‘NO MAKE-UP’ MAKE-UP

Shiseido sees the continuation of the trend towards ‘no make-up’ or ‘natural look’ make-up as more women opt for a natural, fresh-faced look. Consumers are also requesting make-up products that integrate skincare benefits.

 

While Shiseido’s performance in make-up is not as strong as skincare, the company is actively building up this side of the business with products that ‘combine colour and technology, the latter being a hallmark of Shiseido skincare’, says Jouguelet.

 

“Last year we launched Rouge Rouge, featuring Shiseido’s exclusive Vibrant Red Color Technology, and this has given us good momentum in the make-up segment, which we are leveraging to introduce a new make-up line for Shiseido in 2018.”

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