Chinas cosmetics market has grown dramatically in recent years. Given its established business for ¥42 billion in China, Shiseido has identified China as its leading priority. As Shiseido develops strategies for expanding its presence in China, it needs to look for ways to develop its supply chain and distribution channel to give it a competitive advantage over other cosmetic manufacturers.
The Chinese cosmetic market is highly fragmented. Import brands (imports being considered premium in China) are price around 300 RMP or higher, while the local brands sell at 10-20 RMB. Foreign cosmetic firms that manufacture through joint ventures with the local partners are able to get a slight premium over domestic manufacturers and sell for 20-30 RMB. To compete in this highly fragmented market, Shiseido has adopted a well-diversified strategy offering multi-brands in all categories. It then uses retail price as a signal of the category: Premium, Mass-premium, and Mass.