Shiseido's Optune is a skin care service using IoT. It delivers personalized skin care to users by analyzing skin data and environmental data such as temperature and humidity with a unique algorithm, considering the timing and environment. This service is Shiseido's first subscription format and offered for 10,000 yen (about 100USD) per month.

We asked Mr. Kawasaki, the brand manager, about Shiseido's intention to develop IoT services, what customer issues have they found, and what worldview Optune tries to create.

(Interviewed: August 2019)

Shiseido Japan Co., Ltd. Next Generation Business Development Department Digital Future Group Brand Manager Michifumi Kawasaki​ ​After joining Shiseido, worked as a sales representative and engaged in product development and marketing, mainly for skincare. After working in the business strategy department etc., in January 2017 he was appointed as brand manager of Optune Project.

Skin care for yourself

In July 2019, Shiseido Co., Ltd. and Shiseido Japan Co., Ltd. (hereinafter referred to as “Shiseido”) finished its 1.5-year beta version operation and ​announced​ the full deployment of Optune​. Calculated by its original algorithm, the combinations of personalizations count up to 80,000 . Offered in subscription model  of 10,000 yen per month.

If you apply for Optune, you will receive an IoT machine and five skincare cartridges (Optune Shot). Usage is as follows.

Source: Optune site​ ​​ ​

You launch the Optune app and shoot your skin with your smartphone's rear camera. Then, the skin condition such as moisture, smoothness, sebum, and pore conspicuousness are recorded. This is the "Sensing" phase. The recorded data will be used together with several data sets; the data which user entered in the app, such as physiological cycle and mood at that time,  and data individually acquired by Optune, such as temperature / humidity, pollen amount, PM2.5, UV data and user's sleeping status. Those information will be put into the Optune's unique algorithm. Based on the data given, the required cartridge and extraction amount are calculated and be sent to the machine. This is the "Analyzing" phase. When you put your hand in the machine, the personalized skin care moisturizer automatically comes out. The moisturizer is extracted twice  and if you apply it to your skin, the whole skin care will be completed. This is the "Personalization" phase.

How the "Sensing" is done. You take a picture of your skin with  Optune's app camera. The skin measurement engine uses same mechanism as app provided by Shiseido  "​Skin pasha​ "​

When you put your hand in the machine, the moisturizer will come out.

There are 5 cartridges in the machine, and when one gets empty, a new cartridge will automatically be sent to the user for a refill.

As mentioned above, the Optune algorithm requires three types of data: (1) "external environment data" such as temperature and humidity, (2) "automatically acquired user data" such as sleep status, and (3) "user input data" such as their mood.​ ​

The data of (1) is obtained from a weather data sales company. For (2), ​in cooperation with C2 Co., Ltd., which develops an app called  ​"Deep sleep alarm​ "​ , user's sleep data is acquired by API. If you have a smartphone at your bedside and sleep, data will be acquired. It can be easily guessed  that (1) and (2) are related to skin condition, but it is difficult to intuitively understand how far (3) affects the skin. However, Mr. Kawasaki explains "Research results from Shiseido have confirmed the correlation between stress and skin, and we recognize that this is an important variable for skin personalizing".

The machine contains five cartridges, but not all Optune users get the same cartridge. Each user receives their own unique necessary cartridges. If your skin condition changes while using Optune, different cartridge will be offered. In other words, after a certain period of time, there may be five completely different cartridges due to user's condition.

When the machine detects that the cartridge is low,  refill cartridge will automatically be sent. "Since the  amount of moisturizer varies depending on the condition of each user's skin, it varies how much time it takes to use up one bottle", says Mr. Kawasaki.

If you use Optune after washing your face, all you have to do after is to start makeup. In short, all the skin care can be left to Optune. At present, Shiseido do not recommend products other than Optune by analyzing skin condition.

Optune has been in beta for 1.5 years prior to the launch. In beta version, users requested a function to check current and past skin condition.

The beta version envisioned a user image that wants to take care of your skin as simple as possible without taking time. There was a function to see the past data , but we thought that the interest given wouldn't be that high.

However, we have realized that we were wrong.  A lot of the feedbacks  were; "If there is data, I want to know more about it",  “I want to know how my skin is doing, and understand how my solution was decided”,  “I want to know my skin conditions in the past and current”.  (Mr. Kawasaki)

Optune has just launched, but in the future, it will be possible for users who have been using Optune for a year to check their transition in skin condition. Until now, you could only feel your skin care had worked well  or not,  based just on the feeling. However, by visualizing it through an app, it may be easier for the user to take good care of their skin.

How Shiseido's first subscribing was born

Optune profits from a monthly subscription of 10,000 yen.  In general rule, there is no other cost for the user; machine charges and cartridge charges are all included. For Shiseido, which has traditionally sold through wholesaler to retail stores resulting in retailers selling cosmetics to consumers, the flat-rate monthly subscription model is their first attempt.

There could have been a business model in which machine  and cartridges are charged separately, but why did they settle into the current subscription format?

We examined the business model repeatedly. However, with  two decisive factors, we came to the conclusion. First of all, if a machine is lent to a customer rather than having it sold, the customer can always use the new machine when a new version is made.

Shiseido is not a consumer electronics manufacturer, so there is no need to do business by adding add value to the machine. As a result, we came to the conclusion that the subscription method is good overall. (Mr. Kawasaki)

Mr. Kawasaki says, “I don't even know how long Optune will be in this shape”. In the future, the shape of the machine may change, and the cartridge may have a different shape as well. Under such circumstances, if the machine is sold rather than lent to the user, maintenance of the old model becomes necessary even after the new model comes out, or the old and new cartridges should be held in inventory.

It costs money when a machine's new version is made as well. Above all, the latest version should provide the best experience for the users. It seems likely that Shiseido thinks switching the machine to the newest one available is reasonable.

Monthly fee of 10,000 yen has its reason too. For readers who are not familiar with skin care may feel that 10,000 yen is expensive. Assuming Shiseido's skin care products, for example, about 3500 yen of skin lotion / milky lotion plus 10,000 yen of beauty serum will cost about 17,000 yen. Since the average trial period for skincare products is about 1.5 months, it is calculated that 11,000 yen per month is spent on skincare. That's why Optune's price , which costs 10,000 yen per month, is rather reasonable; of course, there are some items that are much expensive or less expensive than this calculation.

Optune is not for everyone

Optune's main user is woman about 30 to 40 years old (as the latesat data when interview was conducted). However, it seems that the proportion of people in their 20s is higher than the team originally assumed.  The IoT aspect may have been the reason attracting the younger crowd. Optune is made for women, but can be used by men without any problem (see below).

Needless to say, Shiseido has long been a face-to-face company selling cosmetics to customers. On the other hand, the business model of "subscription" and "automatic refill" has some contradictions. Wasn't there  in-house opinion on the so-called “innovation dilemma” that “a new business can cause cannibalization with the existing business”?

Of course, there were some.  But I was not worried since Sugiyama, the product owner of Optune and the CEO of Shiseido Japan had backed me up.

Firstly, I don't expect all current Shiseido customers to use Optune. (Mr.Kawasaki)

Mr. Kawasaki said that during the beta-version, there was an insight that "some users don't fit Optune." In other words, Optune is not necessarily a service for everyone. It “chooses its user”.

Optune's users are described as women in their 30s and 40s, and needless to say, women entering workforce is increasing. There are many who are busy or raising children while working. Some people say that if they are busy, it is inevitable to leave their time to spend on skincare later.

In addition, there are many kinds of cosmetics and skin care provided by Shiseido and tons of information about them. Thus, it takes time and effort to find the best item for themselves. Leaving few women confident about their future skin condition.

Not all existing Shiseido customers wish to cut their time. Some people would like to select items at stores and interact with beauty staff to learn more about the product. They like taking time in skin care in the first place, and want to use new items. Some may want to adjust the amount, change the way you use it, or want an another item in each  different day. For these users, it is better to buy products in the same way as before.

In that regard, Optune is a service that "automatically provides optimal solutions for transforming skin". The time and effort will be greatly reduced, compared to buying required skin care products by themselves. Therefore, women who are interested in skincare but not giving high priority or who are not interested but know its necessity become target users. Thus, Shiseido's existing customers and Optune users do not necessarily cause cannibalization.

In fact, most of Optune's royal users currently use cosmetics from other companies, but rather say that they were waiting for this kind of service.

A lot of Optune's royal users, including the beta version, were different from Shiseido's existing customers. They had been using other companies' products or using less expensive goods. I feel that if you feel the convenience of Optune, you can find the value for your own.

In that sense, there are quite a few people who do not fit Optune. Therefore, we believe that Shiseido's BtoBtoC business will continue to exist. (Mr. Kawasaki)

Beauty provided by technology

Shiseido has recently been investing in digital service. In Japan,  “Optune” and “skin pasha” have been developed and custom-made foundation “MATCHCO” and AR makeup “GIARAN” have been acquired in overseas. However, compared to the history of selling cosmetics for 145 years since its establishment, the history of digital service is yet very short.

All of the digital investments other than the Optune listed above are R&D, but most went no further than digital communications shifts. Under such circumstances, how did Optune, took advantage of Shiseido's past research results and established a product which combined combined digital and skin care ?

According to Mr. Kawasaki, it was in 2017 that the full-scale study of Optune began; which was 2.5 years before the Optune launch. It was just around when BeautyTech was becoming a trend. It was when startups as well as big players such as L'Oréal and P&G began to publicize their digital services.

Speaking of Shiseido in 2017, the medium- to long-term strategy " ​VISION 2020​ " was a  ​success and  the company has achieved sales of 1 trillion yen for the first time in its history. In order not to stop that trend, Shiseiedo was probably thinking about the next growth strategy. At that time, Mr. Sugiyama, President of Shiseido Japan, speaks to Mr. Kawasaki.

Mr. Sugiyama had given us a challenge to come up with consumer-oriented business model.  The conditions are “not bounded by traditional business model” and “has speed priority”. So, the goal was set to bring prototype within a year, and I started with the point of view of what could be done with the technology in the world. (Mr. Kawasaki)

Shiseido has created a brand based on market oriented concept, capturing target insights in the mature cosmetics market. The goal of producing a product within a year was tremendously fast compared to that method. To increase the development speed, Mr. Sugiyama himself was appointed as the project owner. He met frequently with the team, gave his opinions and came up with the concept of Optune.

Although coming up with the idea of Optune, tackling new business model was a big challenge. In the past, cosmetics and skin care encouraged customers to use specified amount in a specific way. However, for Optune, it is based on the concept that skin changes depending on time and circumstances, so the solution must also be altered.

When we do marketing in cosmetics, we are quite conscious that our products be used within the scope of existing beauty methods. Despite of that theory, I was honestly worried if it would be okay for a new brand that suddenly appeared to say, “If the skin condition changes, the solution should change.”

However, Mr.Sugiyama, the project owner, pushed my back, saying, “Shiseido has been steadily updating old things with new things for 145 years, and we don't need to be caught in the past.” So we worked on a new business model and successfully released Optune.

The future created by skincare data

As previously reported, Optune is a service in which Shiseido provides machines directly to users and provides personalized skin care based on their information. For that reason, personalized skin care data is gathered at Shiseido. What kind of data can be obtained through the development of Optune, and how will it be utilized for service development and management?

Although it has recently becoming possible to obtain customer information little by little as it can be tracked when selling at ID-POS and through E-commerce, accurate information on how it was used after bought was difficult to get . In terms of skincare, some consumers use it in a decent way, some consumers sell it on online marketplace, and some consumers don't use it very much and keep it in the closet.

On that point, Optune can clearly show the time, amount and frequency of skin care in the form of usage logs. Therefore, there is a possibility that you can do CRM so that you can make the customer continue to use, and stop them from using another product. By doing so, I think that customers and brands can establish new relationships. (Mr. Kawasaki)

Mr. Kawasaki cited “time used for skin care” as one of the data that Optune can acquire, which is an information that could not have had acquired until now.

For example, if there is a product for skin care in the morning and evening, it is not assumed to be used  mid late night close to the early morning or noon. However, there may be users who use skin care at that time due to their work or other reasons. Although marketing research has done alot of work  so far, Optune will be able to grasp the skincare time zone for each user. Perhaps, in the future, it may become clear that “when skin care is done late at night, the smoothness of the skin is likely to be lost.”

Past research has shown that there is a correlation between internal rhythm disturbance and skin condition. So, Optune reflected sleep data into the skin care solution.

Maybe you can see the relationship between when you do skin care due to your lifestyle and skin condition. (Mr. Kawasaki)

In addition, for example, data about what kind of skin quality changes could be acquired when Optune is continuously used. In the future, it will be possible to upgrade the Optune algorithm using these data.

It may also affect inventory optimization. In the conventional BtoBtoC business model, Shiseido must optimize its inventory consindering its  in-store and wholesale inventory. On the other hand, with Optune you can get hold of what you need with plenty of lead time. For example, “Some moisture cartridges are expected to be needed this much, so let's keep a little more inventory.”  In addition to Optune,  data may be used in marketing for other brands as well.

​ ​Male use of Optune is worrisome in terms of data.

Optune is basically considered to be used by women, but it can also be used by men. Rather, given the rise in the recent male cosmetics / skin care market and the convenience of being able to perform skin care automatically, there is a certain demand for men who are interested in skin care but do not know how to choose items. In fact, it seems that it is usual for Mr. Kawasaki and men around him to do skincare with Optune.

Nonetheless, Optune's algorithm is uncertain whether Shiseido is able to provide optimal skin care for men, partly because Shiseido has been researching and developing mainly women in the past. Even though women can be offered 80,000 ways of skin care, men may not benefit so much.

Certainly, Optune's skincare basically is't facing men. However, in terms of measuring the amount of moisture and sebum in the skin, it both works for men and women. In that sense it can also be used by men.

However, the optimal point for both moisture and sebum will vary between men and women. If the number of male customers increases, there is a possibility that prescriptions may be more optimal for men. (Mr. Kawasaki)

Become a global beauty company

Needless to say, Shiseido is a global company that sells cosmetics and skin care all over the world. Of course, the overseas expansion of Optune is also being considered. However, Japanese skin data may not necessarily be diverted overseas.

Getting on track in the Japanese market is our top priority, but of course we are also considering overseas expansion.

However, the skin information in each region is necessary, and in that sense, I think that the other Asia region which has similar skin characteristics with Japan will be prioritized. (Mr. Kawasaki)

Of course, skin data is not the only issue for overseas expansion. The distribution network for delivering cartridges must be considered, and it is generally said that overseas delivery takes longer time than in Japan, so the lead time for cartridge delivery will be longer than in Japan. In addition, since the service coverage ranges from product sales to IoT services, new communication environments must be considered. Overseas expansion may not be straightforward, but I want to deliver Japan's first beauty IoT product to the world.

Shiseido aims to deliver new value to consumers by adding digital services to conventional product sales. Optune will be the touchstone. However, the Optune has just begun. As data accumulates in the future, it will improve the blending algorithm and utilize the data for other businesses. Shiseido advocates “a global beauty company from Japan that can win the world”. I would like to see how Japan's leading beauty company will evolve into a global beauty company.

Production team