Key takeaways:
- In a bid to secure relevance in a competitive beauty market, Shiseido is relying on its digital hub to drive internal change.
- The company has invested in a unified global e-commerce strategy, influencer marketing and acquisitions that bolster its profile.
- In two years, Shiseido has grown sales for its prestige category, the focus of the strategy, by 14 per cent.
NEW YORK— Shiseido, determined to shake its ageing image, is playing catch-up to regain relevance with younger customers in an increasingly competitive global beauty industry.
The Japanese beauty giant and parent company of brands including Clé de Peau Beauté and Bare Minerals has formed a three-pronged plan that involves a digital makeover, a more intentional influencer strategy and a robust M&A plan. The work stems from the company’s Digital Center of Excellence, a tech- and innovation-minded department that opened in 2016. Based in New York, it operates globally across eight regions.
While Shiseido runs companies across six beauty segments, including personal care and professional, its digital transformation is focused largely on its most successful prestige category, whose eight brands include Nars and its namesake Shiseido. The Digital Center drives much of the change at the company, including the work to re-platform Shiseido’s brand websites for better user experience and to invest further in AI.
Shiseido’s digital strategy has helped to earn back relevance and regain sales traction. After posting losses two years ago, the company’s sales increased 8 per cent to $2.7 billion in the second quarter of this year. Sales in the prestige beauty and personal care categories, the central focus of the digital overhaul, grew by 14 per cent.
In 2016, Shiseido’s brand websites were hosted on multiple platforms across the world, with varied abilities to offer benefits like free shipping and gifts with purchase. The result was an expensive, difficult-to-manage operation, which led to poor user experience.
To remedy this, the company re-platformed its digital flagships onto one server with Salesforce throughout 2017. The move gives Shiseido-owned brands more control over their e-commerce experiences, with capabilities to launch new web pages and campaigns at a quicker speed, set up chat and SMS services for consumers and personalise content using AI-built algorithms.
“It provided us with a digital flagship framework that’s agile and can be global, but that can also be regionalised and customised for local nuances,” says Angelica Munson, president of the Digital Center of Excellence.
Many of Shiseido’s brands now also have an online presence in key markets including websites for Clé de Peau Beauté and Nars in Canada and Japan. Employees of the Digital Center of Excellence are deployed regularly to help brands launching in new regions calibrate against different market needs, such as the importance of Alibaba, Tencent and WeChat in China, and retailer partnerships in AMEA. For smoother regional launches, local and global digital teams work in tandem around a new market debut.
According to the company, the e-commerce transition to a global platform has resulted in 5x revenue growth over the past five years, with China, in particular, witnessing 30 per cent growth year-over-year over the last three years. Overall gross merchandise volume has increased by 40 per cent in the last year.
Prestige beauty brands have been slower to adapt to social media, operating under the belief that women paying hundreds of dollars for skincare weren’t taking cues from Instagram influencers. The reality is that while the path to purchase is slower, influencers can be tapped to encourage long-term customer acquisition.
“Because of the accessible price points, mass beauty consumers can be influenced to try a new product on a whim, whereas for luxury beauty brands, the consideration phase tends to be much longer,” says Thomas Rankin, co-founder and CEO of Dash Hudson, a visual marketing platform.
With this in mind, Shiseido has revamped its influencer strategy, replacing an erratic gifting and partnerships schedule with a more strategic and layered approach that involves recurring partnerships with influencers of varying follower counts. One key component of the influencer strategy is consistency: Working with the same faces over time, as with Aimee Song for Clé de Peau, builds trust with savvy consumers, according to the company.
Combining different tiers of global influencers also creates a halo effect for product launches, says Shiseido US president Melissa Sperau. The company also thinks outside of the usual beauty influencer box, working with lifestyle and fitness influencers to gain relevance in wider circles, according to Sperau.
While Shiseido declined to offer specifics on influencer spend, Sperau says they’ve increased investment in consumer marketing and paid media in the last 12 months. Part of that investment has gone towards boosting retailer partnerships with companies like Sephora and Ulta: Shiseido launches products and product line-ups exclusively with these retailers and then doubles the impact by paying to promote the products on both the retailer’s and its own social accounts. “It creates a lot of buzz and attention that really does convert to sales,” says Sperau.
Following in the footsteps of other older beauty conglomerates like Estée Lauder and L’Oréal who are eager to widen their reach with Gen Z and millennial consumers, Shiseido has begun ramping up its M&A strategy with an eye towards buzzy upstart brands. In October, the conglomerate purchased cult skincare brand Drunk Elephant for $845 million, immediately bolstering its market share with younger consumers.
The brand appealed to Shiseido because it is founder-led and has strong digital positioning, according to Munson. “The Drunk Elephant consumer is a very different consumer for us, and it was important to add volume in skincare, particularly in the US,” she says.
That purchase was led by the company’s global M&A team, which Munson says grew this year to include employees that have deep expertise in the beauty category who, in step with the Digital Center, are on a mission to keep the company competitive in an ever-changing market.
“The team looks at the zeitgeist of consumer needs: what are the important categories and where could we further strengthen our position in the portfolio?” Declining to comment on future acquisitions, Munson offered only that they had their ears to the ground.
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