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Special Issue
Beauty Inc issue 06/17/2011

Carsten Fischer has spearheaded Shiseido’s international expansion over the past five years, transforming the company from a predominately Japanese player into a global brand with a presence in some 85 countries. Although Shiseido’s business in Japan has declined steadily in recent years, the company’s international sales have grown significantly. Over the course of Fischer’s tenure, Shiseido’s international sales have risen from 32.4 percent of total revenue in fiscal 2006-2007 to 42.9 percent in fiscal 2010-2011 at 287.84 billion yen, or $3.56 billion. One of the company’s most audacious moves came in January 2010 when it bought Bare Escentuals for $1.7 billion—a deal Fischer, whose official title is director, corporate senior executive officer, helped broker.

A native of Germany, Fischer has a vast beauty resume, having entered the industry right after high school. 
The charismatic executive speaks passionately about many things—from the genius design of a slightly asymmetrical product bottle to his love of driving his convertible on the open road. But this longtime Japan resident turns reflective when discussing the massive earthquake and tsunami that struck the country in March, saying, “The earthquake…kind of reminded me personally that I should be grateful for the things I have and I should not take things for granted.”

This story first appeared in the June 17, 2011 issue of WWD. Subscribe Today.

How do you see the beauty industry evolving over the next two to five years? What opportunities excite you the most and why?
From a consumer perspective, for the last century we have had a beauty very much influenced by the western world and that is changing. Eastern Asian beauty is much more prominent now and will become even more so in the next couple of years. It’s not only the Chinese market but the overall development in the middle household income in Indonesia and in Malaysia. Beauty itself will become more democratic. You’ll see overall a more multicultural beauty approach and that will have a lot of implications. Women will be much more confident about their beauty. Instead of having a sense of an outside beauty idol, you will move to have beauty centered about the individual woman.

Secondly, men’s beauty is coming up, especially the younger generation. That’s also driven by Asia. You also have, especially in Japan but also in China’s future, an aging society. So beauty will become more multifaceted. This aging society will have an expression for beauty that is different to what we have so far. So embracing the aging process and centering the beauty expression around that will come as well.

Consumers are much more informed than in the past. The manufacturers were once the opinion and knowledge leaders. Now you see a tremendous balance in terms of knowledge, and the consumer really becomes the channel captain in a way. We have to adjust in terms of how we approach and educate them. The kind of experience we are providing becomes very important to really tap into multidimensional beauty.

Which of these opportunities excites you the most?
Asia is a growing area and the expression of Asian beauty is something that we as an Asian manufacturer are very well positioned in and have a tremendous knowledge about. In the next couple of years, we will have a middle-class income expansion from 300 million to 800 million people not only in China but in Indonesia, Malaysia and India. The beauty regime they use will be upgrading and will be multicategory and that is where I believe the biggest opportunities lies.

In the short term, what does the industry need to pay attention to in the year ahead?
Sustainability. We have to make sure our that our products are really produced in a way that they are sustainable, that the business model we have is sustainable. We also have to think about the emotional value that we provide in terms of usage and product design. Sometimes in the beauty industry we forget that people really make the difference. Sometimes we utilize people really as a cost factor only, but in the beauty industry they’re much more than that.

As the retail landscape evolves, what channels and concepts do you find the most interesting and why?
The whole digital area online is something that is going to grow, and social networks and e-commerce platform or portal concepts will be tremendously important. However, you also have to make sure that at the store level you have an experience that is matching. Online gives you a tremendous ability of slicing information in a way the consumer needs. On the store level you have to make sure that you create the emotional, high-touch environment that complements the online knowledge. We have to work on managing the channel not as a revenue channel only but very much as an experience.

Shiseido is gearing up to launch e-commerce in the United States and China. Could you tell us more about that?
We are very selective in terms of distribution in the U.S. and the e-commerce infrastructure enables us to touch the consumer who always wanted to have Shiseido but wasn’t able to buy Shiseido close by, so it’s the convenience and replenishment aspects that are important. It’s also an ability to provide a broad experience and the knowledge and history of Shiseido.

Do you think that online sales will represent the biggest sales channel for you internationally at some point?

I would expect that our online channel will become the biggest single counter. That expectation is basically reflected in the experience of other manufacturers in our industry and other industries.

How would you describe your management or leadership style?

I’m a rather shy person but I’m very passionate about the business and the organization and I’m quite hands-on. I like to communicate with people. I like to get their ideas. I’ve worked the last 20 to 30 years not in my own mother tongue. I’ve always worked in English or Japanese so I’m aware that I miss information just because of the language. That makes you a little more aware. I wouldn’t say I’m a great listener so much but I like to interact with people in order to get their opinion and get their viewpoint because I know that I’m probably not having the full picture. So I walk around the offices and visit people more than calling them in. I try to get out and see people at their places in order to catch not only the information from that person but from the people around them.

I’m interested in results and I drive a lot of passion and motivation out of achieving those numbers. That puts me under pressure but it also enables me to put a certain ambition into the organization. It’s not rocket science. It’s coming back to the philosophy [that] people are very important in our business. I’m interested in innovation. I’m interested in the numbers and so on but at the end of the day you will see that over and over if you have the right person motivated then the business is flying. This human factor is absolutely crucial in our business success.

What’s it like being a European manager in a Japanese company? Have you had to adjust your management style?
I’ve worked in an American company, I’ve worked in an European company and now a Japanese company. I’m German. Germans are quite straight. We are brought up in a dialectic way. I have my own way of communicating, my own style. That means I’m speaking directly—more directly than a Japanese would do. Even so, when I speak Japanese, I probably speak more vaguely than I would in English. I have to stay true to my own because that’s the reason I joined and the company asked me to join. If I become too Japanized, I wouldn’t be able to function because my role is to be like a bridge. I have to translate and represent the foreign world to Japan. At the same time, I have to translate and represent the Japanese and Shiseido way to the outside world. For this, I need to have the trust and the respect from both sides.

Is it a challenge to deal with the Japanese consensus culture?

No. One big difference is that in Japan, decisions are not made at the table but consensus is built up by discussion and that’s something that takes time to understand. So you’re kind of massaging the topic and then the consensus is built and that is then formulated in a decision. This is where you have to learn to engage many more stakeholders early on to make sure that the decision and implementation processes are smooth. I’m part of the consensus but I’m also using my foreigner card to push the topics that are dear to my heart. I have to change the organization. For this, I have to be a little disruptive sometimes.

What was the most difficult business decision that you’ve had to make?
The acquisition of Bare Escentuals—not because it was such a difficult decision but it was a difficult environment. The financial crisis had just started. We’d started to accelerate our globalization and you had the stock price collapse and then partly rebuilt so every evaluation was difficult to read. Was it cheap, was it not cheap? Nevertheless, we believed that this was really a very good opportunity.

How has that business evolved since the acquisition?

It’s very positive. From a financial point of view, we are above our expectation. It’s also important from a learning perspective. We’ve learned from Bare Escentuals a lot about digital media and Bare Escentuals has gathered a lot of knowledge from us. Just one year after the acquisition, we launched skin care based on Shiseido technology yet developed by the Bare Escentuals team. We’re moving with the Bare Escentuals brand, especially in Japan. In the U.S. we’re moving into more store-based businesses.

How has the earthquake affected business and the consumer psyche in Japan and Japan’s future?

It’s a tremendous tragedy that we all experienced and it reminds me daily how [unpredictable] the whole system is. Life…it can all be turned around in barely two minutes. There’s a strength and resilience in this country and especially as a society. Shiseido is really a part of the fabric of Japanese life. So what Japan has to deal with, Shiseido has to deal with and we are working hard on rebuilding the country together to show the strength of the Japanese character. The unity and self-restraint that the company has and the country has are very important.

It’s not only an issue of the area where the earthquake happened but it’s the sentiment of the whole country. We have to start working so that enjoyment is nothing to be ashamed of. Over the next few months there will be a return back to a normal lifestyle. But what will remain is the experience of going through this crisis, starting to rebuild, and that energy can help infuse a new lifeblood into the country.

Japanese consumer confidence was low before the quake. How long do you think it will take to recover?

I honestly don’t know. We all have to work on that. The good thing is that you see a stronger momentum in the western part of Japan and hopefully that will bring a wave of goodwill and momentum into the east.

Has the earthquake situation impacted your international business?

Not in that big a way. We have a lot of overseas factories and actually most of our products that we sell internationally are produced out of Japan. Safety has become another big topic, so we work very closely with an outside [radiation testing agency] to make sure that our products are safe. We have [Geiger counters] so we can have seamless quality control across the whole supply chain and distribution chain.

How do you see China evolving and how central is that to Shiseido’s overall strategic plan?

China is a very, very important market. We are now 30 years in China. We invested the first 10 years in R&D and education without actually doing business and then we started to do our own business. We started to build up a dedicated Chinese brand, Aupres, developed specifically for the Chinese market and the Chinese beauty approach. The multidimensional aspect of beauty is driven by the kind of breakthrough that Chinese beauty has in Asia and in the world now. You see more catwalk models from China. You see that the actors and actresses are making inroads into Hollywood. We have established a bigger business set up. We have trading and R&D facilities. The whole Chinese business infrastructure becomes much more diverse and stronger.

How complex are Chinese women in their skin care routines? Is it evolving in the direction of the classic Japanese example of the multistep process?
We believe it’s going that way, that the Chinese consumer will have a multistep approach. They are very eye-focused. Eye cream is becoming bigger and bigger. You will have an in-bath usage, because like Japanese women, they have an evening shower or bath routine. So you see a lot of similarities, but because of the size of the country you see differences, some based on climate for example. You have a very dry north and a rather wet south.

What do you do to relax?

I like driving—fast. What I really enjoy is that concentration that you need when you drive fast. It kind of wipes your mind because if you have a certain speed you have to concentrate on the traffic and the road and that basically takes every other kind of thought away and that’s very relaxing. Whenever I can—when I’m in Germany obviously it’s easier [laughs]—I try to drive. Vacation, I like scuba diving and it’s similar as well because you have this environment that is so beautiful and silent but you always have to be aware of the danger. Third, I like to run. I’m not a big runner. But again, this physical fatigue makes me relax.

In Brief
After graduating from high school in his native Hamburg, Germany, Carsten Fischer entered an apprenticeship program with hair products company Hans Schwartzkopf in 1979.  Several years later, he enrolled at Hamburg University of Economics and Politics, attending classes during the day and working nights. Fischer graduated in 1989, and accepted a scholarship to study in Japan. Over the next several years, he moved between Japan and Germany. In 2003, he was executive vice president of America/Asia Pacific and global marketing for Wella in Germany. That same year, Procter & Gamble bought Wella. In 2004, Fischer became president of P&G’s professional care division. He joined Shiseido in 2006 and took the helm of its international business in 2007, as corporate senior executive officer.

Carsten Fischer’s Fast Track: 5 Key Points
The East Rises: Although Western ideals of beauty have historically predominated, the influence of the East is becoming much more pronounced.
Follow the Middle Class: The middle class is booming, not just in China, but in Indonesia, Malaysia and India. Their rise will help fuel growth.
Connect Online and Offline: While an online component is key, the offline retail experience must provide the emotional context for the brand.
Cross-Cultural Revolution: By working within the Japanese consensus culture but staying true to his direct nature, Fischer has been able to gain the trust of colleagues around the world.
Ear to the Ground: Don’t wait for people to come to you. Walk around the office if you really want to know what’s going on.

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