Japanese makeup giant, Shiseido, has been reshaping its acquisitions strategy in recent years to include the purchase of a number of tech startups. The thinking behind the strategy is the shift from traditional store buying to more online purchasing. E-commerce in the makeup industry is seeing a steady rise with younger shoppers predominantly bypassing the beauty counter staff advice in favor of using Artificial Intelligence (AI) technology to determine the products that are right for their skin.
Shiseido, having noticed this change in buying trends, has turned to tech startups to enable their cosmetics to be more connected and customized to their customers who shop online.
The evolving customer habits have seen a number of beauty companies making changes by using AI and smartphone apps to provide personalised skincare. French beauty company, L’Oréal, purchased ModiFace in March, a beauty tech company focused on augmented reality and AI.
evolving customer habits have seen a number of beauty companies making changes by using AI and smartphone apps to provide personalised skincare
Shiseido tech startup acquisitions
Over the last two years, Shiseido has bought three startups in the United States. MatchCo, a company that develops software customers can use with their smartphones to create personalized foundation products to match their skin tones. Giaran, a startup that develops AI technology which enables customers to remove and apply makeup virtually so they are able to see how they look before making a purchase. And Olivo Laboratories, a firm specializing in artificial skin technology.
Shiseido offers an internet of things (IoT) device called Optune which can be leased by customers for a monthly fee. Then, using a smartphone app, the system scans and analyzes the user’s face. It analyzes skin condition, mood and factors in weather conditions to identify a personal mix of skincare products to suit that specific person.
The rise in makeup e-commerce
As we mentioned, e-commerce in the beauty industry is seeing a rising trend. Last year online sales accounted for 7.8 percent of the $465bn market for beauty products. This is a rise from 4.2 per cent in 2012, according to Euromonitor International.
Shiseido expects e-commerce to account for 15 per cent of its global sales by 2020, compared to 8 per cent last year which is why investment in this area is vital for the company’s sustainability and growth. China is its biggest online sales market, accounting for 25 per cent of Shiseido’s business. Predictions project an increase to almost 40 per cent in Chinese sales in the next three years.
The makeup company aims to increase its research and development staff to 1500 by 2020 from 1000 in 2014 to keep up with the changes in the beauty and skincare industry. The plan is to hire experts in digital technology, AI and data science. Shiseido has also revamped its entire makeup line to attract a younger generation of shoppers to the brand.
This combination of measures demonstrates Shiseido’s desire to remain relevant in the ever-changing beauty market. Time will tell if they are successful.