Latent needs, local industry

In August 2020, Estorage, which operates under the brand of Shuno Labo, meaning “storage lab,” opened a showroom in Tokyo’s Ginza district, its third after those in Nagoya and Yokohama. Due to the coronavirus pandemic, the Tokyo showroom is only accepting customers with reservations. Still, customer traffic remains vibrant.

The advantage of custom-made furniture is that it can be designed to suit items for storage or the existing floor plan. In addition to functional advantages, owners can develop an emotional attachment to a custom piece. Companies that specialize in custom-built wall storage furniture are rare in Japan. Estorage has sold over 4,000 items by capturing the hearts of consumers dissatisfied with general-use storage goods.

Estorage President Katsunori Yajima remembers two complaints he heard from customers when he was in the build-to-order home business. “I finally bought a house, but I’m not satisfied with the storage space,” one said. Another asked, “How can I get a shelf to perfectly fit this space?” It was customer complaints like these that eventually led him to found the company. Yajima, who is from a family engaged in furniture manufacturing in Seki, Gifu Prefecture, was also worried about the future of the local woodworking industry.

“Many people were not satisfied with built-in storage furniture or products available at shops, while the wooden furniture industry was declining despite superior technology, cornered by cheap, mass-produced products,” Yajima said. “I was convinced I could create a big market by linking them.”

His conviction led to a business model that mass produces and quickly delivers custom, high-quality storage furniture. He established Estorage in 2007 at the age of 27, using money from his own pocket.

Unique production system

Estorage’s operation is supported by a production structure based on a proprietary system. The system creates 3D imaging data based on plans made by sales staff, and passes them to the manufacturing division, which uses them for processing. Yajima describes this system as “an idea similar to building information modeling,” which is used by a growing number of companies, including general contractors. This has allowed Estorage to improve the efficiency of its design, manufacturing and installation processes. Since this model allows the company to achieve roughly the same flexibility as using preinstalled furniture and high production efficiency at the same time, Estorage craftsmen can put their skills to maximum use to provide what customers want. Yajima takes pride in this advantage of his company, which he says is possible because it is an independent manufacturer that handles both manufacturing and sales.

A GNT company is one operating in a market that is not particularly large, but it holds an overwhelming share in said market, and is an important presence that supports global supply chains. The ministry previously selected 100 such companies in fiscal year 2013. Why is METI creating another list? “It’s been over six years, and the business environment surrounding Japanese companies has since changed dramatically,” Tetsuro Yamaguchi, the ministry’s chief deputy director of the aerospace and defense industry division, said.

“As they faced a changing social structure caused by factors such as the development of the digital economy, a rapidly changing global political-economic landscape, declining birthrate and aging population, it’s become more important than ever for businesses to have advantages that rivals don’t.”

The key for businesses to build a stable profit base unaffected by external factors is to build on their unique technologies and business models, while increasing market shares and competitiveness. In addition, it is ever more significant for companies to establish a singular, indispensable presence in supply chains they are a part of, in view of the current situation, where many businesses are forced to change their ways of production and procurement amid the coronavirus pandemic.

The average company of the selected 113 has a global share of 43.4 percent and an operating margin of 12.7 percent. Its overseas operation generates 45 percent of its overall revenue. The market for the products and services by each of these companies is expected to at least double over the next five to 10 years, making them promising companies that have potential for further growth. Economy, Trade and Industry Minister Hiroshi Kajiyama said these companies are “essential and indispensable to global industry, not just Japan’s.”

What is the secret of their strength or the source of their competitiveness? It can be broken down into three elements: narrow focus on a single market, indispensability of their role and difficulty in imitating their offerings.

Addressing special cases

Nikkari Co. in Okayama Prefecture manufactures the Monorack, a monorail system used by farmers to transport produce over steep slopes in mountainous regions. It is Japan’s first such farm-use monorail system. The first example of this equipment was completed over half a century ago. It has since found use overseas, such as in an Italian vineyard.

Another example of a company that has established a strong position in a very specialized market is Utsunomiya’s Rheon Automatic Machinery Co., which introduced the world’s first commercial machinery that automatically wraps fillings in dough, for bakeries. The company has adapted the machine to specific local needs and now has customers in 125 countries.

There are several companies that support manufacturing by offering devices that serve specific needs or take on specialized production processes in the manufacturing industry. These include Kanefusa Corp. in Niwa, Aichi Prefecture, that manufactures single-use cold saws, or circular saws used at ambient temperatures to cut industrial components, such as steel pipes used in automotive industries. Another is Fukui’s Takeda Machine Tools Co., a maker of duplex milling machines that produce metal plates for mold bases and mechanical parts.