Cosmetics to Japan

(Last updated: 29 Sep 2008)

Trends and opportunities

The market

Together with the USA, Japan is the world’s largest cosmetics market, with skincare and make-up products dominating sales.

Demand for functional products that provide a specific benefit has increased in recent years, especially as consumers are becoming increasingly demanding about value for money.

The cosmetics market in recent years has divided into two separate markets, a high end market and low 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 budget level market, which has expanded in recent years, tends to exist in supermarkets, convenience stores, and drugstores. These products can also be foreign brands that are in the initial stages of getting recognition in the market, or domestic products that are second brands of top manufacturers. For these reasons, mid-range products are finding it difficult to fit in.

Consumers consider skincare to be the most important element of personal grooming. General trends include:

• Product lines targeting men and babies are becoming more vigorous.
• Products, especially make-up, become outdated quickly and companies are obliged to improve existing products and launch new ones every season.
• Lipsticks, with their short fashion cycles are the second most popular make-up items.
• Shampoo is the leading import by value for hair care. Young consumers drove a significant increase in the use of hair dyes and tonics by both men and women.
• Sales of deodorants and sunscreens are no longer highly seasonal because of increased awareness of the harm caused by ultraviolet rays, and because many outdoor leisure activities are now available all year round.
• Foreign products dominate the fragrance sector, but demand has always been low compared to the USA and Europe. Young consumers are leading an increasing interest in perfumes.

Opportunities

Japanese cosmetics companies are actively sourcing innovative products from overseas. Australian cosmetics and beauty products are becoming known for containing pure essential oils and unique natural materials.

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

• Professional aesthetic and salon products
• Nail care and enamel
• Make-up items that highlight the face or body, such as eye make-up
• Bath salts, milks and other relaxation goods
• Aromatherapy, body care, skincare products containing essential oils
• Personal care items for men

Competitive environment

Over 1,000 cosmetic manufacturers operate in Japan, including foreign companies, however, it is an overwhelming presence of domestic manufacturers that command the lion’s share of the market. Domestic competitors Kanebo, Shiseido and Kao each occupy 10-15 per cent of the Japanese cosmetics market.

Although Japan has a significant market of strong domestic brands, imported brands also play a big part, of which about 63.3 per cent of total imports are comprised of products from France and the USA. Australia is yet to be seen as a major supplier of cosmetics or beauty products, which can be confirmed by the presence of only about 12 Australian brands in the Japanese market.

Tariffs, regulations and customs

A consumption tax of five per cent is levied on all goods purchased in Japan. This is calculated by adding together the cost, insurance and freight (CIF), and customs duty, then multiplying it by five per cent.

Some main customs duties on cosmetics include:

• Perfumes and eau de toilette - zero per cent
• Personal deodorants and anti-perspirants - 3.9 per cent
• Pre-shave, shaving or after-shave preparations - 4.8 per cent

Industry standards

Standards for cosmetics have been eased and the Japanese Government is deregulating the cosmetics industry, so the system of obtaining prior approval and licenses for products has been abolished in principle. However, deregulation means the existing system of approval and licensing for the manufacture, import, and sale of cosmetics remains intact, but requirements for granting approvals and licenses are eased in the following areas:

• Structural facilities (eg. testing facilities, storage environment)
• Eligibility of technicians in charge
• Approval and license for each business and sales office engaged in import and sales operations

All ingredients must be listed on labels.

Marketing your products and services

Market entry

Before entering the Japanese cosmetics industry, companies must gain a thorough understanding of issues such as pricing, packaging, and distribution options.

Local partnering is the key to market entry. Australian companies should find and appoint local agents, distributors, or partners. Due to high start-up and maintenance costs, establishing your own channels (stores and sales personnel) is not recommended. Instead, test your market success first with local representation.

There is an emerging trend towards joint ventures with a Japanese manufacturer, to develop and manufacture products in Australia that may be worth investigating. Representatives can be engaged to target three options for market entry:

• Conclude sales contracts with import agencies and wholesalers, and market products through their sales routes.
• Conclude sales and partnership contracts with Japanese cosmetics manufacturers, and market products through their sales channels.
• Conclude sales contracts with Japanese retailers and deal with them directly.

Japan's cosmetic industry is comprised of strong competition between the 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 package design and brand logo.

The use of media and recruitment of celebrities as a spokesperson for a specific brand or product is a major marketing tool for 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 be guided by your local Austrade representative to ensure a customised market entry strategy is implemented, and products meet the specific needs of the Japanese consumer.
• Participating in cosmetics trade fairs and events, such as Beauty World Japan, and Japan Drugstore Show, in order to promote your products, make industry contacts, and understand your competition.
• Monitoring the Japanese cosmetic industry in order to detect 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.

There is an opportunity for the sale of luxury consumer cosmetics online. This is due to the increasing number of career women who face stressful and long working hours. They are time poor, and therefore seek time saving devices like the Internet. It makes economic sense to sell high-end cosmetics online, as the cost of only one or two items is proportionate to the shipping and credit card charges.

The mobile phone Internet market (i-mode) is another medium of contact applicable to those considering the promotion of cosmetic products online. Japanese consumers appreciate the 'i-mode' service for its simplicity and convenience.

Distribution channels

The distribution of cosmetics may be broadly classified into four areas:

• Direct selling through wholly owned subsidiaries
• Selling through wholesalers
• Door-to-door
• Internet

A tendency towards channel specialisation has emerged, as consumers now tend to 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.

Importers either distribute through wholesalers or sell directly to retailers. A small number of wholesalers also do business directly with overseas manufacturers.

Upon entry into Japan, individuals are allowed to take 24 units of any single product into the country for their own personal use. ‘Product’ refers not to a brand, but the name of a single product. Therefore, if a single brand of perfume has a number of different product names under the brand name label, then theoretically you are permitted to bring in up to 24 bottles of each separate perfume product.

Links and industry contacts

Cosmetics–related resources

Cosmetics Importers’ Association of Japan
Tel: +81 3 3560 3041
Fax: +81 3 3560 3042

Japan Cosmetics Industry Association
Tel: +81 3 3502 0576
Fax: +81 3 3502 0829

Japan Cosmetic Suppliers Association – http://jcsa.ne.jp/en/index.html

Government, business and trade resources for Japan

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

Australian resources

Japan External Trade Organization (JETRO) Sydney – 
www.jetro.go.jp/australia
Level 25, Gold Fields House
1 Alfred Street
Sydney NSW 2000
Tel: +61 2 9276 0100

Japan External Trade Organization (JETRO) Melbourne – 
www.jetro.go.jp/australia
Level 26, 35 Collins Street
Melbourne VIC 3000
Tel: +61 3 9654 4949
Fax: +61 3 9654 2962