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Fashioning success in Japanese retail

Interview - March 6, 2024

In an illuminating interview with The Worldfolio, Hirotaka Kunikyo, President of Narumiya International, delves into the distinctive strengths that have propelled Japanese retail brands, such as Uniqlo and Miki House, to global success. Kunikyo emphasizes the speed and precision of Japan's supply chain, coupled with a unique balance between price, quality, and delivery, as key factors behind this success. Touching on the growing appeal of Japan for inbound tourists, he discusses Narumiya's strategy to create a lasting connection with customers, extending from in-person experiences to borderless e-commerce. Kunikyo also explores the company's international expansion plans, the significance of entertainment in retail, and the unique approach to licensing foreign brands in Japan. The conversation concludes with insights into Narumiya's commitment to capturing family moments through its photo studio and Kunikyo's vision for fostering a positive and enduring company culture.

HIROTAKA KUNIKYO, PRESIDENT OF NARUMIYA INTERNATIONAL CO., LTD.
HIROTAKA KUNIKYO | PRESIDENT OF NARUMIYA INTERNATIONAL CO., LTD.

Over recent decades Japan has seen the rise of regional competitors from countries like Korea, China, and Taiwan, who have replicated the Japanese model of success but done so at a cheaper labor cost, however, we still see brands such as Uniqlo, Miki House, and Muji as quite successful in overseas markets. In your opinion, what do you believe are the advantages of Japanese retail brands that have allowed them to be so successful? What added value do they bring to their customers?

First of all, I would like to briefly explain my background. It has only been about six years that I’ve been working in the apparel industry, and before this I was mainly engaged in B2B business, working with functional materials as well as a toy manufacturer you might have heard of called TOMY. I would say that I have more of a manufacturing point of view.

What I feel is the strength of Japanese firms in general is the speed of the supply chain. Comprehensive supply chains are provided by Japanese companies, from planning to manufacturing, all the way to after-sales services. All of this is done with speed and precision. I think additionally that Japanese companies offer a uniqueness in the fact they maintain a good balance between price, quality, and delivery. In China, a ballpark figure for creating a new product is eight months, but here in Japan, it varies depending on what you are making. If it is a low-price product range then it might only be three months, whereas if it is for a high-department store for example, then that might be eight months. Planning and scheduling are crucial in this regard and are a big advantage over other regional competitors.

 

You said that one of the advantages is the balance Japanese firms have been able to achieve between price and quality. Given Japan’s weak JPY, we are seeing Japan as a much more cost-effective option. Coupling this with the growth of inbound tourism and tax rate reductions for visitors, Japan is becoming a very attractive destination for tourists looking to take advantage of the economic situation and bring back quality Japanese products to their own countries. What business opportunities do you see for Japanese providers to leverage inbound foreign tourists?

With the prevalent demographic issues facing Japan right now will inevitably lead to the domestic market shrinking in size. Having 30-40 million tourists inbound annually is a huge boost to the domestic market, so with that in mind, we need to create new businesses focusing on inbound tourism.

We don’t envision making a one-off inbound purchase business, rather we want to follow the customer throughout their entire journey. We want customers to take our products back to their country and spread the word about our brand through word-of-mouth. The next step would be to facilitate returning customers to purchase again through our borderless e-commerce (EC) channel. The ultimate goal in this respect would be to generate so much positivity around our company that we could open new stores in foreign locations.

 

The rise of EC has been a swift one due to the convenience factor as well as the lifestyle changes that the COVID-19 pandemic necessitated. By 2026 24% of all global retail purchases are expected to be online. Can you go more into depth about the role that e-commerce is currently playing in your business model?

This EC channel has been greatly fortified by the COVID-19 pandemic and thus we saw an increase in EC sales. What we are trying to do is strengthen our own online sales channel called Narumiya Online while also providing our products to other online channels such as sites like ZOZOTOWN. This is all to lead our customers to our website and introduce them to more of our great products.

What is important for Narumiya is to have a double-sided sales channel. One side would be physical retail stores and the real-world shopping experience. This whole process of visiting shopping malls is a vital part of Japanese culture and entertainment, with many families visiting the malls on the weekends to shop, eat, watch a movie, or visit the arcade. We want to continue to provide entertainment to those families that value the real-world retail store experience. The other side of this sales channel is, of course, EC, and developing that side of things is also crucial to our continued success and providing entertainment to customers.

 

What do you mean by entertainment?

One method we are thinking about is creating a fan surge within the internet world. I think it would come down to creating a fan community so that fans can communicate with each other about Narumiya products. This type of opportunity would be a form of entertainment.

 

Many of the brands you offer are tailored to children, and with Japan’s demographic situation, the domestic market is shrinking. This is especially pronounced for your firm because the products you provide are for a younger demographic, and with fewer babies being born every year this compounds the shrinking domestic market. We do however know that you recently established a brand targeting adult women called LIEN. Considering that Japan’s demographic is shrinking in the children’s sector in particular, are you looking to diversify and cater to more adults?

Ironically although the younger demographic is shrinking, the market size for children’s clothes and apparel has not shrunk. Even in the toy industry rather than decreasing in size, it was getting bigger when I worked at TOMY. This phenomenon is what we call the “6 Pocket,” in the industry, which essentially boils down to parents spending more on their children than ever before. We don’t foresee a market decline as long as we can effectively market to those parents with purchasing power.

Our concept is to provide brands to users for a lifetime, creating lifetime loyalty. Babies will wear our brands as a touchpoint, and we will continue to provide various brands until the age of around 14-15 years old. Traditionally the connection ended there, but now we’ve extended that with the LIEN brand we recently launched. It has allowed us to create this cycle of brand usability. This is the focus rather than just creating a brand for adults due to the shrinking domestic demographics. It's like Gundam and Pokemon; brands that stay around for a lifetime.

 

Many of the brands you provide are licensed foreign brands distributed within the Japanese market. Are you looking to license more international brands to the Japanese market?

We are the only company that can cater to these high-end brands who want to enter the Japanese market. Other companies such as Miki House only sell their brands, but we partner with overseas high-end brands to provide sales channels in Japan, both through retail and EC. As such we do receive a lot of contact from foreign brands. We are confident that we can provide these brands with the operational experience needed to penetrate the Japanese market.



Could you outline why these foreign brands chose Narumiya as their partner to enter Japan?

There are multiple advantages we have, and the first one is our deep understanding of Japanese market needs. We can take the essence of the brand and combine it with the Japanese needs to create something that is the most appropriate for the Japanese market. Our success can be seen in how we’ve increased Japanese sales numbers for these high-end brands.

Another strength we have lies in our relationships with high-end department stores here in the domestic market. It is quite difficult for foreign brands to enter these stores, so having us as a partner allows these companies to develop further sales channels. Additionally, we have our direct stores and within those stores, we provide multiple brands, and all sales staff are trained in selling these brands. Conventionally brands need three staff members per brand, however, since we deal with multiple brands within one store it is less risky and less costly for new foreign brands to enter Japan.

 

You had stores that were operated in tandem with foreign partners in Korea, China, Taiwan, Malaysia, and Singapore in the past. Could you talk about the potential for your international business in a post-COVID world and tell us about any significant milestones or events you’ve experienced in your international stores?

The overseas operations of Narumiya started around 2004, but they ended in 2016. This happened because there had been significant changes in the composition of our shareholders. In 2018 I had a contract with Alibaba in China as the primary contact person, however, that contract ended in 2020 under COVID-19. We are now in what we are calling Phase 3 of our attempt to challenge overseas markets, and in this phase, our targets are Taiwan, Thailand, and other Asian countries.

 

You mentioned that when it comes to Japan, Narumiya is the perfect partner since you understand the Japanese market so well. If you are taking on new challenges overseas in Taiwan and Thailand, those are very different markets. When it comes to penetrating these local markets, are you looking to partner with local firms to better understand the needs of local customer bases?

Our current parent company is a major Japanese retailer that is known in the global market. They have already established a base in Taiwan, so we will be leveraging their scheme to work together with a local entity, but of course, there is ample potential for collaboration with local companies.

 

Could you talk to us more about the details of Phase 3? What is the process and what are some of the targets you’ve set for yourselves?

Currently, we plan to take Petit Main to overseas markets since it is our best-selling brand. We have a good relationship with Mitsui who runs the global chain of shopping malls called LaLaport. They are establishing a new LaLaport shopping mall in Taiwan, and since we have a good relationship they have asked if we are interested in opening a retail location in that new mall. Discussions for this store are currently still ongoing.

As for EC channels, we are currently searching for local platforms that would be best suited for our products.



Earlier you said that you were looking to create a new business targeting inbound tourists. If you go to a big retailer like Muji or Uniqlo they have their tax-free counters and in-store information for foreigners in multiple different languages. Could you tell us how Narumiya is making the in-store experience more user-friendly for foreigners looking to make purchases?

Since Most of our stores are in department stores or shopping malls like LaLaport we can direct customers to their facilities to help customers navigate the requirements for duty-free shopping. We are trying to introduce multilingual signs and automatic translation devices into all of our domestic stores. Another approach is the introduction of a new product lineup that is designed to cater more to the tastes of Asian customers.

 

Will this new product lineup involve licensing branding with local Japanese companies?

It would be a Japanese character license, such as Hello Kitty or Pokemon.

 

In addition to your clothing brands, we know that Narumiya has its photo studio where important days in a child’s life can be captured. Why did you decide to set up your photo studio?

The concept of Narumiya is to make the lifestyles of children and families colorful. Part of this concept is of course the children’s clothes, but another part is the photo studio. Mothers will often take photos of their children, but often they are not in the photo themselves. It is heartbreaking when a mother realizes that her joy in a moment isn’t also captured along with her child. We wanted to let mothers share the joy of a key memory with their family, and thus we have started our photo studio to capture a little glimpse of the family dynamic for parents.

 

Imagine that we come back on the very last day of your presidency and interview you again. What goals or dreams do you hope to have achieved by the time you are ready to hand the baton to the next generation of Narumiya executives?

My goal is to leave an impact on the company culture here at Narumiya. I want the company to be a place that is comfortable and friendly to employees rather than create a culture that is solely focused on sales targets or new products. Creating a culture where everyone is happy will strengthen the company in the long run. We have many mothers working here, so horizontal communication among all employees here will create a company that not only lasts a lifetime but creates products that families can enjoy for a lifetime.


For more details, explore their website at https://www.narumiya-net.co.jp/ 

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