Focus: Japan's unorthodox household goods champion rides a pandemic boom
23/10/2020 01:42
By Sam Nussey and Makiko Yamazaki
MIYAGI, Japan, Oct 23 (Reuters) - Iris Ohyama, whose goods
are ubiquitous in Japanese homes, has relied on its usual
offbeat methods during the COVID-19 pandemic and U.S.-China
trade tensions to ride the teleworking wave and bring production
back from China.
Family-run, unlisted and based in the provincial city of
Sendai, the quick-iterating manufacturer of everything from rice
to rice cookers has become the most high-profile firm to sign up
for government incentives to bring production back home.
With newly labelled "made in Japan" face masks flying off
shelves alongside its other diverse products, such as office
furniture and air conditioners, Iris predicts annual revenues of
700 billion yen ($6.7 billion), compared with 500 billion yen a
year earlier.
Although pandemic-driven demand is propelling Japanese sales
this year, the company sees overseas markets growing to provide
most of its revenue, compared with about 30% now, its president
Akihiro Ohyama said in an interview.
That change is made possible by advances in factory
automation and the growth of e-commerce, opening up markets such
as the United States, where Iris is expanding production of
"made in USA" items, including electronics and masks.
The shift also provides a hedge against U.S.-China trade
tensions. Corporate Japan is deeply dependant on Chinese supply
chains, making it all the more important to ensure production is
insulated from disruptions there.
Iris, for instance, may increase production in Japan beyond
plastic items and LED lighting.
"Unfortunately many parts for items like washing machines
and refrigerators can't be sourced domestically," Ohyama said
during an interview in rural Miyagi prefecture, where factory
space is being converted to face mask production.
Three quarters of the cost of building the mask line is
covered by government subsidies - part of a 60 billion yen ($570
million) programme covering about 60 companies.
Iris is also applying for further subsidies as the
government expands payouts under new Prime Minister Yoshihide
Suga.
The company said it remains committed to China both as a
production site and a market, with a new factory under
construction in Tianjin.
But analysts say lower barriers to entry in the electronics
market mean Iris could be vulnerable to fresh competition.
"Iris Ohyama is still not such a big brand, and if cheaper,
attractive products appear, it risks being squeezed," said
Hideki Yasuda, an analyst at Ace Research Institute.
ELECTRIC DREAMS
Little-known outside its home country, Iris Ohyama got its
break with plastic products before moving into mass market
electronics in 2009.
To hire engineers from manufacturers like Panasonic and
Sharp, who were shedding staff in the face of Chinese and South
Korean competition, Iris shifted research and development to
Osaka, in Japan's industrial heartland, where those workers
lived.
Product proposals at the company receive on-the-spot
approval or rejection at Monday meetings. It's a
seat-of-the-pants approach that industry insiders say the firm's
unlisted status - and lack of investor pressure - makes
possible.
Iris launches more than 1,000 new products a year, which
make up more than half of total sales.
The firm's emphasis on simple design and reasonable prices
has also proved a winning formula for companies such as
furniture maker Nitori Holdings 9843.T and Uniqlo parent Fast
Retailing 9983.T .
Although the total Japan market for lines such as storage
items has peaked, the company will continue to grow by expanding
its product range, Ohyama said, adding that online shopping
would help sales.
Japanese manufacturing has a reputation for quality but also
overengineering. New products often include more and more
features and foreign competition has left players competing at
the top end for items like televisions.
"The number of high-end brands will decrease over time,"
Ohyama said, who took up the position of president in 2018 from
his father, Kentaro, the company's leader for more than half a
century.
Competitors say they lean toward more expensive materials
and work in larger teams than Iris, which has attracted
engineers by giving them the chance to directly design products.
"Iris fixes a product price target and rigorously builds to
stick to it, whereas we tend to overrun," said an executive at a
rival electronics maker.
The firm, which employs about 13,000 people, plans to
recruit a record 640 more next year.
Industry insiders point to the difficulties of attracting
engineers amid competition from larger peers and Chinese
companies offering higher pay.
"Lack of people is the biggest problem; the company is
growing but staff numbers haven't kept up," Ohyama said.
Iris sees annual sales hitting by 1 trillion yen by 2022, a
milestone that would elevate it into an elite group of companies
that have prospered by taking aim at Japan's thrifty consumers.
"Our brand image is improving," Ohyama said.
($1 = 105.3100 yen)
(Reporting by Sam Nussey, Makiko Yamazaki and Noriyuki Hirata;
Editing by Gerry Doyle)
((sam.nussey@tr.com; https://twitter.com/SamNusseyRTRS;
+81345632760;))