Building from their Italian background, but now completely independent from it, Arflex Japan creates high-end furniture combining the best of Italian designs with the finest Japanese materials and functionalities.
It is our view that Japan is at a very exciting time for manufacturing. On one hand, we have had major supply chain disruptions in the last three years, caused by the COVID-19 pandemic as well as tension from the China-US decoupling situation. As a result, we are seeing many multinational groups try to diversify their supply chains with a focus on reliability. This is where Japan can enter; a country known for decades of high reliability, trustworthiness, and short lead times when it comes to production. Now, with a depreciated JPY, it is our view that there’s never been a more opportune moment for Japanese manufacturers to meet the pressing needs of this macroeconomic environment. Do you agree with this premise, and why or why not?
First, it is important to distinguish between the two companies. It is true that Arflex, the Italian company, originated back in 1951, and we derived our roots from there and subsequently separated from the company. As it stands, there are now two distinct entities: Arflex Japan and Arflex. We acquired all the manufacturing, distribution and branding rights in Japan for the Arflex name, essentially granting us the authority to operate under the Arflex brand. Under this brand, we exclusively hold regional distribution rights in Japan, which necessitated the establishment of another brand, Hoshina, responsible for our overseas activities.
Returning to the question at hand, we do not perceive this situation as favorable for all Japanese companies. While it might be the case for companies primarily engaged in exporting, it poses challenges for businesses like ours that also heavily rely on imports. The strength of the JPY does not play a favorable role in this scenario. The procurement of materials from outside of Japan is imperative for us, and this economic context has significantly increased our operational costs. It's important to note that I cannot speak on behalf of all companies, as each may analyze the situation differently, but from our specific perspective, it is an unfavorable situation.
Over the last 25-30 years we have seen the rise of regional manufacturers from countries like China, Taiwan, and Korea, who have replicated the Japanese manufacturing model but done so at a cheaper cost, thus pushing Japan out of certain markets. However, we still see Japanese firms as leaders when it comes to certain niche B2B fields. What would you say are the core strengths or competencies that set your firm apart from regional competitors?
I would assert that one of our key strengths lies in our ability to craft original Japanese products infused with the essence of Italian designers, a facet that has been central to our identity as a furniture manufacturing company since our inception. In contrast to other players in the industry, their ethos typically revolves around importing products from countries with cheaper labor forces, often overlooking the crucial aspects of design and aesthetic appeal; aspects that we have diligently embraced from the outset. Our distinctive capability to adapt sophisticated Italian design sensibilities to suit the requirements of Japanese households stands as a truly unique and defining characteristic ofArflex Japan. Notably, the dimensions and layout of Japanese homes differ substantially from European living spaces, making the translation of these designs to the Japanese context a testament to our company's excellence.
We occupy a unique position within the Japanese furniture market. Some even find it perplexing and mistakenly categorize us as an Italian company, which is not the case; we are an entirely Japanese enterprise. At present, all production processes are managed within Japan, with production taking place at our own factory in Asahikawa, Hokkaido and at partner factories in Japan. Furthermore, within our in-house repair workshop, we offer repair services for all our products sold to date, including discontinued items. This operational model has proven highly effective for our company, setting us apart from our competitors.
You spoke about the legacy you inherited from Italy, and now you have disassociated yourself, striking out on your own. Is it only the tastes and designs that you took from Italy, or are there any other things that you learned during the time you were associated with rflex?
While design is important, what truly defines us is a philosophy of living that has been passed down. At the heart of our craftsmanship lies the belief that people are the protagonists of their lives. Our time in Italy taught us the significance of durable, secure, and well-maintained furniture in elevating the quality of life. The essence of Italian design is palpable in our products, thanks to our collaboration with a diverse array of designers from across Europe, complemented by contributions from Japanese designers. Our products exhibit the unmistakable flair of Italian design, intricately melded with the meticulous attention to detail and the high standards of quality inherent in Japanese production and assembly. This synergy extends to the materials we employ, with a significant portion of our resources being sourced from foreign countries, notably Italy.
The majority of fabrics and leathers used for upholstery originates in Italy, and even the marble we select for tables hails from Italian quarries. Despite the procurement process occurring in Italy, the refurbishment and final product assembly take place right here in Japan. However, I firmly believe that seeing is believing; it's only when you physically interact with and experience our products that you truly grasp the essence of what we aim to achieve.
Our company boasts deep-rooted connections stemming from our history, having been conceived in Italy and nurtured in Japan. While we function as a regional brand within Japan, we also serve as a distributor for prominent Italian furniture brands including Molteni&C, Riva 1920 and Roda..
You mentioned your strength is your ability to adjust and combine Italian designs with Japanese households. What makes the Hoshina brand unique for overseas markets?
I firmly believe that the strengths I previously mentioned for our domestic market are equally applicable when considering our international endeavours. This convergence involves harmonizing the unparalleled quality of Japanese production with the innovative concepts originating from the finest Italian design minds. This synergy provides us with a clear trajectory for entering foreign markets. While Italy boasts exceptional designers, there is room for improvement in the manufacturing sector, an area where a Japanese company can excel by producing products of the utmost quality. Each item we create adheres rigorously to stringent Japanese standards, and we are confident that this approach is not only successful within Japan but also beyond its borders.
It's important to acknowledge that, at present, our export volume is not substantial. In all honesty, our company has only recently embarked on export activities. Nevertheless, we recognize that exportation is poised to eventually become a necessity in light of the challenges confronting the domestic Japanese market.
Japan is now the world’s oldest society with a rapidly decreasing population. This is causing a labor crisis as well as a shrinking domestic market. How are you adapting to this demographic shift? How much are you looking to overseas markets in order to ensure business opportunities for your firm in the long term?
Currently, the outlook for the domestic market doesn't appear particularly optimistic. Consequently, we have initiated efforts to expand our scope. Several years ago, we came to the realization that our business model couldn't be sustained solely by furniture manufacturing. When I speak of expanding our scope, I'm referring to our diversification into complementary areas, such as interior design, storage and kitchen tables, through our partnership with an Italian company called Molteni&C. We have begun introducing Molteni&C's kitchen solutions to Japanese households.
Venturing beyond furniture effectively encompasses the realm of interior design, a facet the company now actively embraces to meet our customers' evolving expectations. I'd also like to address foreign entities like Facebook. These organizations are increasingly moving away from traditional office designs, opting for more open and flexible work environments. In tandem with this trend, the Japanese government has been pushing for changes in how Japanese companies operate, with the aim of enhancing the comfort of office workers. This dynamic presents a promising opportunity for our firm, as we endeavor to introduce our residential furniture into corporate office spaces across Japan.
It's worth noting that the declining population, which might be a concern for some businesses, doesn't significantly impact ours. Our business primarily caters to affluent individuals rather than the general public. The accumulation of wealth in Japan is on the rise, resulting in an expanding demographic of individuals with the means to invest in luxury furniture for their personal use.
Who is the target for your products?
Our target consists of sophisticated consumers who seek high-quality, well-designed furniture. Specifically, individuals and households with a penchant for modern interior design, as well as design-focused professionals, are the primary target. Arflex caters to people who value durability, comfort, and aesthetics in their furniture choices. The company offers unique designs and quality to those who prioritize comfortable and stylish living spaces, with a particular emphasis on key residential areas such as the living room, dining room, and bedroom.
You mentioned interior design and expanding into kitchens. Are there any other spaces within houses or offices that you would like to expand into or develop products for?
Our collaboration extends to working closely with construction firms., resulting in our kitchens and wardrobes being adopted as the standard specifications for newly constructed high-end condominiums. This cooperative relationship with construction companies is of paramount importance to us. The effectiveness of our partnership hinges on the synchronization of our procurement activities with their immediate project requirements.
Partnerships are a theme of our interviews, and many companies have stressed the need for partnerships to penetrate certain markets. What role do partnerships play in your business model, and are you looking for any new partners right now both domestically or overseas?
We are committed to strengthening our market position and expediting our production capabilities. Although we currently maintain our production facilities in Japan, we aspire to extend our reach beyond our borders. To this end, we are actively engaged in discussions with several domestic and overseas companies regarding Original Equipment Manufacturing (OEM) partnerships. At this juncture, our primary focus is on establishing robust production partnerships, as we understand that once this foundation is solidified, distribution can be systematically addressed in subsequent stages.
One of your company’s strengths is not only your ability to provide high-quality products but also your ability to provide a comprehensive interior design solution with your service, Total Coordination. For the overseas market, we know that you are able to export your products, but how will you provide this same type of comprehensive interior design solution?
In the domestic market, we recognize that offering total coordination is highly effective for our company. However, in the international market, there are many design firms and interior designers who excel in interior design, and there is less demand for furniture companies to provide it. Our priority overseas is to first gain recognition for our products among professionals such as architects and designers and have them incorporate our products into their projects.
A more prudent approach might involve not only leveraging the expertise of Italian designers but also collaborating with Italian construction firms to offer such a comprehensive service. Essentially, this entails adapting our production to suit the local market. However, it's essential to note that, at present, implementing this full chain of services outside of Japan poses considerable difficulties.
Japan’s industry has very high ambitions of reaching carbon neutrality targets of 46% reduction by 2030 and 100% by 2050. What is Arflex Japan doing in order to ensure your company is an environmentally sustainable manufacturer?
First and foremost, the core tenet of our existence aligns closely with the stringent principles of Sustainable Development Goals (SDGs). As a furniture company, we are steadfast in our commitment to infuse our products with the utmost quality, thereby extending the lifespan of our furniture to its maximum potential. Prolonged usage of furniture obviates the need for disposal, creating a positive environmental cycle.
Additionally, our company has introduced maintenance services designed to extend the lifecycle of our furniture, further promoting sustainability. This commitment has earned the trust of our customers, who return to us repeatedly. Our products and furniture inherently adhere to SDG principles by significantly reducing CO2 emissions and environmental impact. However, it's essential to acknowledge that, as a manufacturing company, there are unavoidable CO2 emissions associated with production. Nevertheless, we are actively transitioning towards more sustainable practices. The Asahikawa factory is planning to establish a new facility and relocate in the near future. In this new location, we intend to use non-fossil fuel-based electricity by installing solar panels and making use of naturally collected snow as a cooling resource during the summer, as Hokkaido experiences heavy snowfall.
Sustainable materials are another facet of SDGs that our company is vigorously pursuing.We collaborated with a material manufacturer to develop a lattice-like structure composed of polypropylene (PP), which is a recyclable material and can be used in furniture as a representative example of sustainable materials. Its flexibility and malleability allow us to craft it into a myriad of shapes. In fact, we released a new product in September 2023 that will incorporate sustainable materials. Beyond this, our company actively engages in various SDG initiatives. An illustrative example is in our delivery methods; recognizing that delivery trucks contribute significantly to CO2 emissions, we have transitioned to using train containers for transporting furniture over longer distances, reducing our carbon footprint.
When people buy furniture, I think that the main concern is comfort. By changing the materials, how are you able to retain comfort in the furniture you produce?
That is a good question and we also think about that carefully. I think this relates to the R&D capabilities we have, and we make significant efforts to retain the same properties in new materials before we introduce them into our products. We understand that clients have a preference so we try to keep those in mind so that we don’t lose them as customers.
30% of our materials right now are biodegradable, and it is a proven fact right now that if you exceed this percentage then the properties of the material will change. It will not be as comfortable, which is a big concern for our customers. As you can see, we’ve now reached the limit in terms of how much material can be biodegradable.
Japan as a nation invests more heavily in R&D than any other country; around 3% of the GDP, whereas the US invests 2% and China invests 1.5%. With such an emphasis on R&D, what is your current focus or R&D strategy? Are there any new products that you would like to showcase today?
Yes, we’ve actually already talked about it a little bit and I’ve mentioned new materials. That is our current R&D focus right now and these materials were incorporated in a new product “A・SOFA es” released in September 2023.
As a Japanese manufacturer R&D is important, and we tend to prioritize R&D activities more than anything else. Branding is also important, however, and we do conduct a lot of branding activities. Our products can speak for themselves, but we do often speak to final users to get their input into potential future iterations. Word of mouth is very valuable to brands such as ours.
From my understanding, the rich and wealthy are quite demanding in terms of quality products. Whenever they purchase a new house, they want the perfect furniture to fit that living space. Do you provide a service to these clients where they can customize their products or do you only offer standardized products?
We actually have a team that is responsible for customizing items to meet the specifications of customers. Also we strive to manufacture products that respond to customer wishes, such as regular products in a wide range of sizes and sofas that can be combined into individual units.
Is there a particular product or project that you think defines either or Hosina?
I take particular pride in our concept showroom, Casa Mia Kawaguchiko as it was conceived entirely from the ground up. This space reflects our original design and features exclusively our solutions. It is conveniently situated near Lake and the foothills of of Mt. Fuji, making it easy accessible from Tokyo, just about 1.5 hours away. I believe it serves as an ideal platform for introducing potential clients to the quintessence of Arflex Japan. On a personal level, I hold this showroom in high regard, and I am deeply attached to it.
What role will overseas play in your future growth? Do you have any specific areas that you are targeting for future expansion?
Our vision is to expand our footprint across as many countries in Asia and America as possible. Currently, while we don't have a strictly defined strategy in place, our approach involves identifying adaptable locations with a customer base interested in our products. We currently have retail partners in Singapore and South Korea, and we are aiming to establish a strong distribution channel in these regions. This development is indeed an exciting milestone for us.
Imagine that we come back in 6 years and have this interview all over again. What goals or dreams do you hope to have achieved by the time we come back for that new interview?
Let's delineate two distinct aspirations of mine: one on the domestic front and the other concerning our overseas ventures, which fall under the purview of our brand, Hoshina. It's imperative that we draw a clear distinction between the attributes of Arflex Japan and Hoshina, as each market exhibits unique characteristics and affluent clientele harbor multifaceted desires. What we offer here in Japan may not necessarily resonate elsewhere, owing to variations in preferences. Consequently, we must segregate these businesses and formulate tailored strategies for each brand.
The second objective I hold dear relates to the human dimension. Over the course of recent years, we've witnessed a remarkable uptick in our domestic sales. However, it's essential to recognize that monetary success does not equate to ultimate happiness. To ensure the satisfaction of our stakeholders, we must honor the commitments we've made to them. Balancing these considerations, rooted in human nature and the diverse needs of individuals, is indeed a formidable task. Nonetheless, we are unwavering in our dedication to making every effort to achieve this delicate equilibrium.