How Shiseido succeeded in Europe: History and International strategy
12th January 2005
MR YUTAKA GOTO
Director General of Shiseido Communications Centre for Europe
Today I would like to talk to you about Shiseido's expansion into Europe.
It was in 1963, more than forty years ago, that Shiseido, the number one cosmetics manufacturer in Japan and number four in the world, landed on European shores.
We made our first inroads into the European market via Italy, followed by the expansion of our activities into France, Germany, and UK. Currently in the European region, Shiseido is marketed in 38 different countries through our sales subsidiaries and distributors.
Being a Japanese cosmetics manufacturer, we were forced to travel a long and arduous path before we were able to succeed in selling cosmetics and perfumes to the French, the home of such items. But before I give you an account of these experiences, I would first like to touch on Shiseido's early history.
Shiseido was founded as the first western-style pharmacy in Japan in 1872.
Watching Japan ride the wave toward modernization, the founder, Arinobu Fukuhara, former head pharmacist at the Japanese naval hospital, must have been eager to take part in the transformation himself. In an era where herbal medicines were the norm, Arinobu established a pharmacy that safely prescribed western-style medicine on the main avenue of Ginza in the new capital of Tokyo, rife with the scent of western culture. This pharmacy, particularly redolent of the west, was named Shiseido, taking two Chinese characters from the phrase found in "Yi King," a classic Chinese poem: "praise the virtues of the earth which nurtures new life and brings forth significant values."
The following three attributes of Shiseido were formed at this early phase of the company's history:
- First, Shiseido's advanced and avant-garde mentality was apparent early-the company was founded at the beginning of the Meiji era as a new enterprise based on western pharmacology.
- Secondly, the naming of a new western-style enterprise with something based on eastern philosophy indicates an underlying concept of combining eastern aesthetics with western learning, of pursuing the business of western technology aided by eastern philosophy, and consequently achieving a fusion of east and west.
- And thirdly, as its beginnings in pharmacology indicate, Shiseido is a company strongly devoted to research and development.
The ideas of the founder have been inherited by the company and live on to this day as the corporate culture.
The founder, Arinobu, was an inquisitive character in a good sense, embarking on an inspection tour of Europe and the United States in 1900, when only a handful of people were venturing abroad. In Europe, he visited the 1900 Paris Expo. Arinobu was deeply moved by everything he saw and heard, and experienced an immense culture shock. This eventually had a great impact on the history of the company.
Following his return, Arinobu, taking a cue from the drugstores he observed in the United States, opened Soda Fountain at his pharmacy. He created a sensation by manufacturing and marketing Japan's first soda water and ice cream. Soda Fountain was the predecessor of the SHISEIDO PARLOUR, a part of the Shiseido restaurant business.
Later, Arinobu sent his son, Shinzo, to the United States to study pharmacology. On his way home, Shinzo spent a year in France. This time it was his turn to fall in love with that country. Shinzo had always been artistically inclined. While in Paris, he became acquainted with emerging young artists and fully immersed himself in the Art Nouveau era of Paris before returning to Japan.
It was Shinzo who laid the foundation for today's Shiseido.
Shiseido expanded into the cosmetics business with the introduction in 1897 of Eudermine, a skin lotion developed by Arinobu. But it was only after Shiseido became a joint stock company under the first president, Shinzo, that its main business shifted from medical and pharmaceutical products to cosmetics.
In 1916, Shinzo established the Design Department (the present Advertising Creation Department), which would later play a crucial role in forming Shiseido's brand image.
This Design Department was staffed by young artists and art students, who set out a wide range of advertising products, such as posters, newspaper and magazine advertisements, package designs, and store designs. Shinzo already knew how important the area of design would be for Shiseido at a time when Shiseido had only one store.
The design was based on art nouveau, with touches of art deco and arabesque patterns, and grew into a refined style that later became known as the Shiseido style. Shinzo also designed the camellia mark, which is Shiseido's trademark.
High quality, an advanced nature, and an orientation toward the genuine article lie at the center of Shiseido's products and activities. Shinzo held these as his favorite mottos: "Everything must be rich," and "Let the product speak for itself." Shiseido has inherited these mottos as its corporate philosophy.
Let us now bring our story a little closer to the present.
This year marks the 48th year since Shiseido made inroads into the world market. Our first overseas sales were in Taiwan in 1957, followed by our product launches in the United States, with Hawaii in 1962, New York and other cities in 1965. Currently Shiseido products are marketed in 71 countries around the world, and we operate 11 overseas factories in five different countries.
As I mentioned, Italy was our first market in Europe as part of Shiseido's expansion. Over forty years ago, Europeans had an extremely limited knowledge of Japan with only a handful of intellectuals aware of Japan at all. Consequently, it was difficult to be accepted in the market by virtue of simply being a Japanese cosmetics manufacturer. Some customers even asked us if their skin would turn yellow when they used Japanese products. However, since we were confident of the quality of our products, we adopted the approach of dispatching our beauty consultants to the perfumeries there, and had them diligently convince customers, one-by-one, to try our products. The quality of a cosmetic can't be known without actually using it on one's skin. With such efforts, we were able to acquire a number of loyal followers in Italy after people tried our products. At that time, remittance from Japan was not possible, and thus we were forced to re-invest our sales back into sales promotion expenses. We couldn't conduct promotional activities through mass media, including magazine ads, and the only option we then had was to capture new customers and have them try our products. Nevertheless, in time, sales increased, and currently our non-fragrance division, which combines both skincare and makeup products, holds the number two spot in the Italian market.
In 1980 our operations expanded into France and Germany. In France we entered the market through a 50 / 50 joint venture with the French pharmaceutical company, Pierre Fabre S.A. Many people wondered why we chose a form of joint venture to enter the French market, while our expansions into the Italian and German markets were achieved through our 100% subsidiaries. In France at that time, an extremely exclusive mentality pervaded the country. Moreover, market hostilities were particularly fierce toward the Japanese. In light of these negative circumstances, we had a safety net from our political point of view, just in case something went wrong. We were afraid that fierce Japanese bashing would kick us out of the French market. In spite of our fears, however, things went particularly well. The French welcomed us to their industry from the start as though we were one of their own.
At the time of Shiseido's entry into the French market, the International Operations Department was headed by Yoshiharu Fukuhara, grandson of the founder Arinobu, nephew of the first president Shinzo, and current honorary chairman of the Company. Under his leadership, a crucial decision was made regarding Shiseido's internationalization: to manufacture products designed exclusively for the international market and design advertisements especially for these markets.
Needless to say, completely overhauling a company's products requires huge resources. New molds need to be made for the new products, and inventory must be disposed of. Products exclusive to the international markets also entail exorbitant development expenses. Yoshiharu Fukuhara, General Manager of the International Operations Department, went ahead and made these changes.
The French creator, Serge Lutens, was appointed designer of Shiseido's overseas business strategies. This decision was met with strong resistance from within the company, since the Advertising Creation Department of Shiseido had always boasted numerous proud and award-winning designers. However, the decision to override opposition eventually resulted in today's international Shiseido, particularly the high-profile image of European Shiseido.
This was the very first design by Serge Lutens, expressing the perception of the Shiseido image overseas. In the center is the red sphere representing the red sun of the Japanese flag, with an image of a woman. We were shocked when we first saw this design, but we had to acknowledge that it brilliantly symbolized the essence of Shiseido. The design was Japanese to French eyes while it was French to Japanese eyes. Rather than depicting outright Japanism with straightforward Japanese images, it set out to establish a more universal image. This image superbly represented the fusion of the East and the West that has been the aim of Shiseido since its foundation. This symbolic image is still being used today as the symbol for Shiseido's overseas market.
Serge Lutens used a sphere as a symbolic image of Japan. He continued along this line by creating a series of ads with images representing the seasons illustrated within the sphere. Serge Lutens also designed a poster with an image of a twisted Eiffel Tower. Seeing the poster, a French employee expressed concern that the poster might be misinterpreted as the image of Japan, the economic superpower, crushing the Eiffel Tower, the symbol of France, just as in the movie, Godzilla crushed the skyscrapers of New York. Such concerns were understandable since this was an era characterized by fear of Japan-bashing. However, oblivious to our concerns, the ad was received well and even won an advertising award. Serge Lutens was responsible for Shiseido's overseas brand images until 2001.
In order to establish our brand image in France, we also coined the catchphrase of three H's. That is, High quality, High image, and High service. Furthermore we infused this marketing policy with a Japanese identity.
High quality stands for the pride we have in the quality of our products. High image refers to the fact that the images created by Serge Lutens can be considered works of art rather than simple advertisements. High service refers to courteous service and counseling always with the customers' satisfaction in mind. We have made these ideals Shiseido's major characteristics.
When contemplating overseas expansion, we knew the Asian market could be penetrated with relative ease because we only needed to introduce the exact same products as those sold in Japan. Success in penetrating the US market depended on the amount invested in advertising, PR, and sales promotions. However, penetrating European markets required us to differentiate ourselves from others, that is, we had to assert our originality. And this was why it was so difficult to enter European markets.
After World War II, Japan became a classless society. Most Japanese consider themselves in the middle class. Consequently, Shiseido never encountered any difficulty in selling an all-encompassing brand, which included everything from lower priced products to the upper end items. However, this type of marketing would not work in Europe. Therefore, Shiseido decided to adopt a prestige brand as its overseas strategy, and targeted the upper class. Instead of aiming for recognition by the general public, Shiseido directed its efforts in pursuing the prestigious customer.
As you are aware, consumers have their own tastes for cosmetics. Therefore, in order to successfully penetrate the market, we need a number of different brands accommodating the preferences of the different segments of the market. Shiseido has been pursuing this strategy by developing and acquiring non-Shiseido brands, and targeting a wider range of customers with a comprehensive brand lineup. Shiseido's competitors, L'Oréal and Estée Lauder, practice this multi-brand strategy as well. L'Oréal owns a number of brands, including Lancôme and Helena Rubinstein. Estée Lauder also has a number of brands, such as Clinique and Aramis.
Now I would like to discuss Shiseido's advertising and PR strategy after adopting the prestige brand.
In Europe as well as in the US, Shiseido's advertising activities amounted to only about one-twentieth of its rivals. In particular, competition in France was so fierce and the number of competitors so numerous that there was no way we would have succeeded if we had just followed suit. Consequently, we decided to create an advertisement that would be recognized as Shiseido's without even displaying the logo. We agreed that in order to achieve that, we must come up with an ad campaign that people wouldn't forget. Any advertisement that is supported by more than 50 out of an audience of 100 is inoffensive and nondescript, and certainly won't leave a lasting impression. We realized that we didn't need the type of advertisement that would be accepted by a large number of people. What we needed was an ad that would make a strong impact, even if it were on a limited audience. If only the opinion leaders, those with foresight and those engaged in creative activities, preferred our ads, it would be enough. And this was exactly the image that Serge Lutens created for us.
As for our PR strategy, we concentrated all our efforts in two directions, one being elaborate receptions with invitations to the leading celebrities of Parisian high society and the other being a focus on the beauty journalists.
Shiseido operates Les Salon du Palais Royal Shiseido, a maison du parfum, in the arcades of the Jardins du Palais Royal, near the Avenue de l'Opera in Paris. With the boutique's décor designed by Serge Lutens and with the exclusive sales of Serge Lutens' fragrances specially developed for Shiseido, Les Salon du Palais Royal Shiseido has been enjoying success as a boutique representing the exclusive and prestige line of Shiseido. The opening party for this boutique in 1992 marked the highlight of the many receptions held by Shiseido in France. Celebrations lasted for two days: on day one, a reception for journalists from morning to evening and a grand reception at night for 100 carefully selected VIPs, while on day two, a grand reception for the bankers, neighboring shops, and other parties to whom Shiseido owed its gratitude.
We never advertised Les Salon du Palais Royal Shiseido, but its events were spread by word of mouth, and by the end of the first year of operations we had a scrapbook full of articles covering events at the Salon. If we were to translate this into advertising expenses, it would be equivalent to hundreds of millions of yen.
In addition, compared with other manufacturers, Shiseido is more aggressive in approaching journalists in France. As a cosmetics manufacturer, we are in constant contact with beauty and fashion journalists. In making the necessary contacts, the right method of approach can be pivotal in building a deep and lasting relationship with the media.
Another crucial point is to engage in PR activities involving the heads of companies and leading creators. In general, an article to simply introduce a new product would be displayed in a brief column, unless it is an earth-shattering invention. But the same article could expand to four to five pages if it involves the company head or the artistic creator. Readers are easy to forget the contents of the article introducing a new product, but remember it well if the article is about Mr. Fukuhara, Serge Lutens, or any female board members. In France, in particular, top management is constantly required to address the public about a company, so much so that one cannot hope to reach the top unless he/she can address the public well. And unless the message comes straight from the CEO, no one will listen. From a PR point of view, messages from top management are one of the best forms of product promotion, and we utilize them to the fullest.
In 1997, The Year of Japan was held in France. Since our honorary chairman, Mr. Fukuhara, was the president of the committee of The Year of Japan, he had the opportunity to make numerous visits to Paris. Seizing this opportunity, Mr. Fukuhara made the rounds of all the major newspapers and magazines of France that year. Interviews with Mr. Fukuhara ran in the major newspapers, such as Le Figaro and Les Echos, and also in the major magazines, including Le Point, Figaro Magazine Capital, and Challenges .
Shiseido expanded into its European operation by first entering the Italian market in 1963, then the French and German markets in 1980, and finally the U.K. market in 1986, with its grand opening at Harrods. In addition to Shiseido U.K., currently, Decléor UK Limited, which is Shiseido's 100% owned subsidiary, markets the brands of DECLÉOR and CARITA. DECLÉOR is sold at 900 stores throughout the U.K. and the SHISEIDO brand is marketed in 50 stores, mainly at upper-end department stores such as Harrods and Selfridges.
As of 2005, Shiseido's operation in France will be comprised of twelve organizations. (Please refer to the chart.)
- In 1980, after establishing Shiseido France S.A. as a joint venture, we established Shiseido Europe S.A.
- In 1986, we acquired the prestigious French beauty salon, Carita S.A.
- In 1990, we established Beauté Prestige International S.A. for the purpose of developing original perfume brands. In 1991, its factory was built in Gien.
Beauté Prestige International S.A. launched the fragrances L'EAU D'ISSEY and Jean Paul GAULTIER, both of which became the greatest hits of the past decade and are still major moneymakers.
- In 1996, we acquired the remaining 50% of shares of Shiseido France S.A. from Pierre Fabre, making Shiseido France S.A. a 100% owned subsidiary. In return, Pierre Fabre increased its shareholdings in the joint venture in Japan.
- In 1999, the second Val de Loire factory was built near Orleans. It is close to the Gien factory.
- In 2000, we undertook an equity participation in the Laboratoires Decléor S.A., an aromatherapy brand from France.
- In March 2002, we established the makeup brand Stephan Marais.
- In July 2002, we launched the Shiseido La Beauté store as a symbol shop near the Church La Madeleine.
- In March 2003, we launched a boutique on Rue de l'Université to market the IUNX brand perfumes. The IUNX brand is collaboration with the renowned photographer and director Francis Giacobetti.
These business developments seem to have no logical connection, but, in fact, they are all consistent in that they are strategic moves in forming a multi-brand portfolio targeting the upper end of the market. It can be said that the trials and tribulations that we experienced in Italy beginning in 1963 have finally come to fruition.
This year marks the twenty-fifth year since our entry into the French market. Currently there are 12 organizations under our French operations: 21 representatives from Japan and 1,300 employees. Among the presidents for the 9 companies, 4 are French nationals, pointing to the fact that Shiseido has become thoroughly localized in France. We have 25,400 employees worldwide and 7,700 overseas employees.
One of the major factors that contributed to Shiseido's success in the French market, was the fact that Shiseido had always been a company involved in mécénat activities (patronage of the arts).
In 1919, Shiseido's first president, Shinzo Fukuhara, opened the Shiseido Gallery in the heart of Ginza. He offered the gallery to young emerging artists as a place to show their works. This was the beginning of Shiseido's mécénat activities. In the past 85 years, 3,000 exhibitions have been held at the gallery with participation from 5,000 artists. Many of them have later become famous and influential artists in their own right.
Since Shiseido has maintained a special relationship with the arts through its corporate development, every one of its cultural assets, such as the products, posters, billboards, and historical resources on beauty treatments, have been preserved and are on display at the Shiseido Corporate Museum and the Shiseido Art House, which was built in a corner of Shiseido's factory in Kakegawa, Shizuoka Prefecture, Japan.
Because these materials have been preserved in an impeccable state, Shiseido has been able to hold a number of exhibitions of its works in France.
- In 1986, an exhibition titled Beauté et Publicité 1872-1986 was held at the Musée de La Publicité in Paris
- Shiseido also exhibited a number of items at the Japanese Avant-garde: 1910-1970 exhibition held in 1986 at the Pompidou Center.
- In 1997, an exhibition covering the history of Shiseido, PARIS-TOKYO-PARIS SHISEIDO 1897-1997 La Beauté, was held at the Musée des Arts Décoratifs, which is next to the Louvre. The exhibition was so highly acclaimed that the leading French art magazine, Connaissance des arts, published a special issue to commemorate the exhibition.
- In 1998, "Shiseido the Meme Exposition --- Generations Art and Science" exhibit was brought back to Tokyo.
The basic policy for Shiseido's mécénat activities is to provide support to yet-to-be evaluated young talent and in many cases patronage is not limited to financial support. Shiseido has been sponsoring the dance troupe, Sankaijuku, by specially developing and providing the dancers' white stage make-up. In the Loire Valley, where the second Val de Loire factory is located, Shiseido has been actively supporting the local community by becoming a partner in the Festival International de Sully-sur-Loire. Shiseido also continues to sponsor the Prix de Lausanne International Ballet Competition.
We believe that the key to Shiseido's success in marketing cosmetics, i.e. cultural products, in France, the home ground of such products, lies in that fact that Shiseido has been and will always be a corporation with a face. Shiseido's special relationship with France, initiated by our founder, Arinobu Fukuhara, and nurtured by our first president, Shinzo Fukuhara, has evolved with the ages, but has been inherited as part of Shiseido's corporate DNA. It is this stance that Shiseido has held toward France and has remained unchanged since the beginning, which lies at the basis of all our corporate activities that are responsible for the success of Shiseido's expansion into Europe. On that note, I would like to conclude my talk.
Thank you for a very interesting article. Even though it is company promotion, it is informative nevertheless.
An unusual success story. There must be a lesson to be learned in there somewhere.