Japanese cosmetics giant Shiseido on Sunday become the world’s first company to open a dedicated office in Hangzhou to work with Alibaba Group to co-create products specifically tailored for Chinese consumers.
The office, located strategically within walking distance of the Alibaba Xixi headquarters, is expected to house a team of 20 Shiseido employees by the end of the year. The purpose is to tighten collaboration with Tmall, Alibaba’s B2C marketplace, as a way to better position Shiseido in China, Shiseido China President Kentaro Fujiwara said.
“China is Shiseido’s biggest and most-important market [outside of Japan]. By combining Alibaba’s strengths in digitization and consumer engagement with Shiseido’s world-class standards in research and development, we can create products that can precisely capture the appetite of the Chinese consumer,” he said. “I hope this unprecedented collaboration will pave the way for further innovations for the entire [Shiseido] group.”
According to Shiseido, its China business saw the fastest-ever acceleration in 2018 with sales growth of 32.3% year-on-year to RMB 11.6 billion ($1.73 billion). China accounted for 17.4% of Shiseido’s total net sales last year, making it the most-profitable market followed by its home market of Japan. Shiseido said it expects e-commerce to generate 40% of its China sales by 2020.
“Without a doubt, whether it be e-commerce or digital innovation, Alibaba is the leader. Alibaba is one of the most important strategic partners for Shiseido China as well as for the entire group,” said Fujiwara.
One of Shiseido’s cosmetics brands, Za, opened a Tmall flagship in September 2011. Since then, 12 Shiseido brands have followed suit. Fujiwara said there is a plan to bring Shiseido’s mommy-and-baby product brand into China later this year via Tmall.
Just for China
Together with Alibaba’s dedicated product and market-research arm, the Tmall Innovation Center, Shiseido will launch two for-China-only products in September under its hair and body-care brand, Aquair. The two products – Mild and Refreshing Shampoo and Essence Oil for Split Ends – will be sold exclusively on Tmall.
“By leveraging TMIC’s expertise in analyzing consumer behavior and preferences, TMIC was able to help Shiseido reduce the concept-to-launch time to around nine months. Traditionally, such a process could take 18 to 24 months,” said Tmall Marketing head Miya Duan, who overseas TMIC.
Duan explained that TMIC tracks consumer shopping behavior over a period time instead of basing its conclusion on a one-time snapshot.
“This helps TMIC to have a more-accurate perspective on what consumers like and want. Such insight is crucial for brands as they determine what products to introduce to China and how to position the brand in order to generate the biggest appeal,” she said.
Moreover, the performance of the products online can help brands format their offline strategy, Duan added.
To date, TMIC has collaborated with over 800 brands to provide them with customized services based on the brand’s individual needs and demands, from consumer insights, pricing and packaging to marketing campaign and offline sales.
China’s Pursuit of Beauty
With nearly 700 million monthly active users, Tmall is the preferred platform for many global cosmetic brands that want to capitalize on China’s fast-rising demand for high-quality beauty products. In 2018, sales of beauty products on Tmall rose more than 60% year-on-year. The uptrend mirrors the growth seen in China where online sales of cosmetics, skincare and personal hygiene products increased 46%, 40% and 37% year-on-year, respectively, according to a joint report by Tmall and research house Kantar.
Recognizing Tmall’s strength, top brands such as Giorgio Armani Beauty, LVMH-owned Givenchy and YSL Beauty all opened flagship store on Tmall last year. Tom Ford is expected to open one later this year.
