(Last updated: 24 Nov 2011)

Trends and opportunities

The market

Japan is the world’s second largest cosmetics market after the US, valued at ¥990.3 billion in 2009. It recorded slight negative growth of 0.3 per cent year on year. The Japanese cosmetics market places high value on quality and functionality, and is also a trend-setting market for the rest of Asia. The decline in sales in 2009 reflected sluggish sales at department stores where sales of high-priced products such as lotions and serums costing more than ¥5,000 continued to shrink.

Despite this, sales of organic products increased by 86 per cent in 2009 to ¥8 billion (Source: Fuji Keizai). Demand for functional products that provide specific benefits have increased in recent years, especially as Japanese consumers increasingly demand value for money. The demand for anti-ageing products such as items for skin tone and firmness, wrinkle care, and brightening is expected to continue to increase.

Opportunities

Japanese cosmetics companies are actively sourcing innovative products from overseas. Australian cosmetics and beauty products are slowly establishing a reputation for containing pure essential oils and unique natural materials.

Australian cosmetics, especially those made of natural materials, may find opportunities in the following areas:

• Organic certified products
• Cosmeceutical products with proven scientific evidence of their effectiveness

It is becoming a requirement for Australian cosmetics to be 1) made in Australia and 2) containi natural ingredients. Therefore, Australian cosmetics manufacturers must have something in addition. A unique factor or a story to tell potential partners and consumers – simply being Australian and natural is not enough. Needless to say, market entry also depends on competitive pricing and excellent packaging.

Competitive environment

The cosmetics market in Japan is known to be one of the most sophisticated and competitive markets worldwide. Over 1,000 cosmetic manufacturers operate in Japan, including foreign companies. However, there is an overwhelming presence of domestic manufacturers that command the lion’s share of the market. Domestic competitors such as Kanebo, Shiseido and Kao each occupy 10-15 per cent of the Japanese cosmetics market.

Although Japan’s strong domestic brands comprise a large majority of the market, imported brands, mainly from France, the USA, and other Asian countries, also have a place. Australia is yet to be seen as a major supplier of cosmetics or beauty products in Japan, which is demonstrated by the presence of relatively few Australian brands in the Japanese market.

Tariffs, regulations and customs

Under the Pharmaceutical Affairs Law, companies that import, wholesale, retail and market cosmetics for business purposes require a manufacture/import and distribution of cosmetics license from the Ministry of Health, Labour and Welfare.

In addition, the information required must be printed directly on both containers/vessel or external packaging. All information must be written in Japanese.

Ingredients lists along with the manufacturing process must be provided for importing procedures.

Marketing your products and services

Market entry

Japanese consumers are discerning about their selection of cosmetics. There are mainly two groups of consumers, low-price-oriented young women and middle-aged/older women who seek functionality and high-value-added items. To enter the Japanese market, companies must gain a thorough understanding of issues such as pricing, packaging, and distribution options.

Japan's cosmetic industry is characterised by strong competition between domestic and foreign brands. To be able to compete, a brand and its product must be unique – clearly distinguishing themselves from others. These factors could be functional characteristics, such as natural anti-aging or whitening effects, or a marketing characteristic such as packaging design and/or branding.

The use of media and recruitment of celebrities as a spokesperson for a specific brand or product is a major marketing tool for cosmetics companies. Products are better recognised and often develop into a trend from commercials, magazine ads, and poster ads.

To market your product effectively, consider:

• Working with, and being guided by your local Austrade representative to ensure a customised market entry strategy is implemented, and your products meet the specific needs of the Japanese consumer.
• Monitoring the Japanese cosmetics industry to identify changes and growing trends that may affect your marketing strategies.
• Developing relationships with local partners and/or distributors to facilitate ease of entry into Japan.

Distribution channels

The cosmetics market in recent years has divided into two separate markets, a high-end market and a budget market. The higher end market, comprised of top domestic and foreign brands, can usually be found in department stores and sold over the counter with personal advisors and make-up artists.

The lower-end budget market, which has expanded in recent years, covers supermarkets, convenience stores, and drugstores. These products can also be foreign brands that are in the initial stages of gaining recognition in the market sold at largely discounted prices for a limited time, or domestic products that are second brands of top manufacturers.

Channel specialisation is a major characteristic of the Japanese market. Consumers buy mass marketed products inexpensively at supermarkets, discount stores and drug stores. High-end consumers tend to buy higher priced products at department stores and cosmetics specialty stores. Companies that are able to market to both channels tend to be domestic cosmetics companies with large sales forces that can cover both segments. Due to pricing structure, imported cosmetics usually fall into the category of the high-end market where a strong story, branding and excellent packaging are essential.

(Source: JETRO)

Links and industry contacts

Cosmetics–related resources

Cosmetics Importers’ Association of Japan (in Japanese) – www.ciaj.gr.jp/index.html
Japan Cosmetics Industry Association (in Japanese) – www.jcia.org/
Japan Cosmetic Suppliers Association – http://jcsa.ne.jp/en/index.html

Government, business and trade resources for Japan

Ministry of Health, Labour and Welfare – www.mhlw.go.jp
Ministry of the Economy, Trade and Industry – www.meti.go.jp/english/aboutmeti/data/a226004e.html

Australian resources

Japan External Trade Organization (JETRO) – www.jetro.go.jp/australia

Contact details

The Australian Trade Commission – Austrade – is the Australian Government’s trade and investment development agency.

Through Austrade’s network of offices in over 50 countries, we assist Australian companies to succeed in international business, attract productive foreign direct investment into Australia and promote Australia's education sector internationally.

For more information on how Austrade can assist you, contact us on:

Australia ph: 13 28 78 | Email: info@austrade.gov.au

A list of Austrade offices (in alphabetical order of country) is also available.