Video Quick Take: Shiseido’s Toshiro Sugimoto on Enterprise-Wide Digital Reform

Video Quick Take: Shiseido’s Toshiro Sugimoto on Enterprise-Wide Digital Reform

by Bloomberg Stocks
0 comment 4 views

Todd Pruzan, HBR

Welcome to the HBR Video Quick Take. I’m Todd Pruzan, senior editor for Research and Special Projects at Harvard Business Review. Japan-based multinational beauty company Shiseido and consulting company Accenture have come together to form a joint venture called Shiseido Interactive Beauty, dedicated to enterprisewide digital reform for Shiseido and its companies. Today, I’m delighted to be speaking with Toshiro Sugimoto, the chief digital officer of Shiseido Japan. Toshi will speak to us about how he’s leading this forward-thinking and innovative company into the future and engaging with next-generation consumers. Toshi, thank you so much for joining us today.

Toshiro Sugimoto, Shiseido

Thank you very much, Todd. It’s an absolute pleasure to be speaking with you today.

Todd Pruzan, HBR

Toshi, how did COVID-19 affect the beauty industry in Japan, and what are some of the evolving consumer trends you’re seeing in Japan?

Toshiro Sugimoto, Shiseido

Due to COVID-19, millions of people worldwide collectively experienced displacement. How and where we do things had to change. And social recession rose due to lockdowns, remote work, and all of us being disconnected from familiar comforts, whether it was place, activities, or communities. Japan was no different. While Japan is the third largest economy and has the third largest beauty market in the world, we saw that the crisis was a huge shock to the beauty industry in Japan.

Total beauty market CAGR from 2019 to 2021 has seen a decrease by 7.9%, and it has affected many segments, such as makeup, skin care, hair care, sunscreens, and perfumes. Literally, due to months of lockdowns and international travel bans, the beauty market has stagnated with the steep sales decline and worldwide temporary store closures of the past two years.

Sentiments toward an uncertain economic recovery and the average monthly income per household is shrinking at 6.3%. We saw that the shopping basket contents have undergone a significant change in mix, and consumers are changing the ways they get their information and experience retail. Companies had to rethink how and where they connect with consumers due to the shift in behaviors and trends. Japan has, more or less, followed the same behavior patterns that are globally shared.

For example, consumption-wise, we’ve all witnessed a rise in e-commerce purchases. We saw an increase in conscious consumers and a polarization in regard to sustainability. There was obviously a decline in discretionary spending and/or trading down from higher brands. And we’ve seen a larger basket size at each purchase and reduced shopping frequency, regardless if it was at physical or online stores.

Entertainment- and communication-wise, we also saw entertainment and learning channel shifts to digital media consumption. And we’ve especially witnessed the mature audiences, the baby boomers and the post-baby boomer generation in Japan, take up social media. Sharing of information and communication has increased significantly in the digital and social space due to the reduction of face-to-face interactions.

The residual effect we’ve seen is stability in skincare consumption despite a significant decline in makeup and a different usage mix of beauty products due to constant mask wearing when venturing outside the comforts of homes. And finally, health- and well-being-wise, we’ve definitely seen increased attention on health and hygiene along with a surge in fitness and on-demand across both genders, which kind of spilled over to a higher awareness and usage of cosmetics for men. So definitely, COVID-19 truly shifted Japanese moods in the beauty market like never before.

Todd Pruzan, HBR

That is a lot of change in a very short time. How is Shiseido responding?

Toshiro Sugimoto, Shiseido

Will these behavior changes last? I don’t know. But for sure, Shiseido had to respond. With more time at home and alone, people became more conscious about themselves. The timing became crucial for us since we have a unique opportunity in nourishing self-esteem through beauty. Our corporate vision in supporting each and every individual’s personal beauty wellness was a rallying call to challenge us to pivot, become more agile, and find alternative methods to inspire people’s confidence, especially since the pandemic and associated lockdowns disrupted rituals and upended the strong emotional ties associated with many of them.

The past two years have been a period of reassessment and searching for new meanings. The pandemic isn’t over, and it’s clear that people want and need new habits. Shopping is one example. The so-called “newness” or the trying-on social occasions along with regimen buying is, unfortunately, no longer there, meaning a void developed in the shopping experience itself.

And anxiety rose around what to do next and a loss in confidence toward the cosmetic shopping process in itself. As a result, building shopper confidence in beauty became our key focal point—basically to bring value to the purchase decisions, infuse consumer self-esteem, and strengthen the trusting relationships with our brands. Obviously, overnight, we all had to pivot toward a clear lifetime value consumer as well as to digitally enable ourselves and our partners to serve the changing consumer expectations.

We started off with, number one, unified commerce: basically a strategy to centralize first-party and product data so that we could make data-driven decisions centered on the consumer’s behavior and further build the brand’s trust. Additionally, the strategy will capture the individual lifestyle needs and identify key insights to fuel number two, our omnichannel experience, the seamless end-to-end shopping experience that is a hyperpersonalized, highly tailored shopping journey that meets the consumer’s growing expectations, especially in obtaining their own version of personal beauty wellness.

An example of this would be promoting safe and hygienic shopping for beauty, given the situation at hand. So, we have provided touchless solutions. At physical stores, we have QR codes that are strategically placed so that consumers, using their own mobile device, have an immersive in-store experience. At our flagship stores, we have introduced an automatic tester that can dispense cosmetic samples just by holding your hands underneath the appliance.

Lastly, the implementation of AR capabilities to test the color swatch of various makeup and brands and the implementation of cloud-based analysis solutions to help consumers understand their skin conditions—these solutions were immediately utilized at our retailers and D2C online stores. And such solutions driven by data provide a personalized experience, which is paramount today. We’ve carried that understanding of personalization to our e-commerce, and it’s been very healthy.

Before and even during the pandemic, we continued to retain the number one share in beauty e-commerce for the fifth straight year. And with our know-how, we’ve supported our partners, especially our long-standing relationships with the mom-and-pop stores, by developing an e-commerce platform to help aid their consumer engagement and online transactions.

The number three part is that people are using their home technologies in a way they hadn’t previously considered necessary. During and after lockdowns, usage of tools and platforms for self-expression and especially to connect with others were rising. People are feeling a stronger sense of agency over how and where they spend their time and attention that provides value. So, we looked at this opportunity and geared our large number of beauty consultants to leverage these digital platforms and connect, engage, and empathize with their consumers wherever they want to be.

The beauty consumers really, really, really accepted our beauty consultants, because they are not celebrities nor influencers, but individuals who are, quote, unquote, “just like me” and who they could relate to easily. So, demonstrations and try-ons at stores shifted to virtual experiences online, social media, and digital tablets at stores. These experiences happen through tutorials, how-tos, livestreaming, live chats, one-to-one counseling, and one-to-many seminars and beauty boot camps.

People are seeking meaning—for why and what matters to them. So we made sure that our beauty consultants also offer advice and make recommendations on how beauty routines can enhance and promote holistic well-being. So, Todd, all in all, we’ve made our beauty consultants’ “retail-tainment” as ubiquitous as possible.

Todd Pruzan, HBR

That’s great. So, Toshi, what is your vision to sustain this growth?

Toshiro Sugimoto, Shiseido

Ooh. Building for tomorrow, not for today. Since the current new normal behavior and habits are not set, depending on how the world will live in conjunction with the virus, human behavior and trends will change yet again. So the four core areas that we’re looking at are—number one, the top theme for us literally is creating the new breed of talent across creative, business and technology capability. And building talent development is crucial in instilling confidence and empowering our employees. Especially in hiring and evolving digital, IT experts will remain as a strategic pillar for growth, especially to meet the evolving needs of our beauty shoppers.

And number two, experimentation and focus on outcomes, not outputs, will continue to be our key. We have to build upon the better outcomes, since we will never truly understand nor appreciate the evolving consumer needs fully.

Number three, literally the trend of first-party data and qualitative feedback are required since these are the only sources that will help us understand our relationship with our beauty consumers. This is our bread and butter to help fuel our CX programs to be holistic, predictive, precise, and clearly tied to the business outcomes.

Lastly is to continue to ground ourselves in our 150 years of corporate heritage and the mantra from one of our founders, Mr. Shinzo Fukuhara: “In whatever we do and whatever we deliver, it must be enriching.”

So finally, regarding the rapid transformation and on-experience creation, Shiseido Japan could not have done it alone. We have leveraged our strong local partner, Accenture, and built up digital momentum as well as having created the bespoke digital training programs for our employees. The collaboration was mutually beneficial, and we’ve moved one step forward by establishing a joint venture, in July last year, called “Shiseido Interactive Beauty” to further our innovation in creating new business experiences of tomorrow.

Todd Pruzan, HBR

So how will digital shape the future of the beauty industry in Japan?

Toshiro Sugimoto, Shiseido

Ooh. The answer will be quite surprising from my end. At the core of it, the needs and wants from consumers, I feel, won’t change drastically, just the evolution in the next chapter of engagement and consumer intimacy. Three examples that I can state: In 1934 in Japan, Shiseido introduced the first beauty consultants at stores. And now, our beauty consultants are engaging consumers directly on social media and online. They are just one touch away from anyone’s digital console.

In 1936, there was an innovation: a paper color chart wheel for illustrating how the makeup looks and its relevant different color swatches. And now, we’ve evolved into AR, virtual try-on applications. We’ve also been supporting, communicating, and empowering women and LGBTQ individual’s confidence through our own publications since 1937. And now, we promote all that through digital content, which reaches a staggering number of readers and followers.

But I do believe that digital will help lift the business to efficiency gains. So there are further potentials through predictive modeling using data and machine learning, innovative usage of IoT, remote identification technology, and unique usage of 3D printing. I believe that the beauty business will be able to reduce the time to serve further as well as enhance companies’ abilities to course correct faster when necessary.

Todd Pruzan, HBR

So, Toshi, what advice would you give to others to lead a big and successful digital transformation?

Toshiro Sugimoto, Shiseido

Oh, wow. While I thought establishing a clear and sound digital strategy would be the grounding principles for our change, I basically fell flat on my face after introducing that immediately two to three months, especially due to the remote work environment. People interpreted the digital strategy differently. Some refused to implement plans. And many ignored them, praying that everything would go back to normal soon.

So one night, while walking home bitter and discouraged, I remembered a quote from Peter Drucker. He stated, “Culture eats strategy for breakfast.” Creating and connecting the new culture collaboratively was basically missing. From there on, my team and I had to link our strategy with not only our company’s vision, but our heritage, given our rich 150-year history.

We also recognized and appreciated employees’ fears of being replaced due to all the demands for changes by implementing feedback sessions along with immediately instilling the digital talent development programs with Accenture.

Lastly, keep building a positive culture by celebrating small successes. We communicated to our people how they had positively changed our beauty shoppers’ habits through creating superior user experiences.

Todd, in summary, it’s all about the people and what makes them want to work for the brands. We want our people to feel confident, and that really can only happen when a new culture is created together through trust. At the heart of it, culture defines engagement, passion, and execution. And I learned the hard way that we need to constantly communicate and show our appreciation toward our dear staff members since they are the only ones that bring the digital strategy to life.

Todd Pruzan, HBR

Toshi, this has been a great conversation. Thank you so much for joining us today.

Toshiro Sugimoto, Shiseido

Thank you very much, Todd. It was an absolute pleasure.

To learn more, please click here.

Read More

You may also like

Leave a Comment