Financial crisis takes the shine off cosmetic products

By Yogita Tahil Ramani

JAKARTA (JP): Fueled with the gift of the gab, Desi, a confident teenager, tries to negotiate a "tiny cut" in price for a bottle of Calvin Klein perfume with a soft-spoken saleswoman.

With sullen determination, the woman politely refuses the 14- year-old's whispered offer.

Desi in turn forks out the cost in Rp 50,000 bills, counting each one slowly and reluctantly.

She walks out of the cosmetic store in Mal Taman Anggrek with a Rp 700,000 bottle of Calvin Klein perfume in hand, her smile long since vanished.

"This was formerly Rp 300,000. How could stores charge us so much?" Desi scowled.

A few paces away, Nani Widyanto scrutinizes the Japanese multinational Kose's range of foundation colors at Matahari's cosmetic and fragrance counters.

She shrugs at the staggering fixed prices and says with a sigh: "If you don't have it (natural beauty), you go out and buy it from the counters."

However, most shoppers are unable to say the same for cosmetic buying nowadays.

Shanti, a regular shopper at Shop-In, a cosmetic store selling imported haircare, bodycare and face products, seemed reluctant to skip buying the Seba Med antiseptic face wash.

"It used to be a little over Rp 25,000. Now, it's more than Rp 100,000. It's madness," she said.

Head of the cosmetic and fragrance department for Matahari Putra Prima in Indonesia Grace Tuni agreed that madness was fueling the price hike.

"I understand the madness, but not because both imported and local goods are overpriced. They aren't," Grace said.

"I know the prices are scary, but we are just going by the dollar rates."

She said the prices of imported perfumes have increased 200 percent to 300 percent while the prices of imported cosmetics, haircare and bodycare had gone up 100 percent.

Local

"There was a satisfactory rise (20 percent) in sales from October through January due to the regular prices. But, ever since the hike, I'm not sure we'll do so well for February," Grace said.

"For instance, regular buyers of Clinique products are now opting for Revlon or Ultima. At this rate, they might even go for local products."

The annual growth rate for Matahari's cosmetic and fragrance departments nationwide usually range from 30 percent to 40 percent, but, since the crisis, they have achieved only 20 percent.

"Brands dominating the market are Clinique, Kanebo, Kose and Estee Lauder. Clinique usually rules for skincare while Kose and Estee Lauder are for foundations.

"I used to buy a certain product from the Lazartique range which cost Rp 100,000. Now the same item costs over Rp 500,000."

Representatives of cosmetic firms had a similar story to tell.

The coordinator of Local Cosmetic Producers Association, Intony Yuswanto, said sales of local cosmetics had decreased 15 percent to 20 percent on average since the crisis.

"There are about 20 famous local brands in the market. Martha Tilaar cosmetics still hold the biggest market share (16 percent to 17 percent), followed by Mustika Ratu cosmetics (10 percent to 12 percent) and Viva cosmetics (10 percent)."

Intony explained that due to the monetary situation, a dramatic raise in cosmetic prices was inevitable.

"If a dollar is still equivalent to approximately Rp 10,000, we will raise prices (of Martha Tilaar cosmetics) by 30 to 40 percent," Intony said.

Prices of Martha Tilaar cosmetics increased 20 percent last October, and another 20 percent hike came into effect on Feb. 1.

"Prices (of all local cosmetics) might be increased by 50 to 80 percent if things worsen. This is done to establish a fair market price and for cosmetic firms to maintain market share."

Exports of local cosmetics are reported to be stable.

"Exports to Malaysia, Singapore, Brunei, Hong Kong, Japan, the U.S. and Arab countries are doing quite well," Intony said.

In spite of its adequate demand, The Body Shop -- represented here by franchise holder PT Monica Hijau Lestari -- like other famous international brands, are feeling the sting too.

Director of The Body Shop in Indonesia Suzy Hutomo said sales in its cosmetics had declined 20 percent to 25 percent since October.

"However, the drop is more concentrated outside Jakarta than inside."

The Body Shop has 10 branches in Jakarta and eight spread across Bali, Medan, Bandung and Surabaya.

Suzy said despite the 15 percent to 30 percent price increments for The Body Shop cosmetics, it was still cheaper to buy items here rather than in Singapore.

"Before, our cosmetic prices in Singapore were 20 percent cheaper than those in Indonesia. But now, prices in Indonesia are 20 to 50 percent cheaper than those in Singapore."

Rush

Nyoman Triastama Jaya, an area supervisor at Mal Taman Anggrek's Matahari Store, West Jakarta, said the monthly turnover at the cosmetic and fragrance counters was Rp 800 million last month.

"This, when compared to those of other cosmetics and fragrance departments in other malls, is satisfactory."

But he said the January turnover may have been influenced by customer hoarding.

"When people heard that prices (for cosmetics and perfumes) would go up after Jan. 15, they rushed in to buy up stocks of their favorite brands. This happened between Jan. 1 and Jan. 15."

He said the effect of the crisis and price increments took its toll almost immediately.

"Sales are decreasing drastically," he said. "They are down by 40 to 45 percent, and the effect is hardest on perfumes."

Nyoman said most shoppers had anticipated the consequences.

"While urban women consider cosmetics a must, perfumes, particularly expensive ones, are an option.

"Some cannot be bothered relating it (the price hike) to the dollar rates. They figure they purchase in rupiah so why bother.

"What they see is, a fragrance formerly costing Rp 250,000, for instance, costing one million now. Things are quite dead in the (fragrance) division everywhere."

A minority of Indonesian cosmetic consumers -- mainly models, celebrities and the elite -- brush off cosmetic price increments as a technicality.

Better known as the face of local cosmetic giant Mustika Ratu, Chiata Hendrayani, winner of the 1997 FSI Vidia trophy for best actress in a TV comedy, does not mind the cosmetic price increments.

"Modeling, among other things, is about face value," Chiata said.

"Good cosmetics to us ... to most career-oriented women for that matter, are a necessity. Usually, the foundation base I use is Mustika Ratu's. But I use branded lip colors and powder."

"I go once a month for a full makeover at Mustika Ratu salon in Taman Mini, East Jakarta. For an intensive conditioning treatment, a herbal bath, facial, manicure, pedicure and the works, they charge me Rp. 150,000++."

But Chiata admitted that she missed shopping for good clothes.

"Prices have shot up everywhere so I don't know what is worth buying.

"Usually, I do a thorough shop (for clothes) every three months but I haven't gone for six. Spending hundreds of thousands of rupiah for grocery shopping is understandable but clothes are a different issue altogether."