China Consumer

Made in Japan

Japan’s Shiseido profits from Chinese tourists


Zhang: Nars brand ambassador

In today’s fame-obsessed world, celebrity endorsements can be an important influencer in selling consumer goods and services.

But while there is no question that a famous face can boost awareness of a product, there are perils in choosing the wrong celebrity to represent the brand.

Nars Cosmetics, which is owned by Japan’s Shiseido, learned this lesson when it invited Taiwanese singer-actor Kai Ko to a product launch in June. After pictures of the event surfaced online, netizens flooded Nars’s weibo account, criticising the collaboration with Ko, who was detained in Beijing for marijuana use four years ago (see WiC250).

“If a star involved in a drug abuse scandal can make a comeback to the stage, can the police who are killed in the fight on drugs be brought back to life? Drug-abusing celebrities should be banned from showbiz permanently,” one netizen fumed.

The cosmetics label later abandoned Ko, switching the ‘ambassador’ role to actor Zhang Hanyu. But netizens were perplexed about this choice too. What did a macho action star, who turned up to a Nars event in mirrored sunglasses and a black suit, have to do with women’s cosmetics?

“Nars got into trouble in Taiwan for inviting a drug user to an event. So this time round, it hires an action hero who has plays an officer that takes on drug traffickers in movies to lift its image,” another netizen mocked.

But in spite of these debacles, Shiseido’s overall reputation with Chinese customers remains strong. In fact the company has announced plans to build two new factories in Japan for the first time since the 1980s. After cutting back on Japanese production and moving it overseas to lower costs, Shiseido is ramping up again at home, thanks to robust demand from Chinese consumers.

One focus is tourists. Shiseido chief executive Masahiko Uotani told the Wall Street Journal that Chinese visitors to Japan are looking for domestically produced cosmetics – i.e. made in Japan goods – which they deem to be of higher quality. “We have to boost production even more to really grab this opportunity,” he said.

The contribution of the tourists was in the spotlight again earlier this week when Shiseido’s shares fell 4% in the wake of Typhoon Jebi, which swept through large areas of western Japan. The worry was that the weather was making it harder for holidaymakers to go shopping but their spending also brings a halo effect for Shiseido in the Chinese market, now the second biggest for the cosmetics giant behind its home nation.

In the first quarter of this year, Shiseido’s operating profits in China rose almost 125% from the same period a year ago, reaching Rmb860 million ($125.77 million). Sales were up almost a third in local currency terms to Rmb2.6 billion.

It’s not only Shiseido that has seen an uptick in sales from holidaymakers. This Thursday the Financial Times cited the findings of a study that visitors from China are spending an equivalent of $13 billion a year in Japan. Another survey reckons that 80% of them are snapping up cosmetics during their vacations. “Compared with European skincare brands, Japanese skincare products are generally more suitable for Chinese skin types,” one shopper told the Global Times.

With so much at stake commercially, Japanese companies will be hoping that politics doesn’t get in the way. Fortunately, ties between Tokyo and Beijing have warmed up after an icy period determined by territorial disputes in the East China Sea. Japanese Prime Minister Abe Shinzo is expected to visit China in October, after Chinese Premier Li Keqiang made the first trip to Japan by a senior Chinese leader in eight years in May. “Premier Li Keqiang visited Japan and the Japan-China relationship has completely returned to a normal track,” Abe told the Sankei newspaper.

The Nikkei newspaper also reported last month that China’s leadership is drafting a new blueprint for diplomatic relations with the Japanese and that Beijing hopes to sign a communique marking four decades of peace between the two countries during Xi Jinping’s visit to Japan next year. The countries inked similar documents on the 20th and 30th anniversaries of the Japan-China Treaty of Peace and Friendship, which was signed in 1978.

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