What's So Appealing about the Japanese Organic Cosmetics Brand THREE?

By Shiho Innami : Reporter of Toyokeizai
April 06,2016
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The domestic cosmetics brand THREE is flying off display cases in department stores nationwide. It is gaining so much popularity that there are even shoppers asking sales clerks to sell them whatever color they have left in stock.

THREE is mainly targeted at beauty-conscious working women aged in their late 20s and early 30s. The brand image has been solidified and spread through word-of-mouth and the strong support of many influential actresses and fashion models who regularly appear in fashion magazines and on social media such as Instagram.

One of the best-selling items is an eye-makeup product called Whisper Gloss for Eye. Only a month after it was released in January, the three-month inventory had fully sold out.

Similarly, organic skincare products, such as an oil cleanser that only uses carefully selected raw materials grown in Japan, and modish makeup items, such as lip gloss, are also in high demand.

The increasing popularity of THREE has become a powerful profit booster for its owner, Pola Orbis Holdings, which is a major player in the Japanese beauty care industry. Pola Orbis saw its quarterly results skyrocket to the end of December 2105, with revenue rising 8.4% year-on-year to 214.7 billion yen ($1.56 billion) and operating profit up 27.3% year-on-year to 22.5 billion yen ($196 million). During the same period, the revenue earned by THREE alone increased 60% year-on-year and contributed significantly to a record high net profit that quarter for the parent company.

The 65-year challenger

The tremendous feat achieved by THREE cannot be explained without referring to Yasushi Ishibashi, the president of Acro, a subsidiary of Pola Orbis. Now, at the age of 65, Ishibashi still actively leads his company as the new cosmetics trendsetter in Japan with the brilliant business model he created with THREE.

Born and raised in Kagoshima, a remote city on the southwestern tip of Kyushu, with great admiration, young Ishibashi used to watch a male makeup artist perform his sophisticated craft on female customers’ eyes, cheeks, and lips over the counter in a local department store.

In 1973, Ishibashi joined the now-defunct Kanebo Cosmetics and spend nearly a quarter of a century serving as a sales specialist in charge of expanding the beauty care business in various retail channels, from independent cosmetic shops to drugstore chains—but not department stores.

The opportunity finally came for him in 1997 to become deeply involved with department stores. He was transferred to a subsidiary of Kanebo Cosmetics that specialized in the development and marketing of cosmetic products designed exclusively for these stores. During his years as a secondee in the company, he participated in conceptualizing and launching two distinctive brands, RMK and SUQQU. The former projected an urban New York-style image, and the latter featured exotic oriental aesthetics.

Another turning point came in 2006 when Kanebo encountered a financial crisis, which compelled the company to sell its cosmetics division to Kao, Kanebo’s long-time archrival. The retirement age of all employees working in the Kao group of companies was 60, which meant that Ishibashi, then 56, only had four more years before he was to be forced to leave. So, he decided to find a new workplace that would allow him to remain active a little longer. “I wanted to work at least ten more years to develop a third brand that would follow RMK and SUQQU,” recalls Ishibashi.

Using home-grown organic raw materials

The company that accommodated Ishibashi’s career plan was Pola, which had a stronghold in door-to-door sales operations. However, this business model was gradually becoming outdated due to fewer women staying home as more and more began to join the workforce. So, the company was strategically planning to stabilize its business by cultivating department stores as its new sales channel and developing new brands that would specifically appeal to consumers who frequently shopped at these stores.

When Pola Orbis President Satoshi Suzuki approached Ishibashi with a proposal to grant Ishibashi’s wish to create a new brand, there was no reason for the veteran branding expert to reject the offer.

As soon as Ishibashi joined Pola Orbis in 2007, he targeted creating a brand from scratch and building a brand identity that would be strong enough to gain global recognition. However, to meet this objective, he believed that this new brand must first gain wide support from Japanese consumers.

After deep deliberation, he decided to use only home-grown organic raw materials and to emphasize the guaranteed safety and high quality of the products under the brand because they were entirely manufactured in Japan.

Ishibashi walked around the country searching for the best raw materials he could find. He also put extraordinary effort and a great amount of money into beautiful, refined containers to add a sense of high-class elegance to the brand image.

Realizing a dream of 40 years

THREE was launched in 2009, but for the first few years, the brand could not win the support that Ishibashi had expected due to external factors. The economic slowdown at the time was leading to reduced consumer spending, and the Great East Japan Earthquake had a huge negative psychological impact on the market.

Ishibashi had to wait until 2013 to feel the wind shift in his direction. Along with the improvement in business sentiment triggered by the economic policies of Prime Minister Abe and his administration, known as “Abenomics,” premium makeup products began attracting demand.

The upward trend is still continuing to this day, enabling Ishibashi and his brand development team to expand the number of department stores that sell THREE products to 70 locations across the country, which include outlets where THREE has marked the top sales among all the brands offered on their cosmetics floors.

Ishibashi hopes that, if the favorable wind continues to blow, THREE will soon become a profitable brand through an increased production volume that will lead to lower outsourcing unit costs.

The reputation of THREE in global markets is slowly but surely rising as well. In 2013, Ishibashi succeeded in setting up the first overseas sales booth for THREE in a department store in Thailand. Now, there are 13 outlets that market the brand in Bangkok. THREE has also made forays into Taiwan and Indonesia, and the twentieth overseas outlet is preparing for the brand’s debut in Malaysia this April.

“The Japanese manufacturing sector succeeded in establishing an unshakable global reputation for its perfectionist-approach and strong attachment to quality. However, there are not many Japanese fashion brands yet, including cosmetics, that are widely recognized in the world,” said Ishibashi.

“Now that consumers in Asia have started realizing the differentiating elements of our products, the next step will be to determine whether our brand will be accepted by discerning consumers in the mature cosmetics markets in developed Western nations.”

Ishibashi is already receiving calls from major department stores in Paris, London, and key cities in North America. As soon as he finds reliable business partners in these markets, he is ready to push his long-cherished globalization plan forward by making effective use of the local infrastructure and network developed by the Pola Orbis group of companies in these regions.