By Chris Betros
TOKYO —
Times may be tough for the economy in Japan but women still want to
look their best. One company helping them to do that is multibrand
cosmetics powerhouse Estee Lauder KK, which has had a presence in
Japan for 42 years. Estee Lauder markets several brands in Japan,
focusing on makeup, skin care fragrance and hair care. These
include Estee Lauder, Aramis, Clinique, Origins, MAC, De La Mer,
Bobbi Brown and Aveda.
The company was launched in 1946 when Joseph Lauder and wife Estee
began producing cosmetics in New York City. Today, the company is
still controlled by the Lauder family, which has about 70% of
voting shares. In 2008, worldwide sales were nearly $8 billion,
with the fast-growing Asia-Pacific region surpassing $1 billion.
Japan remains the company’s second largest market.
Heading up the Japan office is Mark Loomis, who has been president
of Estee Lauder KK for four years. Born in New York, Loomis has
been in the cosmetics industry for 25 years, the last 13 with Estee
Lauder.
Japan Today editor Chris Betros visits Loomis at the Estee Lauder
office in Nagata-cho to hear more.
What is Estee Lauder’s image in Japan?
The various brands are probably better known than the name of Estee
Lauder itself. We have nine different business units targeting
different consumers. Each of our brands has a different market
niche, but our strongest trait as a company is that we really
understand building powerful brands and allowing them to create
their own identity and culture. The one consistent image across all
our brands is prestige. To that end, we have limited distribution;
we are not in every drugstore but only in the finest stores.
How do you market the brands?
Advertising is not the primary driver of the brands. The No. 1
method is people, such as our make-up artists who meet customers.
Our biggest investment is in those people: across Japan, we have
2,500 staff members representing our brands. After that, word of
mouth, PR and corporate social responsibility (CSR) activities,
such as the Pink Ribbon breast cancer awareness campaign.
How’s business in Japan?
We had a banner year last fiscal year (ending June 30, 2008). Last
July-September was pretty consistent, but the 2nd quarter was a bit
slower. Cosmetics tend to be more recession-resistant because
consumers are more emotionally committed to the category. However,
it’s getting more difficult because consumer mindset has become
negative since February.
What trends have you seen amid the economic downturn?
Because many customers register with us, we are able to match about
85% of them with a transaction. Whereas 20-30% of business each
month used to be new customers, it is getting more difficult to
maintain that new customer share. On the other hand, loyal
customers are staying with us.
What is your best-selling brand?
Clinique, a skin care brand which has been in the market for 30
years, is our No. 1 seller in Japan. That is the brand that really
created the cosmetic business in department stores.
Who are your core customers?
We have two make-up artist brands, one called MAC, which is
primarily for women in their 20s and bit younger. We have another
makeup brand, Bobbi Brown, which is targeted at women in their 20s
and 30s. Clinique has a wider demographic. Estee Lauder is more for
women in their mid 30s, 40s and 50s. Overall, I’d say the average
age of women coming to our counters in department stores would be
in their 40s.
How big is the skin care market?
Japan is the largest skin care product market in the world, larger
than the U.S. Japanese are the highest spenders per capita on skin
care, 50% more than the next market, France, and four times more
than in the U.S. Japanese women use on average about seven skin
care products 4-5 days a week and about 8 make-up products a week.
This is one area where women in their 40s-60s are willing to try
new brands. Anti-aging cosmetics is a fast-growing segment, too.
Women start using them in their mid-30s.
Do you manufacture products specifically for Japan?
Yes. We have an R&D facility in Japan, and two years ago, we
set up a skin research institute in Kobe. We customize about
one-quarter of our products for Japan and other Asian markets.
Japanese skin is different in terms of how it ages and it is
thinner. Japanese women tend to have less issue with wrinkles but
more issue with evenness of skin tone, age spots. Fifteen years
ago, the customer might have adapted to the foreign prestige brand.
Today, we have to adapt to the customer.
Where do you sell your products?
Primarily in department stores and high-end salons. We have the
largest market share in department stores and are the most
important player. Our strategy is to be very careful with
distribution of our brands, so that we can give a measure of
exclusivity that Japanese brands don’t give.
How about online sales?
You can order online through department store catalogues and we are
looking at direct online sales for the future.
What are some unique characteristic so the Japanese
market?
The market is much more driven by fashion, trends and innovation.
There is also a seasonality to it, particularly in color. With some
of our brands, like MAC, we have a counter activity almost every
two weeks. In skin care, some of the most innovative ideas are
coming out of Japan. Whitening, which is unique to Asia, comes from
here. In other areas, cultural differences, such as sensitivity to
scent, are much more pronounced. The detail and care taken in
packaging is another unique factor.
The greatest learning method is going out into the marketplace and
talking to customers. We touch people every day. Today, for
example, we’ll touch 15,000 consumers in stores. So we get a lot of
feedback. For the rest, I have good people around me who can
provide the expertise.
How do you get feedback from customers?
We have a consumer communications department which gets thousands
of calls, mostly inquiries, and a few complaints. The main method,
though, as I mentioned earlier, is through a lot of interaction
between our sales staff and customers at stores.
Once a year, we do a mystery shopping program. We hire a
third-party company and they canvas 50 stores, shopping at our
counters and those of our competitors. They then provide an
analysis and some recommendations. It’s something we take very
seriously.
We have a number of global initiatives. We are very much involved
with breast cancer awareness and prevention. The pink ribbon
campaign was started by our company in the early 1990s. In October,
we light up Tokyo Tower in pink and do a lot of activities that
month at our department store counters to raise money. Our MAC
brand has been at the forefront of raising money for AIDS
prevention.
What is a typical day for you?
I show up here between 7:30 and 8 a.m. I try to spend a day or two
during the week in the marketplace. I like visiting department
stores to meet with store management or check out the competition.
Other days, I visit our R&D facilities. Some conference calls
with New York are done late at night or early in the morning.
What is your management style?
I like to have one-on-one meetings and build a consensus before
getting to a big meeting. I am very hands on in the distribution
side and the kinds of decisions we make in terms of how our brands
are positioned in the stores.
Do you travel much?
I visit our regional headquarters in Hong Kong once a quarter and
New York twice a year. My trusty Blackberry goes with me
everywhere.
How do you like to relax?
I ran in the Tokyo Marathon for the first time this year and
finished in just under 4 1/2 hours. Besides that, I go to the gym
and play tennis or ski whenever I can.
What frustrates you about doing business in Japan?
It doesn’t really frustrate me, but there is never a direct route
to getting things done in Japan. You just have to have patience. On
the plus side, though, once a decision has been made, the execution
is swift and there are a lot of rewards.
For more information, visit http://www.estee.co.jp