COSMETICS:

ASIAN
MARKET
ENTRY

P R E S E N T E D

S O U R A B H

K U N A L

N I R M A L

P O O J A

P R I Y A N K

S O N A L I

B Y

K U L K A R N I

( 1 1 )

S A N G H R A J K A

( 1 5 )

K O T A K

( 1 3 6 )

G A R O D I A
W A N I
S H A H

( 1 4 6 )
( 1 4 8 )

( 2 3 )

INTRODUCTION
Mary Kay Inc. is an American privately owned multi-level
marketing /direct sales company selling cosmetic products.
It was 6th largest direct selling company in the world in
2011 with net sales of USD 2.9 Billion.
Business model followed dual-level marketing model
Direct Selling
Share received from sales by recruiting people into distribution
network

Direct selling Industries:

P&G
Estee Lauder
Avon
Revlon
LOreal

MKC OPERATIONS & PHILOSOPHY

Direct selling through party plan with retail sales of $1
billion
Sold range of skin care, personal care and cosmetic
products through beauty consultants.
Companys culture was based on offering unlimited
opportunities for women.
Product line included: skin care, glamour, fragrances,
nail care, sun care, etc.
Sales force consisted of four levels:
Beauty consultants
Sales directors

-- Senior Sales director

-- National Sales director

Communications
Beauty consultants were given training

INTERNATIONAL OPERATIONS
Australia And Argentina Not Chosen Strategically

IN 19 COUNTRIES

MKC

CANADA

AUSTRALI
A

Flourished initially, later on

market research indicated
brand perception as OUT OF
DATE
Competitor had High Brand Awareness and
aggressive marketing
US Pricing Strategy adopted without
alteration

MEXICO

Blossomed with High Brand

Image

TAIWAN

Rapid expansion generated

high sales

CHALLENGES FACED BY MKC

Ethnocentri
c Approach
Scarce Marketing
Low Resources
Consumer
Awareness
Time
Constrains

Culture Barriers

FUTURE INTERNATIONAL EXPANSION

STRATEGY

MARY
KAY

AVON
Realistic; Numb
er
Driven

Mentoring;
Training
Towards
Polycentric but
Dependency
Low Product Lin
e

Resource
Allocation
Only 40%
Polycentric but
Autonomy
Wide Product L
ine

MKC IN ASIA

WHY CHINA AND JAPAN

Base in Hong Kong to manage sale in A-PAC region
Leverage competitive advantage for long term market postion
Leverage Asian economy

FACTS ABOUT CHINA AND JAPAN

Factor

China

Japan

Population, 1992 &

2020

1139 M & 1541 M

124 M & 137 M

Urban Population

27%

77%

Age
Group
(%)

1993

2000

1993

2000

0-24

42

40

32

29

25-49

39

39

37

35

50+

19

21

31

36

Per Capita GNP

$325

$14311

Advertising Expenses

$0.86

$220

*All Figures refer to year 1992 unless specified

COSMETIC INDUSTRY - JAPAN

1989
1% 0% 2%

96%

Imports from
US
Local
Production

1991
Import from
other
Exports

2% 1% 4%

93%
*45% of import from other countries was from France

Factors hampering sales in 1992:

End of manufactures control over
Mature Japanese market with AAGR 3%
prices
Potential buyers in the age group 20-30
Stricter health regulations
Decrease in independent retailers

DIRECT SELLING AND AMWAY

Direct selling a major success in Japan
Housewife Japanese women working part-time
1,120,000 Japanese women in direct selling

Amway Success in Japan

Sales of $1.2 Billion
Sales force of 1,00,000
Commision based compensation
Rewards and Recognition
Effective distribution system

JAPANESE CONSUMER BEHAVIOUR

50% part-time employed
Increasingly career oriented
23% population would be over 65 by 2010
Fair complexion and fine textured skin a hallmark
Believed to have sensitive skin
Pink was a color for children and teenagers

COSMETICS SALES
Cosmetic Sales

40%

Skin care
Others

60%

Direct Sales Companies

Skin
Care

Shadow
Makeup

USA

54%

40%

Japan

25%

22% (Half the

purchase than
USA)*

*Equal expenditure due to price differential

Some important
statistics

Working women spend

25% more than non 40% in 20-30 age
working women
14% Heaviest users
Spend average $400 a
Less price sensitive
year
High-quality products

COSMETIC PRODUCTS
Cosmetic Products

31%

41%

Skin Care
Makeup
Hair Care

High AAGR products in

Skin care:
Skin Lotion (12%)
Face wash (4%)

28%

Dominant
player

Reasons

Skin care Products

Make up products

Domestic

Foreigner

Delicate skins

Associated with attached

status

Understand the need

aspire to look like western

COSMETICS DISTRIBUTION IN JAPAN:

F

Products, marketing
support and
promotions

Manufactur
er

Distributor

TRAINED
BEAUTY
C O N S U LT A N T S

Retailer

GENERAL
DISTRIBUTORSHIP
Manufactur
er

Direct
selling/ Door
to door
selling
Manufactu
rer

Wholesaler

Retailer

Consumer

Sales
Person

Consumer

Other
Ways

Variety
Stores
Aesthet
ic Stores
Mail
Orders

TOP FIVE COMPETITORS

POLA
Estd. In 1946
Ranked third in cosmetic sales and first in direct sales
Sales= 740 million USD in 1991
Target audience= Older women. Recently started targeting
younger women in the moderately priced product line
Compensation structure had 21 levels
NIPPON MENARD
Estd. in 1959
Second among direct selling products, 8 th overall
Sales= 373 million USD in 1990
Target Audience= Main brands targeted women in 20s and
30sand one high priced brand targeting older women

NOEVIR
Estd. In 1978
Sales= 292 million USD in 1990
Third among direct selling cosmetics, 9 th overall
Two brands- Sana and Nov
Sana- Targeted younger women
Nov was aimed at hypo allergic skins recommended by dermatologists
AVON
Estd. In 1973
Sales = 325 million USD in 1991
Fourth among direct selling, 13th overall
Target audience- Women in 30s and 40s
Not regularly demonstrated to consumers

MKC IN JAPAN
Comparative study was started in 1988
7 step process as opposed to 3 step process in the US
Whitening products were more popular in Japan
1992 product approval process began
About 1 million USD invested to enter the Japanese market
Dandurad believed that it would take 3-5 years to break even

MARKET : CHINA
Estimated population in 1992:- 1.1 billion
Expected to grow to 1.5 billion by 2020
80 % population lives in eastern half and 30% in urban areas
Trend towards urbanization and shift from agricultural towards service sector was expected
to continue
1979 Open Door policy bought in major developments
Since 1988 a higher income urban middle class had emerged with household earnings more
that 125$ a month and estimated savings of 35%
Retail sales had increased five fold since 1980
It was estimated that by the year 2000, 41 million households would have income of more
that $ 18,000 /annum

POLITICAL AND ECONOMIC RISKS OF INVESTING IN

CHINA:
Political instability would follow after the retirement or death
of Premier Deng Xioping
Chinese govt. was not granting political freedom
commensurate with the economic condition
Multinationals importing goods faced high duties
During 1980, cosmetics and toiletries became an important
branch
No. of cosmetic factories in China increased sixfold between
1982-90. About 3000 cosmetic producers
Chinese ministry of commerce initiated various training
programs for the same

CONSUMERS
The urban population was becoming prosperous
and progressing rapidly as compared to the rural
87% of the Chinese woman worked and many held
two jobs
Urban workers were employed in factories or
workshops
Housing, medical, transportation costs and mid
day meals were subsidized
A two income household usually spent 25 percent
on food and rest was disposable income
Female workers were entitled 56 days of
pregnancy leaves and most factories had kinder
gardens and nurseries

 A 1991 study concluded that average Chinese

urban woman was 32 yrs old, married with one
child and worked at a state factory earning about
$50 a month
Woman typically controlled the budget and was
concerned of the rising cost of living
They had attraction towards foreign brands and
considered skin care and cosmetics as important,
particularly those that prevented freckles and
promoted cleanliness
Chinese women were greatly interested in learning
and education was held in a very high esteem in
Chinese culture
Chinese universities were asserting their

PRODUCTS:
Product included prevention and removal of
wrinkles, reduction of premature ageing,
absorption into and effects on the skin,
environmental protection, making skin snow white,
smoothness and more elastic, healing acne and
purifying pores
Packaging was basic type in glass bottle with
colored caps and labels in Chinese and English.
Outer packaging was less common and varied in
the quality of carton and liner used
Instructions ranged from being printed on simple
paper to colored brochures

DISTRIBUTION

Displays were confusing and cluttered with many

brands
In department stores imported brands were sold
in separate cases than domestic
Shelf renting could be done

ADVERTISING:
Newspapers were small and fragmented and were rarely
used for advertising purposes
Regional channels were more popular than national channels
National channel advertising was subject to censorship
A satellite channel broadcast would reach 4.8 million people
at the rate of $ 0.50/ 1000 people
Cost of advertising varied according to the status of the
advertiser

30 second ad in Guangzhou Province

Local
Foreign
Advertiser
Joint Venture
Company
Importer
Costof
200
500
2000
Advertising
For a foreign advertiser on Chinese national channel it would
cost $ 4000 in Guangzhou as compared to $9000 for HK

COMPETITORS:
Foreign competitors in China included Avon, Johnson
and Johnson, Unilever, Kao, Loreal, P & G, Revlon and
Shisiedo.
The combined sale was only 3% of the market.
Avon had established a joint venture with GCF owning
40% of equity
Operated only in the southern province with sales
clocking 8 million USD in 1992
Sales of skin whitening products were strong
Used TV to promote products and pint media to recruit
sales people
Salespeople were mostly part timer ladies

 Avon was positioned as offering quality, reliability and

product gurantees
Target audience- Women between 20-35 yrs
Problems-

Pay hike due to inflation

Salaried people receiving better job offers
Employees demanding housing facilities
Entry of Shisiedo:

Established a JV and sold products under Huazi

name

Positioned as offering high quality, technologically

specific products

MKC IN CHINA

Ways to enter China:

Designated Licensed distributors in China
Joint venture with a Chinese partner
Subcontract manufacturing
Importing from United States
Requirements while doing a joint venture project:
Search for the right partner
In-depth market feasibility study
Strong focus on training and development of local management
Patience and long term commitment to investment

MARKET ENTRY DECISION

Party plans - FGDs with potential consultants and consumers

THANK YOU