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Japan Continues to Grapple With the Fallout From Coronavirus

Japan's beauty industry has been hard hit by coronavirus, in terms both of sales and the impact on day-to-day business operations.

TOKYO — The coronavirus has hit Japanese beauty companies with a doubly whammy. Not only has the steady stream of Chinese travelers, whose tour buses used to line the Ginza, dried up, but corporations are also grappling with cases closer to home that have impacted the day-to-day running of their businesses.

Many companies in Japan began asking their employees to telecommute after it was reported last week that a worker at the headquarters of Dentsu, the country’s largest ad agency, had contracted the virus. Shiseido’s global headquarters is located adjacent to Dentsu’s, and Japan’s largest cosmetics company announced on Feb. 26 that some 8,000 employees in the country would telecommute until at least March 6. That figure excludes factory workers and sales staff at store counters, who have been given the option to work on flexible schedules in order to take care of their children while schools nationwide are closed for roughly a month. Staff who have no other option have been allowed to take up to an additional 10 days of paid leave between March 9 and April 10.

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Kao Corp. is taking similar measures, asking some 15,000 local staff, other than factory workers and beauty consultants, to work from home starting Feb. 28 and continuing until March 15. In areas such as production and sales, where teleworking is not possible, working hours have been reduced to ensure that parents can take care of school children during the nationwide school closures. The company has also prohibited all domestic and overseas business trips, and is requiring employees to wear face masks and frequently wash their hands. Beauty consultants at points of sale have been asked to refrain from directly touching customers’ skin.

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In addition to cosmetics brands such as Kanebo, RMK and Sensai, Kao also produces personal-care products. It provided 300 bottles of Biore U hand sanitizer for the Japanese nationals who were evacuated from Wuhan by a government charter flight on Jan. 28. Kao also provided laundry detergents and household cleaners for quarantine facilities used to accommodate Japanese evacuees returning from Wuhan on government flights arriving in Japan after Jan. 31.

“Our company has a wide portfolio of products ranging from sanitary goods and household items to cosmetics,” said Michitaka Sawada, president and chief executive officer of Kao. “While production and logistics departments work together at full speed to produce and deliver hygiene-related products, our call center handles many hygiene-related inquiries from customers. But we can only make full use of Kao’s comprehensive strength by first ensuring the health and safety of our employees. Therefore, we have decided that 15,000 of our employees should principally work from home. This trial will eventually provide fruitful insights and lessons that will be put to use in our ongoing efforts to reform work styles.”

Japanese cosmetics companies are stepping up with monetary donations to support those affected by the outbreak as well. Shiseido donated 10 million Chinese yuan (about $1.4 million) to the Shanghai Charity Foundation. Kao donated 1 million yuan and Kanebo donated 500,000 yuan, both to the Red Cross Society of China.

The number of Chinese visitors to Japan, who normally account for a large percentage of beauty sales in the country, has drastically decreased since January, due to canceled flights and travel restrictions. This has led to a drop in retail sales across Japan, at department stores to specialty shops. In the announcement of its financial results Feb. 2, Kao projected a decrease in revenue by up to 20 billion yen. But depending on the duration of the outbreak, the actual revenue decrease might be less or even more, according to a spokeswoman.

Isetan Mitsukoshi said same-store sales at its five department stores in the Tokyo metropolitan area had fallen 15.3 percent on the year in February. The retailer’s sales had dropped sharply in October when a consumption tax hike dealt a blow to Japan’s economy, but they had been gradually recovering through January.

Takashimaya said February sales among its 17 department stores in Japan declined by 11.7 percent year-on-year. Only three individual stores saw their sales increase last month. All of those stores are away from major tourist areas, and none of them saw growth of more than 0.6 percent. The biggest drop by a single store came from Takashimaya Osaka, where sales plummeted by 25.6 percent.

In addition to the impact of COVID-19, the retailer attributed the decreases to tough conditions for seasonal merchandise because of a mild winter and the sales tax increase.

H2O Retailing Corp., which operates the Hankyu and Hanshin chains of department stores, said comparative sales among those stores fell 14.3 percent on the year last month.

Japan announced Thursday that all visitors from China and South Korea would be placed into a mandatory two-week quarantine before being allowed entry. The rule goes into effect beginning March 9, and will almost certainly to lead to a further drop in visitors from abroad, which in turn will likely mean an additional contracting of sales.


The Retail Impact

Japan’s top department stores are all reporting double-digit sales declines for February.

11.7%: Takashimaya

14.3%: H20 Retailing Corp.

15.3%: Isetan Mitsukoshi