A Fresh Face: New Ain-Marubeni Cosmetics Retailer in Asia Targets Millennials, Gen-Z and ¥10B Sales
By James Simms
KUALA LUMPUR – Japanese trading company Marubeni and pharmacy giant Ain Holdings kicked off an Asian, retail cosmetics joint-venture earlier this year that aims to become a ¥10 billion business over the midterm with outlets across Southeast Asia and other parts of Asia.
The new project in Malaysia leverages Marubeni’s global knowhow and Ain’s two-decades of experience in its retail cosmetics chain Ainz&Tulpe, which targets millennial and generation-Z in its 78 stores in Japan. That first Malaysia store opened in May in the new Pavilion Bukit Jalil shopping center, which covers five floors with hundreds of shops, over a hundred restaurants, an ice-skating rink and a cineplex, in a Kuala Lumpur suburb. Two more will follow in the capital city this year.
This venture marks another expansion for Marubeni outside of its business-to-business core as part of its Next Generation Project focused on untapped markets, such as Asia’s growing middle class, and new sectors like retail and wellness, among other objectives. For Sapporo-based Ain, Japan’s No. 1 prescription pharmacy chain by revenue, this marks its first overseas foray and another move to diversify its earnings base.
Among potential Southeast Asian markets, the firms say that Malaysia offered easy entry without major foreign capital restrictions, a high proportion of youth in its population, over 10% annual economic growth and a diverse ethnic and religious demographic. Both firms, by gaining local retail experience, could leverage that when expanding into countries with Muslim, Chinese and Indian populations, such as in the Middle East and other parts of Asia.
In a bit of serendipity, a Pavilion Kuala Lumpur executive had asked bookstore and café operator, Tokyo-based Tsutaya, to bring in Ainz&Tulpe as a tenant as a condition to open a store in the Bukit Jalil mall. She had shopped at Ainz&Tulpe in Japan.
“When we were thinking of going overseas, we had thought about Vietnam because not many Japanese firms had entered the market. But Tsutaya called us to join it in the new Pavilion Bukit Jalil mall,” says Kaori Ishikawa, director and general manager of the drug and cosmetic store division at Ain Pharmaciez. “After doing market research, we saw that there was little competition [there too], creating an opportunity. Malaysia also has many people of Chinese descent. In our stores in Japan, Chinese inbound visitors were major customers, and we thought we could leverage that knowledge of them in Malaysia.”
Ain Diversifying Makeup of Its Businesses
In the fiscal year through April, Ain earned 90% of its ¥316.2 billion in revenue from the prescription business and about 10% from retail, which includes Ainz&Tulpe, drug stores and a unit comprising and convenience stores servicing hospitals.
In the next five to 10 years, however, Ain wants to expand retail to about one-third of sales to achieve a better revenue balance, Ishikawa says. In Malaysia, Ain wants to expand to about 10 to 15 Ainz&Tulpe stores after the first three years, and once it establishes a base and increases sales there, it would look at other regional markets, she says.
“The pharmacy business can be greatly affected by national government policy. We don’t know when or how policies might change. That’s why there’s a sense of urgency to expand retail abroad now,” Ishikawa says, noting that the targeted retail operating-profit margins of 10% would be higher than pharmacies. In addition to the Japanese government setting drug reimbursement prices annually, a rapidly greying population is shrinking.
Despite Marubeni holding an Ain stake since 1999, the joint venture AMC Retail Malaysia, which operates Ainz&Tulpe in Malaysia, is their first endeavor together.
In Japan, before the pandemic, 2019 cosmetics shipments totaled ¥1.8 trillion and plunged to ¥1.5 trillion the next year. The government attributes most of that fall to the halt to inbound visitors. In 2019, tourists spent ¥4.8 trillion in Japan on shopping, lodging and eating out, and Malaysians accounted for about ¥66.5 billion or 1.4% of that.
Japanese Cosmetics Already Had Foundation Among Malaysians
Junichi Ichikawa, AMC’s store operating manager and marketing manager, says Malaysians know Japanese cosmetics, trusting their safety and quality, through travel to Japan and social media, making their country a fertile ground to expand.
Retail sales in Malaysia are forecast to grow at a compounded annual growth rate of 4.2% between 2021 and 2026, says Euromonitor. And cosmetics sales in Malaysia are expected to grow in line with the retail sector there, says Ainz&Tulpe.
The company was first concerned that the higher prices, compared to Japan, of its goods might limit sales, but that wasn’t the case. “Even though the prices are 20% to 30% higher because of being imported, items continue to fly off the shelves. We thought at first that the prices might be an issue because of limited income. That hasn’t been the case, partly because this is one of the only stores with such a big selection of items from Japan,” says Chiharu Matsunaga, AMC’s merchandising planning manager.
And while the number of products bought are the same as in Japan, because of the higher prices, the average spent by a shopper is about 50% more.
Along with the Japanese brand focus, among its 250 brands and 4,000 items, Ainz&Tulpe’s store layout is quite different from the typical drug store in Malaysia. Using the same layout as in Japan, items are lined up by category, such as eyeliner, skincare and haircare, unlike Malaysia where it’s usually done by brand. And unlike a traditional layout, there is enough floor space to promote and recommend new products by appealing to customers through promotional displays and videos.
“The layout isn’t done mechanically. It’s standing in the customer’s shoes while trying to trigger impulse buys. We also make it easy to try items,” says Ichikawa, noting the company’s emphasis on having cosmetic testers. “Items are displayed so customers can enjoy the experience and to surprise shoppers by enabling them to discover new items.”
Evelis Tham, the assistant store manager at the Bukit Jalil outlet, says the layout and range of choices is a “new experience” for customers. “It’s quite exciting to them. At the same time, they tend to browse more,” she says.
The company first wanted to market to all Malaysians, but it turned out that 90% of its customers were Chinese Malaysians. That demographic concentrates on skincare, while Malays focus more on makeup, adding, as most are Muslim, they have to remove makeup five times a day to pray, Matsunaga says. Ethnically Malaysia is 63% Malay, 21% Chinese and 6% Indian, with a majority Muslim population. Eventually, she says the company wants to better cater to Malays with a fuller lineup of U.S. and European makeup brands.
Still, as in any new endeavor, there have been hiccups. These have ranged from Malaysian wholesalers not understanding the Ainz&Tulpe store concept to the inability to register some products with Malaysian regulators.
While gradually being overcome, especially after wholesalers saw the first physical store, it’s taken a while to get them to understand that suppliers don’t get a block of space. “Their assumption is that they will have specific product placement, such as ‘give us this space so we can do this.’ So, we have to say ‘no’ from the start, as we determine where items are placed and how much to order,” says Mari Mukai, who transferred to AMC procurement late last year.
Cosmetics registration is still an issue, however, because of ingredient restrictions and the reluctancy of some Japanese firms to minutely disclose ingredients. Ain’s Ishikawa says one way around that is to develop new products with export markets in mind too – something the firm is doing with its private brands like Ayura.
For Matsunaga, who started at Ain right out of college, moving to Malaysia last year from Japan for the Ainz&Tulpe rollout has been a challenge because it’s her first posting overseas and of concerns about her English, but she’s enjoying the country, especially the food and working with local staff.
“The great thing about cosmetics is that you can make yourself more beautiful and discover a new you,” she says. “To help Malaysians resolve any issues they may have with skincare, through cosmetics, we would like to connect with more and more of them.”
All information contained in this article is based on interviews conducted in September 2022.
