TOKYO (AdAge.com) -- One of the few Asian cosmetic brands to build a global following, Shiseido is known for innovative products and high-end brands such as High-Performance Care and White Lucent. It has not been known for being cheap -- until now.
Cash-strapped consumers in Japan are trading down to less-expensive products in just about every category. Japan's population is also aging and purchases of pricey skin-care products by Japanese women tend to drop off after age 60. Shiseido is responding with Senka, a "mass-tige" brand that will be sold in unfamiliar retail territory: the low-end skin-care aisle in drugstores, where products sell for 1,000 yen ($11.67) or less.
Shiseido will introduce four Senka moisturizing products in mid-September, with an ad campaign by ADK, the company's Japanese ad agency; other Asian markets will follow. A 200 ml bottle will cost about 980 yen ($11.48). Additional products are expected later this year.
"The sluggish economy has heightened consumers' awareness of protecting their livelihood in Japan, giving rise to the intention to hold off on making purchases or buying low-end products. At the same time, consumers are seeking high-performance as well as economically priced products," Shiseido said in a company statement.
Sales of low-end skin-care products grew 3.3% between 2006 and 2009, according to Intage SRI data, while sales of mid-range to high-end skin-care products fell 2.2% in the same period.
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"The whole marketplace is going this way. It's happening in every category, like cars, electronics, food and fashion," said Tokyo-based Dave McCaughan, senior VP and director of strategic planning, Asia/Pacific at McCann WorldGroup.
"The very high-end market is shrinking less than people think, but it's not growing ... and the middle ground is disappearing. Japan's retail environment is encouraging this trend with the growth of more discount retailers," Mr. McCaughan said. "Department stores have declined rapidly and I don't think they'll ever come back."
Changes in Japan's retail market have affected spending behavior in other ways. Customers are turning to websites to search out the cheapest price for new products or more affordable options. They are also buying more products from e-commerce sites, including some based overseas where products are sold in currencies weaker than the yen. The invitation-only "flash-sale" luxury retailer Gilt Groupe, for instance, now has more than 1 million members in Japan.
"Brand owners like Shiseido need a two-pronged attack so they don't just appear to be at the premium end. In emerging markets, you'll want a multiple-pronged strategy to give people an entry into the brand overseas," said Chris Beaumont, managing partner of brand consultancy Beaumont and Partners in Tokyo and former head of Grey Group in Japan.
Shiseido does plan to introduce Senka as a mid-range brand aimed at middle-income consumers in the rest of Asia, where incomes and skin-care sales are rising fast. The brand will hit Taiwan later this year and roll out in other Asian markets starting next year. Shiseido already has some experience with mass-market skin-care brands outside Japan. In September 1997, it launched Za, aimed at younger consumers.
Shiseido has already singled out China as a target market for Senka. Sales of cosmetics, skin-care and fragrances, mainly to middle-class consumers, have quadrupled there in the past decade to $12.5 billion, according to Bernstein Research. Procter & Gamble's Olay and L'Oreal were the two highest-spending brands on advertising in China during the first half of 2010, according to CTR Market Research.