This is marketing research on the beauty salon - Japan industry and can include information on the background, market structure, definitions, competitors, trends and developments of the beauty salon industry in Japan and is related to other topics such cosmetics, spas and fashion.

Spas and Beauty Salons (Including Cosmetics): Japan

The “spa” as a concept is a relatively new form of business that was introduced to the Japanese market in the new millennium. It can be said to be in the beginnings of its development as a business in Japan, although the types of services and treatments offered at each establishment are not necessary new to Japanese consumers. The spa market is expected to have good growth potential, as are business opportunity prospects for U.S. cosmetics and beauty goods companies. It should be noted that the Japanese cosmetics market is highly competitive. U.S. manufacturers of cosmetics should keep an eye on the Japanese market because it is the second largest market after the United States; a successful product in Japan is very likely to be successful in other international markets.

Market Demand

In Japan, words such as “Healing”, “Wellness”, and “Relaxation” have become trendy buzz words recently. There are many forms of services offering opportunities for relaxation, healing, or wellness such as massage (Western or Asian style), acupressure, sauna (wet or dry), reflexology, aroma therapy, and esthetic treatment, in addition to the traditional Japanese hot springs (therapeutic bath). The spa is a relatively new form of service, although the types of services and treatments for relaxation offered at each establishment are not necessary new to Japanese consumers. Singapore’s St. Gregory spa, which opened its establishment in Tokyo in April 2003, was the first spa in Japan. A number of famous Asian brand spas such as the Mandara spa (July 2003), the Taman Sari Royal Heritage spa (July 2003) and the Banyan Tree spa (July 2004) followed suit. Many hotels, including Grand Hyatt and Sheraton, as well as traditional Japanese hot spring inns (“Onsen Ryokan” in Japanese), have started to open “destination spas.” Following the influx of foreign brand spas, non-destination spas, or “day spas,” have begun to emerge in Japan.

According to industry sources, the total number of spas in 2004 was only 100 and so was believed to be in the beginnings of its development in Japan. But today, these sources estimate that the number has reached 300, and they believe that the number of establishments and types of business will further grow rapidly, as many esthetic salons have begun either offering spa operations or are converting themselves completely to spas. They also expect new types of spa such as “medical spas” that focus more on preventive medicine or integrative medicine will increase and will be accepted widely as the Japanese baby boomers, men and women alike, look to maintain or enhance their wellness. As demand for spa treatments increases, consumer demand for more new cosmetics, toiletry goods, and services will grow as well. Because Asian-style spa concepts arrived in Japan first, followed by the European type of destination spa concept, Asian and European treatment goods reportedly dominate the market. The most wellestablished brand in Japan is DECLÉOR from France. Japan’s largest manufacturer, Shiseido has only embarked upon marketing its own spa product line in the last year or so. On the prospects of the spa business going forward, some industry experts say that demand for American treatment goods will grow, and there will be a shifting away from Asian products as the “Asian spa” boom cools down.

Market Data

(1) The Spa as a Relaxation Service

The “spa” in Japan is not yet recognized as an established, full-fledged industry by the Japanese government; therefore, there is neither an official industrial classification code assigned nor statistical data available to estimate the real size of spas as a business sector. One of the largest leisure industry publishers, Sogo-Unicom, estimates the market size of the “relaxation-related service” industry, but includes spas in the same category as other bathing services such as hot spring baths, saunas, foot baths, etc.

Although there is no data from this source on the number of establishments extent, spa and other bathing services combined are estimated to be substantially comparable to the size of the esthetic industry in Japan. A spa association official estimates that true spa establishments number about 300 today, though they are increasing rapidly. Therefore, the estimated market size of spa today may still be far smaller than it may grow to be in the future.

(2) The Cosmetics Market

Japanese shipments of cosmetics for 2005 totaled 1,505.5 billion yen (US$13,686 million at 110 yen to US$), a hefty increase of 5.98 percent from 2004, while Japan’s imports of cosmetics increased 1.98 percent to 163.6 billion yen (US$1,487 million). Imports accounted for 10.8 percent of the domestic market in 2005.

France and the United States remained the top suppliers; however, cosmetics imports from these two countries decreased to 56.5 percent of total cosmetics imports in 2005, compared to 69.0 percent a year earlier. China ranked a distant third (7.8 percent) after the United States (23.8 percent). Industry sources say that Japanese consumers' interest in beauty and health continues to be high.

Distribution Channels

Cosmetics are distributed in Japan through the following four channels. An industry source estimated the share of each channel for the last three years as follows:

Japanese Cosmetics Market by Distribution Channel (Percentage) 2003 2004 2005 Franchise System 34.0 33.9 34.1 General Distributorship 32.3 32.3 32.3 Door-to-door & Direct Marketing 26.7 26.3 25.8 Other (Institutional/professional use, etc.) 7.0 7.5 7.8 Source: Shukan Shogyo Jan. 1, 2006

Note: The above “Other” category includes institutional channels. Cosmetics and toiletries for professional use are usually sold directly to beauty salons and barber shops by manufacturers or distributors. Some cosmetics and toiletries are sold over the counter by beauty parlors and barber shops to their customers.

While high-prestige U.S. and European cosmetics companies employ a direct-selling franchise system, wherein a manufacturer deals directly with its own accounts, general distributorship is the most conventional channel with products flowing from manufacturer to wholesaler to retailer. Consumers go directly to shelves where they find cosmetics of their choice and no individualized professional counseling is offered. In this system, the manufacturer delegates distribution to the wholesaler / distributor and supports marketing via advertising and promotion. While products traditionally marketed through this channel have typically consisted of daily necessities such as basic cosmetics and hair care items of relatively low price, the variety of cosmetics distributed through this system is expanding. Many imported cosmetics are distributed via this general distributor system. A wholesaler imports products directly and supplies them to retailers, or an importer brings in a product from an overseas manufacturer and supplies it to wholesalers, who supply the retailers.

Cosmetics and toiletries for spas fall in the “Other” channel. As this channel has traditionally been small in size, products tend to be dealt with by small numbers of niche players. With spas gaining popularity among consumers and attracting attention of the cosmetics industry participants, the size of this distribution channel may increase further, relative to the other channels.

Best Prospect

In the Japanese spa scene, the repertoire of services varies from establishment to establishment, e.g., they offer a single form of treatment or any combination of facial, body, foot/leg, hand/nail, and head/scalp treatments. Accordingly, the types of cosmetics that can be marketed to spas are a function of the targeted treatment and spa ritual employed at specific establishments. The types of cosmetics that have the best prospects are as follows:

• Cosmetics for treatment, including cleansing products and balancing products, such as moisturizer, emollient, scrub, skin-brightening/whitening, moisturizing, and anti-aging/age-defying cosmetics. Note hat Japanese consumers are increasingly interested in natural and organic products.
• Fragrances and aromatic oils that are believed to relieve the feeling of stress.
• Men’s cosmetics, including skin care items. Japanese men, ranging from teenagers to the Japanese baby boomer generation in their fifties, acknowledge the need to look and feel better, and their interest in cosmetics is growing.

Furthermore, industry experts believe that various training programs and equipment may have a fair chance to be marketed to the Japanese market. These include training in treatment rituals or techniques, spa therapist training school and programs, and bathing equipment (germanium, foot bath, soda bath), etc.

Market Access, Regulatory Regime

In most cases, spas will be governed by the Law Concerning Public Baths. Prior to the opening and start of a spa as a business, approval from the relevant municipal government must be obtained. Esthetic services to be offered to a customer for a certain period of time will also be subject to the Law Concerning Specific Commercial Transactions. This covers administrative regulations and rules, including the cooling-off system to prevent and facilitate the resolution of troubles, complaints, and claims between the service providers and consumers.

Cosmetics for treatment at a spa facility or for subsequent retail sales will be subject to the Pharmaceutical Affairs Law (the “PAL”) in Japan. According to the revised PAL, effective April 1, 2005, a company that intends to manufacture or import cosmetic products must obtain a “license (“kyoka” in Japanese) for manufacturing or marketing cosmetics (“kesho-hin seizoh hanbaigyo no kyoka” in Japanese) from the appropriate local government offices for each manufacturing plant or business office. The PAL reform reflects the shift in product and post-marketing responsibility from the manufacturer to the marketer, as currently practiced in the United States.

In order to obtain a license for marketing cosmetics, an applicant company is required to comply with GQP (“Good Quality Practice”) and GVP (“Good Vigilance Practice”) in accordance with the standards specified by MHLW (Ministry of Health, Labor, and Welfare) Ministerial Ordinances in terms of quality control and post marketing safety management. Thus, the applicant company must have a Product Quality Manager (“hinshitus hoshoh sekininsha”), a Safety Control Manager (“anzen kanri sekininsha”), and a General Marketing Business Controller (“sokatsu seisoh hanbai sekininsha”). The General Marketing Business Controller, who supervises the other two managers, must be a licensed pharmacist or a specialist who has completed university-level or equivalent pharmacology or chemistry courses. Upon receipt of the manufacturing or marketing license, the applicant company needs to file a notification of the product to be manufactured or imported and may then manufacture/import the product.

The law does not yet permit a foreign company to make direct applications from overseas for a license to market cosmetics products to Japan. Thus, a U.S. company that wishes to export its products to Japan first must find a qualified Japanese importer or representative, or set up a Japanese subsidiary. The Pharmaceutical Affairs Law also stipulates that containers or wrappers of a cosmetics product shall show the name and address of the marketer, name of product, production number or production code, name of cosmetic ingredients contained*, shelf life of cosmetics, if the product concerned is not stable for three years, and other information required by MHLW ordinance.

• A full ingredient listing on the container as required in the United States was put into force in Japan on April 1, 2001. Also, MHLW implemented Positive and Negative Lists of cosmetics ingredients.

Accordingly, ingredients, the safety of which have been confirmed, can be mixed freely in a cosmetic product at the responsibility of the manufacturer or the marketer concerned, as long as the finished product meets the definition of the cosmetics described in the Pharmaceutical Affairs Law.

It is important for U.S. exporters and manufactures to note that some ingredients listed on the positive list are allowed only for limited uses in Japan, even if they have been used in other countries. For example, formaldehyde-donor-type preservatives (Imidazolidinyl Urea and DMDM Hydantoin) are not permitted in Japan, with the exception of rinse-off type products, e.g., shampoos. (Warning labels are required for products containing these preservatives.) Quaternium -15 is not approved in Japan. At the moment, suppliers who discover that their products do not meet existing standards usually seek resolution of their problems through product reformulation. This avoids complications with MHLW's strict requirements for safety and supporting data.

Please note that in Japan a quasi-drug, or “Iyakubugaihin”, is a product that has a restricted purpose of use, has a mild action on the human body, and is not categorized as a medical product. For example, medicated cosmetics, including medicated soaps, are classified under the quasi-drug category in Japan. Industry experts point out that cosmeceutical products (or medicated cosmetics) will likely be classified under the quasi-drug category. Quasi-drugs are not cosmetic products, but form an independent quasi-drug classification. The manufacture and import of quasi-drugs require MHLW approval and licenses.

The Pharmaceutical Affairs Law stipulates that quasi-drugs shall have the purposes given below and exert mild actions on the human body: 1. Prevention of nausea or other indispositions, foul breath or body odor 2. Prevention of prickly heat, soreness, and the like 3. Prevention of loss of hair, promotion of hair growth or removal of hair 4. Eradication or repellence of rats, flies, mosquitoes, fleas, etc., for the health of humans or other animals 5. Other articles designated by MHLW, complying with the items specified in the above (1 through 4).

Import duties for cosmetics range from zero (HS: 3303, 3304, 3305) to 5.4 percent (HS: 3307). Specific tariff rates are available at Asia Pacific Tariff Database (APEC) at URL http://www.apectariff.org/. For other beauty supplies, amenity goods, equipment and even services, a careful review needs to be carried out to determine under what regulations and rules, if any, the subject products will be governed.

Resources & Key Contacts

Nippon Spa Association http://www.n-spa.org
Japan Spa Association http://www.spajapan.net
Japan Cosmetics Industry Association http://www.jcia.org
Cosmetics Importers Association of Japan http://www.ciaj.gr.jp
Cosmetics, Toiletry and Fragrance Association http://www.ctfa.org
The American Chamber of Commerce in Japan
Committee on Toiletry, Cosmetics and Fragrance http://www.accj.or.jp/
Japan Nailist Association http://www.nail.or.jp
Japan Beauty Supply Institute URL: NA
Phone: +81-3-3864-4157, Fax: +81-3-3864-0552

For more information, please visit The U.S. Department of Commerce.