TOKYO -- As Alibaba Group Holding expands its e-commerce empire, foreign companies offering cosmetics and other products are changing course in China, increasingly selling online rather than at physical stores.

Western companies that took an early lead in building bricks-and-mortar sales networks in China are struggling to cope with the changing landscape. Latecomers, namely Japanese companies, are gaining ground fast, using Alibaba's online sites as their platform of choice.  

Shiseido plans to station a team of 20 workers in Hangzhou, home to Alibaba's headquarters, this fall to start developing products tailored exclusively for Tmall and other Alibaba sites. The Japanese company has been selling cosmetics through these sites since 2015.

Shiseido will join hands with Alibaba in using purchasing data for marketing activity, according to President Masahiko Uotani.

Shiseido operates bricks-and-mortar stores in China but will put a greater emphasis on online sales. The company's sales in China rose 22% to 144.3 billion yen ($1.3 billion) in 2017, with online sales representing 26% of the total. Shiseido's plan is to raise the online proportion to 40% by 2020, Uotani said.

Kose is also making a shift. Starting in September, the Japanese company will sell its Cosme Decorte line of premium cosmetics on Tmall. Until now, Kose has sold luxury brands only at physical stores, where attentive service can be provided to customers.

China's e-commerce market for consumers jumped 35% to $1.11 trillion in 2017, more than double the American market and the world's largest. The number of frequent users of Alibaba sites has reached 500 million a year. Smaller players, such as JD.com and Vipshop, are also growing fast.

Alibaba has its own logistics arm and has formed partnerships with courier services in and outside China. In 2017, the company announced plans to invest 100 billion yuan ($14.5 billion at current rates) over five years to beef up its logistics network.

Alibaba's formidable online presence is attracting foreign companies, enabling them to sell products directly to Chinese consumers and relieving them of the need to learn local business practices and build relationships with wholesalers, for instance.

Japanese cosmetics companies are enjoying strong demand for "made in Japan" products among Chinese consumers. This popularity has grown as more Chinese tourists to Japan bring the products home and word of their quality spreads.

The value of Japan's cosmetics exports to mainland China and Hong Kong hit 148.1 billion yen in the January-June period, surging 50% from a year earlier to a first-half record. The full-year figure is expected to exceed 200 billion yen for the first time.

The cosmetics makers are spending more at home in an effort to beef up exports of high-quality products. Shiseido plans to open two factories -- in Osaka and Tochigi prefectures -- by 2020.

A logistics facility of an express delivery company in Harbin, China, shortly after the Nov. 11 Singles Day online shopping festival in 2017.   © Reuters

U.S. companies are also drawn to Alibaba as a way to tap the Chinese market.

Kroger on Aug. 14 announced a tie-up with Alibaba. The American supermarket chain will sell the Simple Truth line of organic food and eco-friendly household goods on Tmall, marking the company's first foray into an overseas market.

Yael Cosset, Kroger's chief digital officer, stressed the significance of being able to reach Chinese consumers even without a physical store.

Meanwhile, Western companies that were quick to build bricks-and-mortar sales networks are finding the going tough.

L'Oreal, for instance, has seen its Chinese market share shrink as Japanese and South Korean rivals expand online sales and bolster their Chinese operations.

Procter & Gamble, among the first to build a sales network for disposable diapers in China, has similarly suffered a decline in market share. Japanese rival Kao formed a tie-up with Alibaba in 2015 and boosted its market share of high-end products to 50% at one point.

Alibaba's influence is only growing. The company plans to host more imported goods on its shopping sites. It seeks to discover products that are high in quality but low in name recognition in China, according to CEO Daniel Zhang.