Fashion that Brings Excitement

Japan is renowned for its cultural heritage and craftsmanship, innovative design, high-quality textiles, and advanced technologies integrated into a well-automated supply chain. Tokyo Base builds on this rich tradition to promote Japanese fashion globally and showcase the finest contemporary design while preserving the Made in Japan essence. How would you define the uniqueness of the Japanese clothing, fashion, and apparel industry, and what are its main strengths?

The history of Japanese apparel is quite short. In fact, it started after World War II. Prior to that, Japanese people were wearing kimonos. The Western influence and the adoption of a Western style of apparel started after World War II, so it’s only about 80 years of history. My predecessors, the senior generations, introduced Western apparel ideas and inspirations by importing products from the US and Europe. As a child, I was very motivated and got new inspiration about how Japanese apparel can evolve, and I was able to combine what I was exposed to as a child with new ideas into something that could be referred to as “produced by Tokyo,” which is new elements and ideas based on Japanese culture but influenced by Western ideas. That is augmented by traditional Japanese craftsmanship skills that have been passed down in Japan through generations. Combining this craftsmanship and manufacturing skill with new ideas makes Japanese brands unique.

Since COVID, we’ve seen huge changes in how we live our lives. For example, Japan has become the fourth-largest e-commerce market in the world. Japan is expected to have over 37 million foreign visitors to the country by the year’s end, with many of those wanting to experience Japanese fashion. How are you tapping into or responding to these trends?

During COVID, there was an increase in online shopping, but what we experienced was that too much emphasis on e-commerce was not good for the business since that channel tends to focus on price competition. If you look at the world’s major brands, like Louis Vuitton and Uniqlo, their e-commerce business is quite small, and we even saw some other companies move from first-class locations to third-class locations because they lost some of their brand integrity by focusing too much on e-commerce and discounting their products too much. Based on that, we realized that it’s important that we strengthen our in-store experience rather than emphasizing e-commerce. Now, especially with the rise of inbound tourism, more customers are visiting our shops, and we want to create a unique in-store shopping experience. Of course, we also want to provide e-commerce sales channels, but that’s not our focus.

I remember in 2021 and 2022, when a lot of fashion stores in Japan scaled back operations, you were one of the few with MASH Holdings to expand stores aggressively. This has had some mitigated success. In Japan, you’ve kept most of those stores, whereas in China, you ended up scaling back non-profitable stores to focus on the ones in key urban centers. Now, two or three years later, what do you think have been the results of this aggressive store opening at a time when other companies scaled back, and what did you learn from the experience? Also, what can we expect in terms of store openings in the future?

The store moves during COVID-19 differed in Japan and China because the COVID-19 impact came at different times. In Japan, when the Japanese government announced the emergency state in February 2022, for the first half year, we were doing well since our fashion brand is supported by people who chose it as a preference, so the economy does not strongly affect the purchasing power or intent of our customers. As you mentioned, COVID caused many brands to abandon prime locations, and the rent of those locations became lower, so we seized the opportunity to expand the number of physical stores.

In China, for the first year or two, we did very well, and sales even increased during COVID. Still, in the third year, the government adopted the Zero-Covid policy, and as a socialist government, all the stores were forced to close. There were no shoppers, which inevitably resulted in us closing stores.

Our business strategy is to focus on the major cities. That strategy has been shaped based on our experiences. For example, in Japan, we concentrate on stores in Tokyo, Osaka, and Nagoya, the three major cities in Japan, and we aren’t in Sendai, Sapporo, or Fukuoka. The reason for that is that we have a dominant operation policy where we concentrate our sales force. Concentrating on stores in specific cities makes it easier for us to develop good human resources and make them more efficient. It’s also not an issue of population size. Rather, since our products are premium fashion, we want to be near a population that is sensitive or partial to that.

In China, we have stores in major cities like Shanghai, Beijing, Guangzhou, and Shenzhen. In the past, we had stores in other so-called emerging major cities because we had good partners there, and these cities had populations of over ten million people, but we realized that although there are ten million people, there are not enough people who are interested in high-end fashion, so we closed these stores.

That experience led us to learn that we should only focus on the major cities and have a dominant operation strategy so we can allocate resources efficiently. We are now also applying that in other overseas markets. For example, we now have a store in New York because that city has the highest fashion sensitivity. If we were to someday go to France, I would focus on Paris and, likewise, London in the UK. Therefore, you can say that the strategy focuses on cities rather than countries.

It’s interesting to hear you say that because one thing that makes Tokyo Base unique as a brand is the in-store experience. For example, your Tokyo store in Marunouchi is beautiful and is also great for discovery because you have different labels and original creations, and you work with creative designers. You mentioned you won’t be over-focused on e-commerce but rather on enhancing your in-store experience. What do you mean by that? As you expand internationally, how do you plan to bring that unique Japanese sense of omotenashi, or hospitality, and the great in-store experience that you have here in Japan to overseas markets?

We are a fashion brand and a retailer, so there are three major elements we need to focus on. The first element is the product. All our original brands are made in Japan, and we also have a select shop operation that showcases only Tokyo brands.

The second element is the sales force, which is the core essence. All our salespeople are in-house. We don’t work with other retailers or partners, even outside of Japan. We have a Star Sale direct sales system where each salesperson takes responsibility for their own customers. Salespersons are connected with customers through social media, email, or other contacts to constantly provide this omotenashi service to best fit the customer’s preference. This system is applied in other countries as well, and local staff is trained by those who have experience with Japanese and Tokyo Base omotenashi.

The third element is the atmosphere and design of the store, which is very important and created to suit the local market and the brand image. We don’t package store design and replicate it. Rather, each store has its own unique design.

It is our goal to replicate these three elements wherever we operate.

We currently have Studious Online and Zozotown for our e-commerce distribution platforms, but in the future, we envision that each individual staff member will have a dedicated e-commerce channel or provide customized service to their clients. It’s not like using an online avatar. Rather, the first encounter would be done in a store and then as the salesperson learns the customer’s preferences, a relationship is formed, contacts are exchanged, and the salesperson can make a custom website specifically for that customer to suggest apparel and designs. The customer can then make a purchase directly through that site and the salesperson. China already has a powerful WeChat app with a direct payment feature, so once this type of option is introduced around the world and becomes more common, this direct style of e-commerce will be valuable.

When do you think this will become available?

In Japan, we will start the early phase of this direct e-commerce model this February. It will probably function by having the salesperson choose some specific products and send them through the popular Line app, and the payment can be settled through a digital system. We have created a digital platform that supports that.

At first, it will be a basic service. For example, if a customer comes to the store but we don’t have their size, the salesperson can directly carry out the sales using Line or another social media application. In the future, we will focus more on personalized e-commerce provided by the salesperson.

The reason I have developed the system is that retail stores naturally have downtime, which is a waste of time for salespeople, so I want to use this downtime to help them make other sales and use new sales channels. This way, we can increase the productivity, profitability, and salary of the salespeople.

Tokyo Base has been a disruptor in the Japanese fashion sector. You talk about the sales staff and remuneration, which is a big point that has gotten a lot of media attention. As you mentioned, in 2016, you introduced the Star Sale System, which allows employees to get cash based on the sales they generate. This year, you announced you would increase the entry-level base pay to JPY 400,000. If you look at the luxury market, this is a kind of benchmark outside of Japan. Why do you think it took so long for a major fashion and apparel brand in Japan to adopt this type of revenue model for its employees, and what do you feel has resulted from this increase since it’s something you just announced this year?

In Japanese retail stores, especially fashion retail stores, the staff in the shop are typically considered as shop staff and not considered a sales force, but we have changed this mindset by considering each individual as a salesperson. In other industries, like real estate, art, or automotive, there are always sales staff who actively engage with the customers, but the traditional Japanese mindset is that shop staff are attractive girls who are just there to listen to and provide what the customer wants. I don’t think this should be the way for fashion sales, so we have changed this mindset by calling each staff member a salesperson and providing adequate compensation for their work.

Compared to, for example, France and New York, especially with the costs and exchange rate, JPY 400,000 may seem low. It is also not that high compared to other industries in Japan, so we still are aiming to increase this, but by being able to provide JPY 400,000 in the fashion industry, we can get more than double the applications and target the highest profitability thanks to the revitalized atmosphere in the company.

Tokyo Base has had a strong financial history. This year saw continued robust financial results, with net profit exceeding expectations at JPY 335 million. You were also the youngest fashion company to be listed in the first section of the Tokyo Stock Exchange. Your midterm plan is to achieve JPY 30 billion in sales by 2026, with JPY 25 billion from Japan and JPY 5 billion from overseas. Long-term ambitions include having 100 stores globally across ten cities establishing your brands as benchmarks for Japanese luxury on the global stage. Can you tell us about your progress in terms of your midterm plans and the strategies you’re implementing to achieve them?

The midterm plan we announced publicly is a minimum promise that we need to achieve, but we have higher internal targets, and we have two strategies for achieving those targets.

The first is to strengthen our overseas presence. Our Hong Kong shop is doing well and is profitable. China has also recently turned profitable. We want to strengthen our sales force and increase our profitability overseas, and I envision at least one shop in Europe, maybe in London or Paris. I also recently visited Seoul, which could be a potential new location for our brands.

Our second strategy is to diversify our brand lineup. We currently have six existing brands, including The Tokyo, Conz, City Tokyo, and United Tokyo, and we want to strengthen those with new brands. Next year, we will launch RITAN, a ladies 'wear brand, and we will launch a Japanese souvenir shop with selected accessories and miscellaneous goods. Overall, our plan calls for about ten different brands and businesses to achieve a more diversified portfolio while also strengthening our existing brands and expanding our customer bases.

Your notable partnerships include, in 2024, your alliance with Makuake, which integrates retail operations to launch new projects. You’ve got collaborations with brands like John Lawence Sullivan and Irenisa. What form will the partnerships of choice take for Tokyo Base in the future?

The type of collaboration and partnership differs depending on our business model. For example, for select shops like Studious and The Tokyo, we have an active collaboration with brands we select from Tokyo that can only be purchased in these stores. The Makuake alliance you mentioned is a cloud funding platform that is seen mainly by the business community, so with our brands like United Tokyo and Public Tokyo, we create specific products and sell a certain amount of those items to reach a target, like JPY 10 million Japanese. We also have collaborations with Japanese subcultures like anime and manga, including Dragonball and Pokémon.

We also had a collaboration with the soccer player Minami Yuta, but that was solely due to our friendship. I designed a uniform since he was retiring, so that was an unusual thing that’s not really in line with our usual business practices.     
For manufacturing partnerships, we want to have stronger ties with Japanese factories, especially in dealing with succession issues, as more factories are going out of business because of those issues. Therefore, it’s important that we work together to sustain their business and facilities so we can continue to manufacture in Japan and maintain quality made in Japan.

As for M&A activity, we have an acquisition of a designer brand in mind. We have a strength in retail, and our Tokyo brands excel in their design capability, so joining together will create a positive synergy.

Another interesting partnership that you had was with Yohji Yamamoto, where you operated one of their stores in China. I believe that the contract ended this year, but is that something that you’d be interested in doing more in the future?

I do have a vision to expand the operation of other brands overseas. Comme des Garçons, Yohji Yamamoto, and Issey Miyake are three top Japanese brands, and we want to expand that to include more of the newer, emerging brands, probably those with less than twenty years of existence.

You created the company and made it what it is today with your own sweat and tears. As a founder, eventually, there will come a day when you move to another venture or hand the company over to the next generation of leaders. Is there a goal or ambition that you would like to achieve before that happens?

As the founder and the president of the company, my mission is to achieve at least JPY 100 billion in sales, which is five times the existing turnover. That’s my minimum commitment. As a listed company, it’s important that we continuously grow our scale and show our presence in society. My target is to retire at 50, so I have about ten years, as I’m 41 years old now. With the time remaining, it’s important that I enhance the company structure so it can become sustainable for future growth. After retirement, I might remain as the chairman to support the company, but it’s important that the young mindset is always kept in the management since fashion changes and develops quickly. Therefore, a young eye must always be kept. The next president may start at about 40 years old but retire at 50. That would be my overall vision for the company.

Seeing the major Japanese predecessor brands, the founders are so great that it’s hard to find a comparable successor. For example, Uniqlo’s founder, Mr. Yanai, has been there for his 50s, 60s, and 70s, and he is still there because there is an issue of finding the next generation successor. Although personally and emotionally, it is sad to leave the company, it’s important to find a successor, and that may be more challenging than growing the company. Therefore, as the founder, it’s important that I create a sustainable structure that is passed on from generation to generation.

For more information, please visit their website at: https://tokyobase.co.jp/