Cosmetics Distribution Channels

Distribution Channels in the cosmetics industry consist of individuals and firms, involved in the process of making cosmetic products or services available to consumers for use and consumption. Their major role is to provide a link between production and consumption. They perform three main functions, namely, transactional function, logistical function and facilitating function.

Distribution channels perform a transactional function that incorporates buying, selling and risk taking. They are in charge of purchasing cosmetics from manufacturers, selling these products to customers and collecting payments accordingly. Whether the above-mentioned process involves risk taking depends on whether the distribution channels take ownership of the cosmetic products or not. If they do take ownership, there are foreseeable and potential risks when the inventories become obsolete later on.

Distribution channels also perform a logistical role. Some of them create product assortments from several sources to better serve customers' needs. They may also store and protect the cosmetic products at a convenient location, to offer better customer services. Transporting the cosmetic products to either the next level of distribution channel or directly to customers is also one of the responsibilities of distribution channels.

Furthermore, they perform the facilitating function to make the cosmetic products and services more attractive to buyers. Hence, they are assigned the role of displaying cosmetic products to potential customers, providing necessary information on cosmetic products and skincare knowledge, actively promoting their cosmetic products to customers while providing customers with excellent services. All these three categories of functions must be performed in a marketing channel, even though each distribution channel may not participate in all three.

Shiseido's operations in China are currently managed by Shiseido China Company Limited, which supports and oversees all its businesses in China, including two major joint venture companies, namely, Shiseido Liyuan Cosmetic Company (SLC) and Shanghai Zotos CITIC Cosmetic Company (SZC). These two major companies are manufacturers who help develop and produce Shiseido's products in China. In addition, SLC and SZC handle imported brands such as Za, Revital, etc. and directly import cosmetic products from Japan. Hence they perform logistical function to a certain extent as well, for after the processes of import and production, SLC and SZC also have to store and protect the cosmetic products in their warehouses, transporting them whenever Shiseido outlets in department stores and specialty stores demand. Sometimes, if there are wholesalers involved in the operation, wholesalers will take the initiative to perform logistical functions of transporting products to retailers. Furthermore, the former have to negotiate with department stores and cosmetic specialty