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Cosmetics market in Japan to grow to US$ 45.64B by 2020

The cosmetic care products has observed a slightly stronger growth in the recent years due to factors such as population ageing. The domestic penetration of the cosmetics in Japan is being maintained by leading players such as Shiseido and Kao.

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Definition / Scope

A cosmetic product can be defined as any item having slight effects on the human body that is applied in a similar manner for the purpose of cleansing, improving, or enhancing the attractiveness of the human body, to change physical appearance, or to maintain skin or hair in a healthy condition.[1]

In Japan the products belonging to the industry can generally be divided into two categories-

  • Quasi drugs- Products related to preventing nausea and other discomfort, preventing heat rash, soreness, etc., encouraging hair growth or removing hair etc.
  • Cosmetics- Products related to makeup cosmetics, hair care, skin care products, perfumes, special purpose such as sunscreen and shaving cream etc. [1]

In terms of the market size and trend, Japan grabs a prominent position in the cosmetics market. Further the success of Japan in cosmetics industry can prove to be the new hope for rest of the countries in Asia-pacific region to become recognizable and establish their brands effectively in near future in international cosmetics market.[2]

Market Overview

As of 2017, Japan is the second biggest in the world market of cosmetics after USA. Japan has an industry value of $50 billion and US has a value of $70 billion respectively. In terms of the domestic or foreign cosmetics brand sold in Japan, they are generally divided into two segments:[3]

  • High end product- They are premium products mostly targeted to the luxury class people and are found at departmental stores and retail outlets. These brands that book a space in departmental stores have to pay rent for using that space. These luxurious brands use gold-color packaging and have a simple design. They are aesthetically pleasing.[3]
  • Low end products- They are mostly targeted to the mass consumers which are generally sold at drugstores, cosmetic stores and convenience stores. Some of the brands in this segment are targeting younger mass consumers who are attracted by the cute look or packaging of the makeup or skincare products and this is catered by the manufacturing companies by establishing 'pop' aesthetic, which is reflected in their packaging.[3]
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Key Metrics

Metrics Value Explanation
Base Year 2017 Researched through internet


Market Risks

From 2012 to 2015, the value of Japanese currency depreciated, as a result many consumers were negative towards consumption which led to decline in cosmetics imports from number of countries. However, China was only the exception as its import to Japan increased and was successful in gaining six percent market share during the same period of time.[2]

Due to factors like recession and risk of losing jobs, consumers are becoming price sensitive and more conscious towards spending due to which these segment of consumers are shifting to the cheaper cosmetics as manufactured by China. The fact can further proven by the import data of 2015 which showed that 24 percent of total cosmetics import in Japan belonged to China.[2]

Top Market Opportunities

Japanese consumers are very sophisticated and they value attributes such as high quality packaging, use of balanced ingredients in product and safety. Thus, domestic cosmetic companies can leverage on these values to create demand of their cosmetic products.[2]

It is necessary for the Japanese companies to follow the trends that are changing and identify which trends are becoming popular at current times to change the trend of the products that they manufacture. For instance, the preference of consumers has shifted from the colorful cosmetics to natural hair and skin.[4]

Older consumers segment is also prominent in the cosmetics market as they are interested in anti-pollution, anti-stress and anti-aging products. Thus, this segment is generally neglected but its need can be addressed by the companies to generate additional revenues.[4]

Creams such as BB and CC are popular in the Asian markets. Thus, cosmetics companies in Japan who are skilled in producing such skin creams can sell these products in the APAC region and add up a new streamline of revenues.[5]

Market Drivers

There has been a substantial growth in the cosmetics industry of Japan which was driven by the high volume inflow of the Chinese tourists in Japan. The depreciated yen had attracted more than 30 million Chinese tourists who accounted 30 percent of the total consumption of the cosmetics market in 2016. [8]

As it is a well-known fact that Japan has a growing number of ageing population, although decline in the birth-rate and young population hampers the cosmetic market. In case of Japan aging has proved to be a boon for the industry. For instance, Lion a cosmetic company in Japan introduced 'Systema Haguki plus' Night Care Gel toothpaste to improve gum health while sleeping. Other companies are also in a pipeline to create similar products to cater the ageing consumers in Japan [6]

The new trend among the women segment in Japan is the need of the naturally beautiful skin rather than the use of heavy makeup on face. Thus, companies have started producing alternatives or beauty purpose and camouflaging makeup in a single product also known as BB/CC creams which have not only received a considerable response in Japan but is getting good momentum in foreign countries[6]

New innovative technologies in the products are used in cosmetic products such as recyclable pack which decreases the product weight followed by sustainability drivers. The most safe and stable material also known as 'PET' is used and also further research has been done in the use of biodegradable materials to form the packaging. As the design and packaging is very essential to the Japanese consumers, these progresses can definitely lead the local brands to create a worthy proposition value in minds of consumers. [6]

Another driving factor of this market is the increased sale of mass or low end cosmetic products through pharmacies and other mass market channels. Customers are increasingly looking for value for money products that are natural and beneficial for the skin and provide a range of combined benefits provided by high priced premium products at a lower cost due to which these products have taken off well in the market. [7]

Market Restraints

The advertising assertions of the cosmetic products in Japan is uncooperative. For instance, describing the value of product by using statistical data is restricted. Thus, the U.S product which are more attractive in packaging, design and texture could become appealing to the consumers as their tastes may change. These value propositions could attract the Japanese consumers who are tired with the same old unscented and plain looking cosmetic product from their own country.[2]

Many foreign cosmetic brands are influencing consumers with their knowledge, unique packaging and ingredients because these are the attributes that the Japanese consumers most value in a cosmetic product. Thus, the foreign cosmetic brands image have proven to be better because the Japanese cosmetic brands have failed to leverage on aforementioned attributes.[3]

The amount of imports of cosmetics in Japan has doubled in last 15 years. This has made the entry of the foreign brands into the market further intensifying the competition making some domestic companies difficult to grow and survive. The success of foreign brands in Japan has attracted more foreign cosmetics companies and particularly in the area of organic cosmetics due to its increasing demand.[8]


The Japanese people purchasing power is impacted by the economic outlook of the country. As the sullen economy has led the consumers to rethink about their consumption habits due to which products such as cosmetics may not be in priority of many consumers as these products are highly priced.[2]

Industry Challenges

The term 'PMDL' which is Japan's Pharmaceutical and Medical Device Law governs the cosmetics industry in Japan. As a policy made effective in 2005, a separate license has to be obtained from the concerned government authority for commercializing or promoting any of the cosmetic product. Further, the process of obtaining license is very difficult as these companies have to meet the required quality and safety standards.[2]

Technology Trends

Japanese Cosmetic manufacturing company called Seishedo has been using the digital mirror technology to provide personalized counselling services and opportunities to trial the product. This mirror is equipped with a touch-panel system which allows a beauty consultant to provide the data of the skin of the individual, application procedure of the product and results of use in the skin through the help of the smart mirror. The results displayed in the mirror can be read thoroughly by the consumer with the help of QR code on their smartphones.[9]

Also, Seishedo has created a new technology by conducting a new survey among the millennials for whom not only the counter but the experience in the store was important. Based on the responses, the old counter where the products are displayed in the store is replaced with a new counter with a display of 3D images of products and texture which is very appealing to the visitors in the store. A digital testing device is also placed where the products are displayed and if any customer picks up the product from the counter of the device it demonstrates all the product information in the screen. [9]

Pricing Trends

Generally, the prices of the cosmetics products are dependent upon the mass and premium market.

  • In the mass market the prices of products ranges from $1 extending upto $100.
  • In premium market the prices of product range from $10 upto $511.[2]
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Regulatory Trends

The cosmetics industry in Japan is governed by the MHLW, Ministry of Health, Labour and Welfare under the PMDL (Pharmaceutical and Medical Law). According, to this law the beauty related products can be divided into two broad categories which are quasi drugs and cosmetics.[1]

In 2005, there was an implementation of the primary distribution system with the introduction of GQP (Good Quality Practice) and GVP (Good Vigilance Practice) which has to be incorporated in the cosmetic products. For instance, these requirements include quality assurance, quality control, safety management, recordkeeping etc assigned to the various staff of the company.[1]

Other Key Market Trends

The use of organic cosmetics in Japan has become the new trend. Such as aromatherapy, essential oil as ingredients of cosmetic products are being successfully marketed in Japan, traditional beauty remedies such as honey, bamboo, argan oil, rosehip seed oil, green coffee bean oil, citrus extracts etc. are perceived high-performing and fun by the modern cosmetic consumers in Japan.[8]

The term 'Puchipura' is becoming quite popular in Japan as these cosmetic products are easily available at convenience or drugstores. They are well known for innovation and ease of use. They are highly affordable as they are low priced. [8]

The high-end beauty manufacturing companies in Japan are also customizing the beauty products according to the different types of skin. They are identifying the need of each individual by using various diagnosis system and then using the ingredients such as herbs and oils to treat various skin conditions each individual is exposed to. [8]

The skin care and makeup routine becomes long with the need to apply several creams about 6 to 8 in steps that cleanses, hydrates, tones and moisturizes the skin, however Japanese cosmetics companies are creating the multi-tasking creams, gels etc. to reduce the time spent on the application of these products. Similarly, the same trend is being used in the face masks as well, where the multitasking masks are being manufactured to save the time of consumers. [8]

Instagram, is the new popular social network for promotion of cosmetics product in Japan. The companies use vivid colours, flowers, manga dolls and pandas to create fun filled posts which is most followed by instagrammers. This new trend has been the target of numerous cosmetic companies in upcoming year. [8]

Market Size and Forecast

Japanese cosmetics market is the most high-volume based as the consumers in this market are prolific. The total cosmetics market in Japan is valued at $22.64 billion in 2017.As of 2017, the makeup related market in Japan is worth $ 314.09 million.[10] Similarly, the skin care products market in Japan is worth $694.29 million.[11] Finally, the biggest share within the domestic market of cosmetics in Japan was accounted by skin care which took up to 46.5 percent and makeup was ranked second with 22 percent.[12]

Japan’s cosmetics market was worth USD 13.62 billion in 2015 and is expected to grow to USD 45.64 billion by 2020 at a CAGR of 9.78 percent over the forecast period.[7]

Market Outlook

At present, cosmetics industry consists of approximately 4,000 companies with 130,000 brand items being distributed.[2]

In 2015, domestic production of the cosmetics represented approximately 70 percent of national consumption whereas, only 30 percent of consumers relied on the imported products [2]

Makeup and skin care products i.e. cosmetics market currently comprise 28 percent of Japan’s imports in the personal care sector.[2]

Despite the recession from 2012 to 2015 followed by depreciation in Japanese currency, the Japanese cosmetics market showed a high consumption. In 2014, $223 per capita in cosmetic consumption annually was recorded in Japan.[2]

Distribution Chain Analysis

There are three common channel of distribution of the cosmetics in Japan which are: [2]

  • Counselling based system sales- It is mostly used by the imported US and European cosmetics brand. The sales of products is made either through the company owned outlets or other chain of networks such as departmental stores, cosmetics specialty stores or boutiques.
  • General distributorship- No individual counselling of the product is offered. A supply chain of wholesaler, distributor and then retailer is created through which cosmetics are sold. Basic cosmetics and hair care items are sold and this form of distribution is expanding rapidly.
  • Direct selling (non-store) - It includes traditional forms of marketing such as door-to-door sales, TV shopping and Internet shopping. Avon, Amway, and Nu Skin are some cosmetic companies using this distribution method in Japan.
  • Others- Off the shelf

The cosmetics products are sold through multiple channels like supermarkets, general merchandise stores, drug stores, etc. at relatively low prices often come with discounts but the difference is that sales is made directly from the wholesaler to the retailers.

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Competitive Landscape

Japan is one country which is also world's largest hub for cosmetics and skincare products. Japan is well known for using its ancient knowledge in field of cosmetics. Since, the core competency of all the cosmetics manufacturers in Japan is sophisticated quality and product value, the industry is faced with intense competition.[2]

In the global cosmetic industry platform, Japan is among the top five national markets for cosmetics standing at a second position after USA. After Japan there is China, UK and finally France.[8] In domestic cosmetic industry of Japan, at present there are three major cosmetics manufacturers who are competing with one another which are as follows:

  • Shiseido
  • Kanebo
  • Kose[2]

Competitive Factors

Japanese cosmetics companies such as Shiseido and Kao are among the largest globally cosmetics manufacturing companies.[2]

Fujifilm entered the Japanese skincare market making full use of its technological expertise in using collagen as a raw material and for anti-oxidation processes. These nanotechnologies are a by-product of manufacturing photo films to prevent fading.[2]

A leading cosmetic house, Senshukai, recently launched a hair care product whose formula they developed internally. Furthermore, contract manufacturers are creating their own brands in search of market opportunities.[2]

Domestic companies such as, Kao is an emerging player that is targeting an increment in profit margin up to 10 percent by the year 2020.As other companies are focusing on foreign markets, Kao plans to penetrate the Apac region which will help them to generate more revenues and be in neck to neck competition with cosmetic giants like Seshido in terms of profits.[2]

Leading domestic players in Japan are to develop age-specific beauty and personal care products such as Lúcido, Prior, Sofina Beaute and Sofina Grace. These products address to the age-related concerns, such as body odour and scalp[6]

In the Japanese cosmetics market, even inexpensive, domestic brands are held to high standards of quality, which occasionally causes price wars and generally means that foreign brands face fierce competition in terms of product cost performance.[3]

Key Market Players

Key Market Players: In terms of the highest revenue share in the domestic cosmetic market-[13]

  • Kao Corporation
  • Shiseido Company Ltd.
  • KOSE Corporation
  • POLA Orbis Holdings
  • FANCL Corporation
  • Mandom Corporation
  • Pias Corporation
  • Noeivir Holdings
  • Nippon Menard Cosmetic Co. Ltd
  • Ci:z Holding Co. Ltd.

According to the top popular international brands among the cosmetic consumers in Japan. The Foreign (Brand) Players are-[14]

  • Lancome (loreal)
  • Shu Umera
  • Clinique
  • Maybelline
  • Clarins
  • ESTÉE LAUDER
  • Guerlin
Top10-Japan-Cosmetics-Companies-2018.png

Strategic Conclusion

The cosmetic market of Japan has already reached a mature phase, thus the companies who are involved with this sector must come up with innovation and differentiation of the product. For instance, airless packaging is a new type of packaging which is used by the premium cosmetic brands to protect the product from oxidation.Similarly, the use of carbonic acid in beauty products has been the recent trend which got a positive response among the consumers in Japanese market. Companies have to see the ongoing trend in the market from the consumer-point of view to understand where the demand has shifted to and create those features in the product in order to increase sales and build a brand equity in the minds of customers.

References

  1. 1.0 1.1 1.2 1.3 http://www.yakujihou.com/img/CosRegulationJapan.pdf
  2. 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18 http://www.yakujihou.com/img/CosRegulationJapan.pdf
  3. 3.0 3.1 3.2 3.3 3.4 https://www.tknexus.com/2014/02/10/japans-cosmetics-market-enormous-opportunity-and-big-challenges-for-foreign-brands-2/
  4. 4.0 4.1 https://www.cosmeticsdesign-asia.com/Article/2016/09/22/Product-innovation-set-to-propel-Japan-s-cosmetics-industry
  5. http://www.cosmoprof.com/old-pages/cosmetic-trend-in-japanese-market/
  6. 6.0 6.1 6.2 6.3 health.https://www.kenresearch.com/blog/2017/11/aging-cosmetic-products-witness-a-radical-growth-in-japan-ken-research/
  7. 7.0 7.1 https://www.mordorintelligence.com/industry-reports/japan-cosmetics-products-market-industry
  8. 8.0 8.1 http://www.cosmetokyo.jp/en/to-exhibit/why-japanese-market/
  9. 9.0 9.1 https://www.shiseidogroup.com/newsimg/2241_o1l20_en.pdf
  10. https://www.statista.com/statistics/758445/japan-make-up-sales-value/
  11. https://www.statista.com/statistics/756647/japan-skin-care-sales-value/
  12. https://www.statista.com/statistics/693726/japan-domestic-cosmetics-market-share/
  13. http://japan-product.com/top10-japanese-cosmetic-companies-2018/
  14. https://www.eu-japan.eu/sites/default/files/publications/docs/japanesecosmetics_final.pdf


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