In this term, the company especially focused on antiaging products. Regarding sales outlook by brand, mail-order sales of our mainstay product Enrich-

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13 In this term, the company especially focused on antiaging products. Regarding sales outlook by brand, mail-order sales of our mainstay product Enrich-Lift EX exceeded the level of the previous fiscal year, while its wholesales decreased from the sales level in the previous year, because of the reaction to the initial shipment of the big-ticket products last year. Therefore, its overall sales declined 5.7% on a year- over-year basis. As a result, sales of the Aqua Collagen Gel series in total decreased by 5.1% over last year.

14 Concerning the peeling and booster product groups, sales of VC100 Pore White Lotion increased by 48% on a year-over-year basis, while sales of Aqua-in-Derm Super Essence increased by 2.7%.

15 As regards the health food business, sales of BI- ZEN-SHOKU reached 1.25 billion yen (56.8% up from the same period in the previous year), which exceeded the combined sales of the BI HA KU Gel and Super Moisture series. Meanwhile, sales of the Placenta EX supplement series fell by 3.4% on a year-over-year basis. In this category, Dr. Ci:Labo released the new products, Highly-concentrated Blueberry and Acai-berry Plus in September and Fermented Asian Ginseng in November, respectively, in order to appeal to anti-aging conscious customers.

16 On the topic of hair care products, as a result of actively advertising the hair coloring products and products to increase the volume of hair in the media, the sales doubled from the same period the year before. In particular, sales of One Simple Brush-in White Hair Concealment reached 40 times the sales of the previous year, and, due to its ripple effect, the sales of Hair Color Foam tripled.

17 Regarding mail-order sales, reflecting our efforts of improving the services of Teiki Tokutoku-bin, the number of its users increased by 21.7% from the same period in the previous year, and sales increased by 14.4% on a year-over-year basis. The amount shipped by regular delivery services increased by 42.5% for the Enrich-Lift series products, 44.9% for the VC Pore White Lotion series, and 48% for the BI-ZEN-SHOKU SHOKU series, respectively. The increase in customers of regular delivery services had a negative effect on profits in the short-term, but the company expects it will contribute to increase profits for the long-term, because it will lower the costs of acquiring new customers and increase repeat buyers in the future.

18 Our wholesale distribution in the first half of the fiscal year fell on a year-over-year basis. Nevertheless, we plan to secure merchandise display shelves and acquire a new customer segment in the second-half fiscal year by enriching the products exclusively distributed for the wholesale outlets, such as Enrich-Lift Hand Cream and Enrich-Lift Perfect Lips released last November, and Skin Barrier Mist released in January.

19 Our sales from the face-to-face retail outlets increased by 3.4% from the same period of the previous year. The average sales per customer increased due to strengthening counseling services and skin-care counselling events. Above all, sales of existing GMSs rose by 9.4% on a year-over-year basis. As a recent notable topic, the percentage of overseas visitors at the Ginza Flagship Store surged from 2% to 25%. In addition, concerning the Genomer brand series, whose target customers are those who seek antiaging products, we successfully increased customers purchase price by renewing the products.

20 Sales from the overseas business operations in the first half fiscal year declined by 2.1% on a year-onyear basis, partially because the scheduled measures were postponed to the following term.

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22 The company will release the renewed lotion VC100 Essence Lotion on March 20th, as a measure in the second half of the fiscal year. The existing products are sold at all of our sales outlets, but the number of stores which handle the products by wholesale distribution are small. Therefore, the company seeks to expand the number of stores which sell the products to 5,000-6,000 stores by taking advantage of the opportunity of this product renovation. Moreover, in all sales outlets we plan to sell the products by bundling them with BI HA KU Gel products toward summer.

23 The release of Aqua-Collagen-Gel Super Moisture EX was delayed from what was initially expected. However, as the medication status was approved for its upgraded product, the company shall newly release it as Medicated Super Moisture EX on March 20th, We aim at expanding sales in wholesale distribution by strengthening measures to target a younger customer segment than Enrich-Lift EX in the same series.

24 With regards to make-up articles, the company will release the renewed foundations from the Genomar brand on March 20th. Because we believe the skin-care counselling at the counters of Department Stores is a limited counselling method to approach to customers, we expect to increase sales by large-scale product renewal. Moreover, for the summer season we shall release the new (light) color Perfect Gel Foundation in the Dr. Ci:Labo brand. Regarding health foods, the company is promoting sales of the products for diet food substitution BI- ZEN-SHOKU mainly through infomercials. Since the customer segments who seek dieting are expanding, the company shall release the new products Enzyme drink and Acai berry smoothie. In addition, by meeting the requests of our customers, we released corn-flavored products in the Bi-Zen-Shoku series to support our customers diet efforts.

25 As a sales measure for the Aqua-Collagen-Gel product series, we plan to implement a Campaign for a free gift of Dr. Ci:Labo No.1 Nonesuch for the customers who purchased the products (From May 20th until July 31st). This type of campaign, called a customer-involvement type campaign, contributes highly to sales. We shall vigorously advertise this event, mainly in E-commerce, newspapers, pp and infomercials. By taking the opportunity of having acquired medicated status for the Super Moisture product, we reviewed sales measures in every sales outlet, and decided to reinforce sales in the Gel series products, as their gross margin ratios are high.

26 In terms of measures by sales outlet, for mail-order sales, Dr. Ci:Labo shall reinforce sales promotion activities of new merchandise including hair-care products. For wholesale distribution, the company shall actively approach the markets in the Kansai region and Western Japan. Concerning sales from face-to-face retail channels, we continue to enhance the contents of skin-care counselling events to increase the number of customers.

27 On the subject of our overseas business, we shall continue focusing on advancement in both the new regions and the inbound measures.

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