Inside Do-Best materials: A vision for the future of cosmetics

During the last decade, there has been a rise in regional manufacturers who have replicated the Japanese model of success but at a cheaper cost. This is especially true when it comes to the cosmetics industry with Japan’s biggest rival being Korea, which has been getting more and more popular in recent years with the rise of Korean culture in Western countries. Despite this, Japanese firms remain leaders within the cosmetics market with famous brands such as Shiseido, Kao Chemicals, and Kose for example. How have Japanese cosmetics manufacturing companies been able to maintain their leadership despite this stiff regional competition? What are their strengths and weaknesses?

The strengths of Japanese cosmetics are first and foremost safety and quality assurance.  Japanese companies take a long time to test their products to ensure that they are 100% safe. Also, if customer satisfaction is low after the launch, Japanese companies make improvements to the products. When it comes to Korean beauty, while their quality is good, I do not believe that they have the same level of passion that Japanese companies have when it comes to R&D. The strengths of Japanese cosmetics manufacturing also lie in the quality and the texture of the cosmetics. For example, keeping wrinkle care products in stable condition was a long-time challenge that Japanese companies were able to overcome. They were able to address the issues and create effective wrinkle care products.

The Japanese population is aging, and by the year 2050, it is predicted that the population will drop below 100 million people. This raises two main issues. The first is a labor force shortage, and the second is a shrinking domestic market. How have you been adapting to this demographic shift, and how much must you look overseas to ensure long-term business success?

The aging population is a grave issue, especially for the cosmetics industry, in which we have our business. With the population decline, we will have fewer customers to target in the domestic market. That will require us to look overseas to open up new business sales channels for the global population. At the same time, we will have to find new business opportunities due to the shift in lifestyle that Japan is experiencing as a result of COVID-19 and the population decline. While these issues have been a threat, they have also offered us a great opportunity to open up new businesses. For our company to sustainably continue our growth, we must find new ways to operate our business, such as securing an EC channel for direct sales to the customers so that we do not have to depend solely on physical retail stores. Being flexible in providing products and finding new sales channels are key to our growth.

As you mentioned, Covid-19 had a big impact on many industries. Physical retail stores struggled during that period, as lifestyle changes impacted retail store sales. At the same time, online sales jumped by 30%, making Japan the 4^th largest nation for E-commerce with a high influence of social network services (SNS). For example, Facebook revealed that 44% of American consumers choose their cosmetics based on recommendations from friends, colleagues, or acquaintances. In this digital era, how have you been taking advantage of this growth of E-commerce? How do you stay in touch with your audience to share the qualities of your products?

To strengthen both our digital and physical sales, it is crucial to integrate our digital and physical retailing capabilities and enhance our D2C channels. It is also important to focus on Generation Z. Our core targets are the millennial generation who were born between 1987 and 1996 and Generation Z who were born in the late 1990s and early 2000s, as these generations are considered to have huge purchasing power. Our focus is on both Japan and the other Asian countries. We are aiming to increase our exports by promoting our “Made in Japan” quality. Generation Z and the Millennials do not watch TV. Rather, they watch commercials and movies on their smartphones. It is therefore very important for us to launch our commercials on those video applications.

Through our research, we learned that the majority of people in those generations use Twitter, or X as it is now called. We also learned that when watching videos, 86.3% of those people use YouTube, 16.4% of users  Abema TV with 13.7% use Niconico. Amazon Prime is watched by 10.9% of people. It is very important that we create a story from the commercials to the actual purchase of the products. If the consumers are interested in our commercials, they will then decide to purchase our products. We have created several promotional videos and have uploaded them onto our Instagram. Our Instagram is followed by around 80 thousand people.

Your company has created more than 20 brands that cover the wide needs of your customers and reach different types of audiences. Your brands are divided into two types of markets. The first are the brands that focus on the 100 Yen shops such as the brands you sell in Daiso and your own brand U R Glam. Your other brands are direct retail brands that are more premium such as Nion Beauty and Art Make. Why did you decide to spread your brands over these two distinctive types of markets, and which of these two segments are you mainly focusing on and envision to have the most growth potential?

Our company was established as a cosmetics manufacturer. We originally sold our products in the JPY 1000 range like Maybelline. However, large department stores and supermarkets such as Daiei and Seiyu closed down and we lost our sales outlets. At that time, we were loaded with stock and close to bankruptcy. We then saw the emergence of 100 Yen shops that contacted us to purchase the stock that we had. Conventionally, cosmetics makers do not discount their stock for sales. However, as we were close to bankruptcy, we discounted our stock. That was how we started our 100 Yen shop business.

We were also supplying mail-order catalog-based cosmetics. With time, TV sales became more popular. For example, in the US, QVC became the mainstream, while in Japan, Shop Channel was launched, and it has been a very important part of our business sales channels for over 30 years.

When it comes to which segment has higher potential for us in the future, there are two parts to our strategy. The first is to enhance our 100 Yen business as it continues to be a very attractive business for us. With the depreciation of the JPY, it has become more difficult to provide products in the 100 Yen shops. Japanese society is changing, and it is becoming harder to import due to the weakened JPY. However, customers will purchase in the JPY 200-300 price range if the product is good. We want to take full advantage of our 50 years of experience and our flexible and rapid development-to-production process to continue to strengthen our 100 Yen shop business not only in Japan but overseas as well.  At the same time, with Japan’s increasingly aging population, we are targeting the 60-80-year-old range through the TV Shop Channel with more high-quality and high-end products. Those are the two pillars of our business. We have also started to sell products to 3 Coins.

In an interview with the President of Primix Corporation, Mr. Kawasaki, he explained that due to the nature of Asian skin, major Japanese cosmetics firms have over 3,000 types of moisturizers, as it has unique characteristics. For example, it ages slower due to a thick dermis, however, because of a thinner stratum corneum, it also scars more easily and is sensitive, which contrasts with European and American skin.　How do you ensure that your products suit different types of skins?

Just like the products from major cosmetics manufacturers, the 100 Yen shop cosmetics that we supply go through very strict and extensive testing and review procedures to ensure their safety. Japanese skin is thinner and more sensitive compared to Westerners. Using more high-quality oil or essence is therefore important when providing cosmetics to the Asian markets. We have thorough communications with the factory and we conduct extensive testing. When the products are produced in bulk, we also do a batch test.

The cosmetics market is historically known to be oriented towards women. However, recently we have noticed a growth in male beauty as well. For example, 15% of the men in the US are using cosmetics, and there is an additional 17% that is considering the use of cosmetics in the future. Even younger men are more open to using products such as mascara and foundation for example. As the male cosmetics market continues to grow in popularity, what new opportunities do you see for your firm? Do you plan to create products tailored specifically for this market?

We will launched products at 3 Coins for men’s cosmetics. These products are mainly centered on skin care. In 2023, the data indicated a 2.7% increase in men’s usage of cosmetics compared to the year before. There is huge potential for growth with 15.8% of men already using cosmetics. The leading cosmetics manufacturers are creating a new market for men’s cosmetics. It is currently centered around skincare, but I am sure that this will evolve more into the makeup realm, and there will be a need for more low-cost and reasonably-priced products. This will be a great opportunity for our company. The target will be Generation Z as well as middle-aged people. We want to continue strengthening our product portfolio for them.

We have not yet launched the products, In addition, it is OEM’s product for 3 coins. So we can not give you the image of it now.

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We are curious to know more about your 100 Yen shop business. There is a very big misperception globally that cheap means bad quality. For example, when we talk about Chinese products, we believe they are cheap due to their bad quality. How are you able to change the mindset of the consumers and assure them that your products are reasonably priced and of high quality?  What would you say to the readers of Newsweek International magazine to convince them to buy your products?

We pride ourselves as a cosmetics manufacturer and our products go through multiple layers of strict testing to ensure their quality and safety. For example, when it comes to our nail enamel, we purchase it from the factory where major brands purchase from. We use high-quality ingredients for all of the products that we manufacture. The strictness of the testing is very important when it comes to cosmetics, as is the combination of the compounds and their appropriate usage. We are one of the highest-cost makers that supply products to the 100 Yen shops, as we want to ensure customer satisfaction even with the 100 Yen shop products that we manufacture. 

As a company that carries out strict testing to ensure that you develop high-quality products, how are you able to develop such high-quality products at such good prices?

Our strength lies in our 50 years of history. We know where to purchase the best ingredients from thanks to the strong networks that we have developed over the years. We also give instructions to the Chinese factory on where and how to purchase the best ingredients. The reason why we are able to reduce the costs is that, unlike major manufacturers, we do not stress ourselves with R&D. Rather, we place more focus on the manufacturing aspect of our business. Working together with the Chinese factory, we can speedily produce our products. For example, within four months, we can make a prototype and then commercialize the product. Another uniqueness of our company is that we have hired retired ex-researchers from some of the major cosmetics companies. They take care of the container and compound testing for example. Their expertise is very important.

You mentioned your international operation. This is something that we have talked about with other key players in the industry. They told us that collaboration is key as a means to leverage expertise and be competitive on the international stage. What role do partnerships play within your business model, and are you searching for new partnerships or collaborations in overseas markets?

When it comes to finding suppliers, we attend various exhibitions. We met with the supplier that we have been working with for over 50 years in this way. Finding new partners is important as it allows us to continue providing high-quality products at lower costs. We have a sales partner in the US who conducts the sale of our products in that market.

We know that you do not only focus on the domestic market, but you also export your products globally, as you mentioned, in the Asian region as well as the US and Europe for example. Where would you like to continue your international expansion, and what strategies will you employ to further grow your international business?

We want to focus on the Asian market. At first, selling to our customers will be a major sales channel for us in that region. As for the US market, our strategy involves creating our own brand and working with a local company to launch the new brand. This will further increase our sales in the region.

Imagine that we come back in five years and interview you all over again for your 55th anniversary as a company. What would you like to tell us? What are your dreams for this company, and what goals would you like to have achieved for the company by then? How would you like your company to be seen in the eyes of international consumers?

My dream is to make Do-Best the Uniqlo of the cosmetics industry. Uniqlo provides high-quality yet reasonably-priced products to people around the globe. In the US, dollar shops are oftentimes considered cheap with low-quality products. I want to take the lead in converting dollar-shop cosmetics to more high-quality yet reasonably-priced products. To do so, we must continue to make the best efforts we can to provide our own high-quality products at reasonable prices. Marketing is crucial. Consumers in the US and around the globe will always seek cheaper products. Therefore, it is important to stress the quality of our products so that we can convince them to purchase from us. By doing so, we will increase our sales channels. That is my goal for the future.