The encyclopedia · Strategy & Leadership · Operational decision · 2011–2024
Realnet's ¥280M cosmetics business lost 88% of revenue as COVID killed beauty sales
A Tokyo cosmetics seller that peaked at ¥910M lost 88% of revenue to ¥110M when COVID stopped customers from going out and R&D costs piled up.
Realnet Co., Ltd. · 2024-01-31
What happened
Realnet Co., Ltd. was a Tokyo-based developer and seller of original cosmetics and health foods, founded in December 2011 with ¥3 million in capital. The company developed its own skincare and beauty products and sold them through retail and direct channels.
At its peak in the fiscal year ending November 2018, Realnet recorded approximately ¥910 million in annual revenue. The company invested heavily in new product development and advertising to sustain growth. However, when COVID-19 struck, customers stopped going out, and demand for cosmetics collapsed. Revenue plummeted to approximately ¥110 million by FY November 2022, an 88% decline from peak.
The company's fixed cost burden from R&D and advertising could not be reduced proportionally to the revenue collapse. With ¥280 million in debt and sales showing no prospect of recovery, Realnet was ordered into bankruptcy proceedings on January 31, 2024.
Why it happened
- Revenue fell from ¥910 million to ¥110 million, an 88% decline — COVID stopped consumers from going out, and cosmetics demand never returned to pre-pandemic levels.
- New product development and advertising costs were fixed overheads that could not be cut — the company kept spending on R&D while revenue was in freefall.
- Founded in 2011 with only ¥3 million capital, the company grew fast but was always thinly capitalized — an 88% revenue collapse left no equity buffer.
- The company had no ecommerce pivot or subscription model — when retail traffic collapsed, there was no direct channel to reach customers.
- The pandemic ended in 2023 but cosmetics demand did not rebound — the 88% revenue loss was structural, not just a lockdown disruption.
The lesson
A cosmetics company with fixed R&D and advertising costs cannot survive an 88% revenue collapse — when the distribution channel disappears and the fixed costs remain, the model fails.
Aftermath
Realnet Co., Ltd. was ordered into bankruptcy proceedings on January 31, 2024, with ¥280 million in liabilities. Founded December 2011 in Tokyo with ¥3 million capital, the company developed and sold original cosmetics, skincare, and health foods. Peak revenue of ¥910 million (FY November 2018) fell to ¥110 million (FY November 2022), an 88% decline, as COVID-19 eliminated in-person cosmetics demand. High R&D and advertising costs made the revenue collapse terminal. The Tokyo District Court handled the bankruptcy proceedings.
Sources
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