It is already July. The year is more than half over. In the first half, we had many difficulties. Where did they come from? Perhaps, one of the many reasons for the difficulties we faced was the political disquiet with THAAD and the consequent damage to the duty free channel. But, what's important is that we must look to ourselves for the underlying cause, rather than blaming factors outside our control.


 Now let's travel through time; about 20 years back to the end of 1997 when the Asian financial crisis took place, bringing about a massive economic meltdown. 1997 was a difficult year and the following year was even more difficult. While most companies suffering from terribly poor sales, we managed to achieve small but solid growth between 1997 and 1998. Many said our proactive corporate restructuring brought about this achievement, but it was not as simple as it seemed.

 Problems surrounding the company had festered from the inside in the 1980s when customers started to change, reflecting broader changes happening across society. The advent of cosmetics retail stores put a brake on the growth of the door-to-door sales channel. The cosmetics market was one of the fastest Korean markets to open up to international retailers. Moreover, the government invested heavily in public infrastructure, sports stadiums and roads for the Asian Games in 1986 and the Summer Olympics in 1988, which helped to boost the economy and stimulate demand for products and services.

 Where do problems come from? Why do they happen? As I said earlier, it's important to take a good look at ourselves. In my opinion, the biggest problem we face is being too confident of our abilities. It's true that we have worked hard over the past few years, but we owe our growth largely to the increasing popularity of Korean culture in China. Perhaps, we have deluded ourselves into thinking that we made such a successful growth all by ourselves and become neglectful of our customers.

 Put your focus squarely on our customers and see how they are changing and what they want. Realize that everything is down to the customer. How much do we know about the tools our customers use and how they come into one of our channels for sales and communication? Here is our chance to change ourselves to be more customer-focused. It's now or never. And in order to stay sensitive to changes of customers and follow their decisions, we must have a good grasp of what they want. Our main customers, millennials, can be split into the old and the new: Generation Y born in the 1980s and the early 1990s grew up with the Internet, while Generation Z is all about always online.

 The world is changing faster than ever before. Amazon is one of the companies leading this transformation. With its market capital surging ahead, Amazon has grown into an e-commerce giant. It recently bought organic food specialist Whole Foods Market to make a new push into the grocery market. Their deal sent shares of traditional grocery stores including Walmart, Costco and Kroger tumbling. Amazon also plans to launch Prime Wardrobe, a service that allows customers to order clothes, shoes, bags and accessories and either keep them or, if they don't like, return them for free. It's like having a personal stylist sending clothes based on preference, age and life-stage to your room all year round. It is nothing short of innovation, allowing you to receive new clothes and shoes of your choice appropriate to the occasion, just as a newspaper delivers news to its subscribers.

 What's more surprising about Amazon is that it rose to e-commerce retail power in Japan. Amazon Japan sales have surged to over JPY one trillion in 2016, which was the 6th highest sales record in the Japanese retail market. This is remarkably fast growth in the midst of market contraction. If Amazon Japan continues with its double-digit growth, it will soon be able to overtake Isetan Mitsukoshi Holdings, the largest department store in Japan. I have visited Japan many times over the past 30 years, but I never once noticed any of the initial signs of Amazon's presence in the market. That's how fast the digital business changes and how unpredictable it can be. The key to the growing retail power of Amazon is FBA (Fulfillment By Amazon) program. It is simply a logistics service with a commission charged to sellers for selling their product on Amazon marketplace. Retail is all about connecting sellers and buyers. Amazon is changing a significant part of that world through its focus on customers.

 What should we do and how? The first key to becoming truly customer-focused is developing innovative products. It is our role and duty to provide products and services that customers want and, to fulfill their wants, we must keep up with trends. It is important to understand and and respond appropriately to the changing needs and wants of our customers. Customers today take dozens of selfies every day using their mobile phone and post them on their social media profiles. They are interested in makeup products to make themselves look more beautiful. And we must be able to fulfill changing trends and consumer preferences. Introduce new products in light of the growing trend among the young generation toward simple skincare routines. It's said that this is a time of cost-effectiveness. There was a time when buy-one-get-one-free was recognized as cost-effective. That is not entirely wrong but we need to see it from a different viewpoint; functional benefits, design and fragrance can be another way of measuring cost-effectiveness. Image on social media plays a part as well. If a product looks better than another that's similarly priced when posted on Instagram, it can be said to be cost-effective. It's important to understand what customers think of cost-effectiveness and take an appropriate approach, especially now that beauty trends can change from day to day.

 Let's go the extra mile to make our own innovative products. The global face mask pack market is growing big and in fact, we released our first mask pack product 20 years ago. But we failed to promote it after its release. Nevertheless, put the past behind us and start anew by going with the times. Customers have changed and, as much as that, we must change ourselves. It may take many attempts, but it's definitely worth keeping at it.

 The second key is customer experience. This new innovation, which we brought into our door-to-door sales and retail channels in the 1990s, changed us and made what we are today. Now that the customer experience is changing to meet the specific needs and expectations of our customers, we have much to do. As we have struggled to innovate ourselves, ARITAUM must continue to think, discuss and ruminate over the present and future of the customer experience. If we change and better ourselves, customers will be able to see the difference it makes. Moreover, the online shopping experience is of great value. It must be enjoyable, intuitive, impressive and inspiring. Online communication enhances the in-store experience and offline shopping satisfaction leads to greater online purchase intentions. Get a good grasp of O2O (Online to Offline) in order to enrich the customer experience.

 Last but not least is digital. Look back upon ourselves, see how well we adapt to big changes in the digital industry, communicate through digital media and utilize digital tools to sell our products. In today's digital age with the Fourth Industrial Revolution happening, it's important to understand our most valuable asset, customer data. In the future, a company unable to obtain customer data will be the poorest. What about us? How do we manage customer data? Large numbers don't mean necessarily mean good. What's really important is to find and make use of valuable data. That's why we set up Camp Amundsen to make the way forward as Roald Amundsen, the Antarctic explorer, marched 30km every day, rain or shine. The One Number System for customer management will soon be settled and integrate data at the corporate level. It's vital that we make our online platform more appealing to customers. Decide where to show what, and make it simple to search, buy products and many more; let us change and make improvements every day.

 In order to make innovative products, provide the best customer experience and make full use of digital tools to be customer-focused, we need specific tactics. I am very interested in talent management. It is talented people that ultimately make all the difference in business. There must be leaders to push through difficulties and masters with expertise in their field to run a business. Therefore, more effort will be put into nurturing leaders and creative masters for the long-term growth of Amorepacific. System and education programs will be provided as talent management is of most importance.

 First, the company must change and then its members. Examine whether what we do is for the benefit of customers, see if the complicated process hinders taking appropriate action and determine corporate policy based on the voice of working-level members. Priority will be given to organizational change through adequate communication.