Kanebo Cosmetics Inc. recalled 54 whitening products more than 10 days ago, and retailers are concerned that Kanebo's overall sales will not only fall, but could spur consumer distrust of the cosmetics industry as a whole, which has been buoyed by the whitening boom.
A drugstore in Chiyoda Ward, Tokyo, has hung signs over empty shelves apologising for the recall.
"A few customers have switched to other companies' products, and not just for whitening goods," the store's manager said, adding that if sales continue to drop, the shop might have to reduce its stock of Kanebo products.
An official at a major cosmetics maker said, "Companies will go on sales offensives to take over Kanebo's shelves."
Kanebo, a subsidiary of Kao Corp., was already struggling before the recall.
Sales in fiscal 2011 were about 190 billion yen, stagnant from the previous year and about 10 billion yen less than when the firm was acquired by Kao in 2006.
The firm has stepped up sales efforts in the developing economies of Asia, and has set a target to raise its proportion of overseas sales from 10 per cent to 30 per cent by 2020.
Demand for whitening products is high throughout Asia, so the recall could make it difficult to reach this goal.
Although incidents of skin damage were first reported to Kanebo in 2011, the firm determined it was due to a disease that was unrelated to its products after examining the symptoms and based on a doctor's report.
But the calls did not stop--in 2012 the firm received 22 reports and in 2013 handled 16.
One reason it took two years to launch a recall appears to be because the firm's mechanism for sharing information has not progressed since the takeover by Kao.
Kanebo introduced Kao's customer consultation system in January 2009.
However, it did not receive enough operational know-how and was thus unable to properly analyse complaints, according to analysts.
Complaints from consumer groups and other organisations prompted Kao to stop making and selling Econa cooking oil in autumn 2009.
After this, the firm tried to address customer complaints more thoroughly.
Under the consultation system, information from customers is shared with the sales and research and development departments. If Kanebo had also been sharing such knowledge, it might have been aware of the problem sooner.
At a July 4 press conference, Kanebo President Masumi Natsusaka, a former Kao official, said problems with the firm's operational structure led to delays in understanding the issue.
An ingredient Kanebo developed for its whitening products that was approved for use in non-medical products, rhododenol, caused skin damage.
Since the whitening boom took off in the 1990s, cosmetics makers have competed to develop whitening ingredients, such as Shiseido Co.'s 4MSK and Pola Inc.'s rucinol.
According to private research firm Fuji-Keizai Group, the domestic cosmetics industry was worth 2.27 trillion yen in 2011, of which whitening products accounted for 198 billion yen.
Summer is the most intense period of competition for whitening products. "With signs apologising for the recall on Kanebo's shelves, it's tough for us to engage in proactive sales and advertising campaigns," a spokesperson at a cosmetics firm said.