• 
• 

Published on November 12, 2007

Having a beautiful face has long been a preoccupation among Thai women. It's an attitude that has made Thailand an attractive market for global cosmetics brands.

However, in the current atmosphere of economic slowdown, Thai women have been prepared to compromise on their beauty in the interests of maintaining the health of their personal finances.

The cosmetics business has consequently been hit hard by the fall in consumer confidence that began with the onset of Thailand's political turmoil last year. Many high-end cosmetic brands, as well as upmarket shopping complexes like The Emporium and Siam Paragon, have been caught up in the slump.

An executive of one high-end cosmetics importer, Elca (Thailand), says the Bt9-billion cosmetics market grew only 7 per cent last year. Nunthawan Laosinchai, Elca's brand general manager for Clinique, believes the situation will be even worse this year.

When Thailand's political situation became chaotic last year, low- and middle-income people were the first group to show their economic sensitivity. Now, since the political picture is still unclear, the gloom has begun to shake the confidence of even those with heavy pockets. Overall, it's a difficult situation for the cosmetics industry.

"They have money, but the economic situation has blighted their shopping mood. They want to wait and see rather than spend normally," says Thipvipa Chantapasa, The Mall Group's general manager for merchandising women's products.

The Mall Group has witnessed some shoppers switching from their usual brands to cheaper substitutes. Earlier this year, it revised downwards its expected sales growth, from the usual 10-15 per cent to only 8 per cent.

Shiseido (Thailand) has seen its first single-digit growth performance since 1997. In the first half of this year, it recorded 7-per-cent sales growth and expects the full-year figure not to exceed 10 per cent. Last year's sales growth was 13 per cent.

Meanwhile, Elca hopes to maintain its targeted growth rate of 5 per cent over last year's sales of almost Bt600 million. It believes some of its brands, such as Clinique, will have single-digit sales growth for the second year in succession, following several years of double-digit growth. However, Clinique's sales should grow 7 per cent this year, compared with 5 per cent last year.

Shiseido managing director Tatsuo Sudo believes the whole cosmetics industry will grow only 3 per cent. Others are more optimistic. Thipvipa from The Mall Group, Elca's brand general manager for Estee Lauder, Alisara Brahmaphalin, and Nunthawan from the same company say industry growth will be more like 8 or even 10 per cent.

Yet while long-time players in the high-end cosmetics market are worrying about their performance, a newcomer has arrived with a very optimistic view. Japanese high-end skincare brand Vinasre entered the Thai market mid-year. Sompol Yotviriyapanich, regional manager for Maia (Thailand), a company under the Vinasre Group, is convinced consumer confidence and purchasing power will soon recover.

He says companies like Vinasre are unfazed by Thailand's economic slowdown. It even chose Thailand as its first international market to penetrate.

"Beauty always stays with women. As one customer told me, she has only one life, so she wants to look beautiful throughout her life. Looking good always makes them happy," Sompol says.

Vinasre began by targeting women wanting anti-wrinkle products. Its price average is Bt7,000 per product, and it currently has only two selling points: Siam Paragon and the Bang Kapi branch of The Mall Department Store.

Its strategy is to use the economic downturn to work hard at building awareness of its brand, so that when the economy recovers, consumers will immediately think of Vinasre as the top brand. Its marketing activities include attracting people to test their skin at its counters, handing out product samples and arranging roadshows. The marketing budget for its first year of operations in Thailand is Bt50 million.

Already it has achieved 5 per cent of its first-year sales target of Bt40 million. It is confident of making another Bt5 million by the end of this year and expects sales to total Bt50 million by next September.

However, for the long-time players it's a tough exercise of maintaining performance rather than building from scratch. The Mall Group has increased the frequency of its event arrangements. Each shopping mall in the group stages promotional events every week. At the same time, the group emphasises customer-relations management through a variety of activities and its Beauty Card system, which has 80,000 members, 70 per cent of whom are active. The group keeps updating its perceptions of consumer behaviour through the card members' database and has found - among other things - that cosmetics made from natural extracts and whitening products are most on consumers' minds.

"We must do three things: create new trends, draw traffic and always make consumers alert to the opportunity to buy new things," Thipvipa says.

And as the shopping malls arrange different events and marketing campaigns, their beauty departments always grab the opportunity to attract extra numbers of shoppers.

Alisara from Elca says some shopping malls have increased the frequency of marketing campaigns, and these help to attract shoppers to cosmetics counters continually. However, they have also created a new habit among consumers: shoppers tend to buy fewer items during each visit, preferring to wait for the next promotion to buy again.

Shiseido focuses on a Japanese strategy called omotenashi (hospitality). It trains its counter-based beauty consultants to provide better service in meeting customer demand. It has also increased its promotional budget this year to 25 per cent of total revenue, from 20 per cent before.

Besides having launched new products to expand its customer base in Thailand, Shiseido is boosting cooperation with premium hotels to use its products, in a bid to strengthen brand awareness. However, it has recently called a halt to new product launches, because of the need to spend huge amounts on promotions.

Elca's Estee Lauder has adjusted its strategy for getting closer to consumers by going out into the market instead of waiting for customers to visit its 41 counters around the country. It arranges roadshows at 12 selected office buildings and major shopping malls, using a VIP bus equipped with skin-examination machines and staffed by consultants.

This month, it also plans to provide product samples with 65,000 copies of Praew magazine and send 100,000 product samples directly to the homes of regular customers.

Alisara says the plan will allow customers to sample new products, thereby attracting new customers while retaining existing ones. The advertising and marketing plan will cost about 20 per cent of expected sales.

Through the tough months, Elca has been able to maintain Thailand's ranking as the country that has generated the highest sales for Estee Lauder, with an average Bt6,400 spent and 2.84 items purchased per bill. This compares with other countries in Asia and Europe, where the highest figures are Bt5,000 spent and two items purchased per bill.

Estee Lauder has three product categories: treatment, makeup and foundation and fragrance, contributing 64 per cent, 28 per cent and 8 per cent of revenue, respectively.

Cosmetics importer Elca has allocated a marketing budget of 20 per cent of its expected Bt670 million in sales for the current fiscal year, covering all of its high-end brands. The budget will be used for advertising in magazines, arranging co-marketing activities with Radio Get 102.5, distributing product samples and arranging marketing activities for university students.

It will also put more effort into advertising through "new media", including sending ad messages to consumers' mobile phones and creating interactive activities on its website.

Meanwhile, it will also expand its market upcountry. While its Bangkok market grew only 5 per cent in its previous fiscal year ending June 30, the upcountry market grew a whopping 20 per cent. The main reasons were the expansion of shopping malls and the emergence of a significant number of new customers, while the high-end skincare and makeup markets in Bangkok seem to have reached maturity.

As a first step, the company expects to open at least two selling points in Phuket: in the Jungceylon shopping complex and Robinson Department Store. Its Clinique brand currently has 42 selling points upcountry and 80 in Bangkok.

Although The Mall Group does not expect the cosmetics industry to enjoy good times this year, its hopes are buoyed by the coming festive season. Thipvipa believes the atmosphere of celebration following months of financial restraint will lead to a good final quarter for this year, with high spending.

She also expects the better outlook to continue and believes the December 23 general election will provide a lift to consumer confidence. The Mall Group has even set an aggressive sales growth target for next year of 15-18 per cent.

Thipvipa's high confidence has been bolstered by the aggressive business plans of many brands that have counters in The Mall Group's shopping malls.

Nitida Asawanipont

The Nation