A Japanese company committed to quality materials and high manufacturing standards, Kamakura Shirts specializes in precisely crafted, stylish shirts that stand the test of time.
Japan is in an interesting time right now. Due to the supply chain disruptions caused by the Covid-19 pandemic and the tension between China and the US, coupled with a historically weakened JPY and the high quality of Japanese products, Japan is once again very attractive to foreigners, investors, and buyers. This is especially the case in B2C fields, as we can see that tourists are returning to Japan. For example, the second quarter of this year saw a 15% increase in sales with the figure standing at half a trillion JPY. Do you agree with this premise that Japan is in an interesting time, and what are the key advantages of Japanese companies in this current macroeconomic environment?
I can only speak about our company as each company has its own pros and cons. The Covid-19 pandemic did not have a serious effect on our business, as we are a domestic company, and the materials that we use are predominantly procured domestically. Companies that import from foreign countries struggled during that period due to the supply chain disruptions and the unavailability of the materials that they required. However, that did not affect us as we do not depend on foreign imports. Our supply chains worked very well and we have very strong connections with our domestic suppliers. We are currently in the final stage of the Covid-19 pandemic, and the Japanese economy is recovering. As you mentioned, the number of tourists visiting Japan is increasing and this has created a lot of optimism for our company. This gives companies such as ours the opportunity to get back on track and introduce our products to them.
Maintaining a balance is essential for our company as inflation is increasing in Japan as well as most of the major economies around the world. There were indicators for this in recent years, so Japanese companies were prepared. We are seeing increases in the cost of electricity, household utilities, and gasoline for instance. Local Japanese manufacturing companies need to maintain a balance between the price and the quality of their products. Inflation inevitably leads to price increases as businesses need to be sustained. Profits must be reached to ensure that companies stay afloat. Our products originate from plants. However, the agricultural sector in Japan is facing difficulties right now due to an increase in labor costs, as well as increases in the price of pesticides and raw materials. These increases mean that we need to slightly increase the cost of our final products. However, that is an essential part of our business. We have to keep up with the costs, and we have been doing so for the past thirty years.
You just mentioned that inbound tourists to Japan are an opportunity for your business. We know as foreigners that if you go into Don Quijote, you will see a lot of Chinese stocking up on Japanese-made products and daily necessities. If you go down to Ginza, you will see Europeans and Americans buying Japanese knives or other products. These kinds of products are beloved by foreigners when they visit Japan. In the case of shirts, do you see the same attention from foreigners, and if so what kinds of foreigners are interested in your product offerings?
Business-oriented people are our target when it comes to tourists visiting Japan. The very essence of our international expansion came from my father. In 2012, he established a shop in New York. This was our first attempt to enter overseas markets. He truly believed that our products were the best of their kind, and he wanted to show the world how good the quality of our shirts was. We established the store on Madison Avenue that was close to the JP Morgan building right in the heart of New York. Through word of mouth, people became acquainted with our high-quality products and more and more people from across the US visited our store. In 2019, we opened a similar shop in Shanghai for the same reasons. Unfortunately, due to the pandemic, we had to shut down our New York store despite its success over the previous eight years. Our overseas stores worked very well in increasing our brand recognition abroad.
We have also expanded in the domestic market. We have stores in Ginza and Shinjuku for instance, which are areas that are popular for inbound tourists visiting Tokyo. For that reason, we benefit a lot from end depreciation as foreign people are buying our shirts domestically here in Japan while on vacation or business trips. It is actually cheaper for them to buy our shirts here in Japan rather than overseas. When people travel to Japan, they become acquainted with our high-quality products and want to purchase them.
Our store in Shanghai has a similar story, as we wanted to introduce our high-quality shirt manufacturing to the Chinese market. Unfortunately, due to the pandemic, Chinese tourists were unable to come to Japan, and our exposure in the Chinese market has not gone as well as we had hoped. Our store in Shanghai is still open. However, Covid-19 restrictions and other issues have affected its operations.
Another important aspect that we would like to discuss is the emergence of fast fashion. Since the late 1990s and early 2000s companies such as H&M and Zara have reproduced high-end fashion at cheaper costs. One major issue that this created however is the waste from the clothing, with estimates of 10,000 pieces of clothing being thrown into landfills every five minutes, which of course causes huge environmental issues. Could you tell us how you have transformed your operations to meet your environmental objectives and expectations?
Our business model is the opposite of that of the fast fashion companies that you mentioned. First of all, the essence of our business model is to produce and sell approximately the same number of products. We do not overproduce or exceed the number of products that we need. We estimate and analyze how much we will need for each upcoming month. That way we avoid overproducing and overstocking our products. This prevents us from increasing our environmental burden, as we do not throw away as many things as the fast fashion companies do. We also do not have seasonal sales discounts, which means that we avoid having to produce extra products for those sales periods. This business model is less burdensome on the environment when compared to some fast fashion companies.
Another benefit of this business model is that we have a very close relationship with the sewing companies and material procurement companies which are all located domestically in the Japanese market. These close connections create a synergy between the companies. We do not allow ourselves to overstock which means that our partners do not need to create excess materials beforehand. We can produce and sell everything that we need.
Another aspect of our business model is its simplicity as we do not create many different variations of products. Diversification of products occurs in fast fashion shops. However, that is not part of our products. We create high-quality products that become very popular, with people preferring to only buy one particular type of shirt, for example. Offering a limited number of types of products allows us to track our stock better.
Your products are 100% “made in Japan” products. The materials, the sewing, and the final retail are all done here in Japan. I am currently looking to buy American leather boots. When I researched the boots, it said that they were American. However, when I looked at the details, I found that the raw materials are sent from Asia, the threads are sent from South America or Mexico, and the final assembly is done in America. They are not truly 100% American-made products. Why have you not adopted such a model where you could perhaps procure cheaper materials from Bangladesh or India and still make high-quality shirts in Japan? Why have you resisted the temptation to do that?
We have tried to procure cotton in the domestic market. However, this is very difficult as Japan is not a cotton-producing country. Therefore, we need to procure cotton from abroad. That is the one exception regarding our products. There are limited regions in the world that produce the long-staple cotton that is required by high-quality cotton shirt manufacturers. We procure our cotton from these regions and this diversification allows for flexibility and ensures a stable supply. That is the only aspect of our products in which we are dependent on the overseas market. Everything else including the spinning and weaving as well as the technologies that we use are all Japanese.
We also have many R&D activities aimed at growing cotton in the domestic market. However, finding the proper land and perfect conditions is a big challenge. Palpa is the material that our R&D has been focusing on. We co-researched this material with Unitika Tokiwa which is located in Okayama.
As you have just mentioned, you have started using a new technology to manufacture Palpa shirts which have an innovative yarn structure that blends cotton and recycled polyester. These shirts are comfortable, functional, and environmentally friendly. Could you shed some light on this collaboration with Unitika Tokiwa Factory and the Ministry of Economy Trade and Industry (METI) that led to the development of your patented Palpa Premium yarn technology?
The Palpa Premium is a patented material that was developed through the prototype development initiative leveraging the "Manufacturing Subsidy" program of the Ministry of Economy, Trade, and Industry (METI). This program was designed to financially support the introduction of manufacturing-related equipment and technological innovations. In 2012, capitalizing on this grant, we commenced research and development of a distinctive thread and material in collaboration with the Unitika Tokiwa Factory, a spinning manufacturer. The term 'Palpa' refers to a dual-layer structured yarn developed in 1975 through the specialized technology possessed by the Unitika Group. This yarn comprises a core (central part) and a sheath (outer layer), and the fabric made from it was primarily developed for durable and functional uniforms, which have since remained bestsellers. Building on this technology, we introduced the Palpa Premium, a refined and delicate material tailored for dress shirts.
Through continuous R&D, the new material emerged: its core made of recycled polyester and its sheath using extra-long cotton (a high-quality cotton with extended fiber length), culminating in a luxurious hybrid fabric. This material's distinctive easy-care feature (resistance to wrinkling) sets it apart, as it's developed through a completely different approach than typical shape-memory materials. First, there is a significant reduction in the use of resins (chemicals). Many cotton easy-care fabrics are treated by either applying or spraying a special chemical resin on the fabric surface to bestow its wrinkle-resistant nature. Contrarily, the Palpa Premium utilizes a unique two-layer structure, with cotton wound around polyester, inherently generating its wrinkle-resistant characteristic. This process drastically reduces the amount of resins (chemicals), making it an eco-friendly material considerate of both producers and consumers.
Secondly, it boasts superior comfort. The outer layer of the yarn used in the Palpa Premium is covered with lustrous, high-quality cotton, offering a touch so smooth it feels akin to wearing 100% cotton products. Thirdly, it offers excellent hybrid functionality. While being an eco-friendly product with a comfortable touch and wrinkle resistance, it dries more than three times faster than regular 100% cotton. When compared to 100% polyester easy-care products, it's less prone to staining and easier to clean, ensuring prolonged and cleaner wear. By adeptly combining the best attributes of cotton and polyester, we have crafted the environmentally conscious hybrid product that is the Palpa Premium.
During the Covid-19 period, retail stores struggled, with e-commerce platforms becoming more and more popular in Japan. However, it has been far from perfect. For instance, a friend of mine in France bought some shirts from a very big store in Japan. She paid the price that was indicated. However, two weeks later, she had to pay DHL for the shipping. Once it arrived in France, she had to pay again. She was not aware of the import taxes. Your company started your e-commerce in 1998 and the price that you show is the price that you pay when purchasing your products. How has your business adapted to take advantage of this growth in e-commerce?
We have a long history when it comes to our online store. We started our online store 25 years ago in 1998. At that time, not many people used the Internet as it was not widely available. Back then we had a shop in Tokyo Station, where many business people passed through to catch the trains. However, our shop’s location was not convenient for everyone, so we decided to start our online shop. This also increased our brand recognition, with more and more people buying our products. We recognized that the Internet would grow in popularity so we started introducing more of our products online. All of our products are reproduced and restocked once they are sold. We realized that there was a difference between what we were selling in-store and what we were selling online. To solve this issue, we created a unified system, where we uploaded pictures of the products that we had in-store in real time. Our online store has been very successful as we sell as many products online as we do in-store.
You spoke earlier about your collaboration with Unitika Tokiwa Factory and METI. During our interviews, companies tell us that partnerships are crucial to penetrating foreign markets. What is the role of partnerships within your business model, and moving forward, are you searching for new partners to help you penetrate new overseas markets?
If the opportunity arises, we are open to cooperating with other companies. Unitika is a company that we have had a long-lasting relationship with, and one example of our collaborations. Additionally, we collaborate with companies possessing specialized techniques in botanical dyeing, as well as with temples in Kamakura. There are over 100 Zen temples in our local Kamakura area. We extract dyes from plants harvested at these temples to dye threads and subsequently produce shirts. Conventionally, dyeing processes involve the use of large amounts of dyes, water, and chemicals. However, our unique technique, which utilizes natural materials for dyeing, minimizes these inputs. This approach is part of our initiative to sustainably use plant waste throughout the year, utilizing seasonal plants ranging from hydrangeas to maple, ginkgo, and cherry blossoms. Shirts colored with the soft hues typical of botanical dyes have become one of our most popular products.
Another one of our initiatives is that our employees go to the areas where the flowers are blooming and pick up flowers that have been thrown away or are not needed. This is a good gesture to show that we are a sustainable company. We take the petals from these discarded flowers and bring them to the dyeing companies.
Your company has a robust international network. As you mentioned, you have had stores in New York and Shanghai as well as select stores that you have wholesaled in various locations such as Thailand, Hong Kong, Taiwan, Singapore, Philippines, Sweden, France, and U.K. Added to this, you have a thriving e-commerce platform. First of all, what have been the main lessons that you have learned conducting your overseas business? Secondly, are there any new markets that you are targeting for growth, and what kind of strategies will you employ to do so? Will it be M&As or joint ventures, or will you open a new shop in a new location? What strategies will you use for your overseas expansion plan?
We are a family business and have done everything by ourselves since our establishment 30 years ago. We want to adhere to our philosophy and continue to operate in that way. Moving forward, we want to expand our business in Japan, as we have still not fully covered the domestic market. On September 15th of this year, we opened our first store in Sapporo, which will also be our first shop in Hokkaido. Next year, we plan to open more shops in Japan. Our products have to be fitted, which requires our customers to visit our shops. Later, those customers can visit our online store and buy the same products again. When we set up a store in Japan or overseas, we complement it with internet sales. However, buying a shirt for the first time online can be difficult for some people as they do not know the correct sizes and measures, and manufacturers do not fit the shirts to your standards. Knowing your size by visiting our stores means that you can buy the same shirt again online at a later date. That is part of our strategy.
When it comes to overseas, we want to reactivate our overseas expansion. In October, I will be traveling to New York to look into reestablishing ourselves in New York and fulfilling the expectations of our American customers, as 80% of the total purchases from our global online store come from the US. We believe that this has been a result of the success of our shop in New York. This is the reason why we want to restart our business there. By showing the actual products, people get to know your products. They can later check your online store to see what other products you have. In the end, they may become loyal customers.
It is very difficult for us to partner with a company. Our unique business model is very hard to replicate. Placing our trust in the hands of potential partnership companies is not easy as we have worked hard for over 30 years to build our brand. We would also like to avoid reducing the price of our products. Controlling our brand and recreating the same story that we have in the domestic market is crucial for us.
This year your company is celebrating its 30th year anniversary. Imagine a scenario where we fast forward to your 40th year anniversary in 2033, and we return to interview you again. Do you have a personal goal or ambition that you would like to achieve with the company by that date?
First of all, we want to continue introducing our high-quality products to both the domestic and overseas markets. We want to spread the word about our products to the wider global audience. We have already begun the steps to do so and we want to continue to grow our business domestically as well. Our financial year closes in December and we expect our turnover to be roughly JPY 5.2 billion. In 10 years, I would like to have doubled our turnover to JPY 10 billion. Likewise, I want to increase our brand recognition across the globe.
You probably already know the story of the tortoise and the hare. In that regard, our company is more like the tortoise rather than the hare. Our company has progressed steadily over the past 30 years. We have taken very keen and very firm steps. However, this happened in a very slow and concentrated manner. These have been the principles that we have adhered to throughout the history of our company, and we want to continue in that vein for the years to come. We currently live in an ever-changing world where things change very quickly. Making rash decisions regarding the growth of our business and pushing ourselves too hard is therefore perhaps not the best choice. The American market will be important for us going forward. For the time being, reopening our store in New York and potentially opening a second store in Washington DC are my goals. While they may be ambitious goals, we will steadily take the steps that are required and we will not rush to achieve them.