With over 70 years’ experience, Nakagawa is a world leader and highly reputed globally for its premium product quality and services. The company’s portfolio includes finished products such as chains, necklaces, rings and bracelets, as well as parts and components which it develops for clients in the jewelry industry as an original equipment manufacturer (OEM), including several high-profile designers and fashion brands in the US and Europe. We speak with president, Takeyuki Nakagawa, to learn more about the company and its plans to strengthen its global presence.
“Monozukuri” is the pursuit of excellence in manufacturing processes, and craftsmanship that is so admired around the world. What does monozukuri mean to you as a manufacturing company, and how do you apply this craftsmanship to your manufacturing processes?
To us, monozukuri means our craftsmen themselves, handwork they perform, and their attitude seeking perfection in their work. This craftsmanship is exactly our attitude as a manufacturing company in engaging in our work; this is the source of excellent techniques and inspirations. Generally speaking, every company now can produce the same products using the same machines regardless of the country they are in. But we strongly believe that the essence of manufacturing resides in excellent skills of the operators maneuvering machines, and that it is what we call monozukuri. We perform about 80% of our entire manufacturing processes by machines, but we well know that the operators’ maneuvering skills could make a big difference in quality of our products.
Other important factors in monozukuri are the products, costs and the delivery deadline. Our products are exposed to harsh competition around the globe. But we produce very unique and creative products which our competitors can hardly copy, and we endeavor to meet market demands in terms of our prices; we believe these are our strengths. Also, I would say another strength is that we build a long-term relationship of trust with our customers by meeting the delivery deadline requested by them.
Let me remind you that there is another key aspect in the Japanese way of monozukuri. It is cooperation of several manufacturers in producing and finishing one certain product. If one manufacturer could perform halfway in manufacturing processes, then other manufactures would come in to take over the rest of manufacturing processes. If any defect is ever found in the semi-finished product, the manufacturer originally in charge would join other manufactures to follow up. It means that several manufacturers assume joint responsibility until one certain product is finished.
Can you give us some examples of that?
As one example, we produce various types of clasps for jewelry and accessories, which have excellent quality and functionality. Even our customers in America and Europe admire the quality of clasps we have achieved. We do business mainly in planning, manufacturing and merchandizing of such basic assembly parts as chains and clasps for jewelry and accessories. We greatly acknowledge that our products must have originality and be different from products made by our competitors.
You are a manufacturing company. Do you design your own products? If so, how can you design products that are competitive and the best suited to various markets?
For us, design doesn’t mean artistic design, but it means industrial design that offers ease of use and is suitable for practical use. We are good at producing industrial designs. This is also our strength.
The jewelry and accessory market is expected to reach US$ 480 billion worldwide with an annual increase of around 8%. We can see this trend in China, India, Hong Kong and other Asian countries where an increase in the purchasing power has let them purchase more junior jewelry and accessories. What is your expectation to increase your market share, and what strategies do you have to take advantage of this market?
We are closely watching the trends in the jewelry and accessory industry worldwide. We already have sales offices in some key locations for this industry, and from there we are eagerly promoting our sales activities. On the other hand, with convenience enabled by the Internet and availability of online sales channels, we now can ship anything from Tokyo to anywhere, not only to those countries and areas you have just mentioned. We are trying to enter into new overseas markets in pursuit of expanding our business arena.
As a Japanese manufacturing company, what are your main competitive advantages in this approach of trying to enter into new markets?
In April 2020, our company was granted the certificate from the RESPONSIBLE JEWELLERY COUNSIL (RJC). This certificate is widely recognized as an international standard for the jewelry industry. Our company is one of only five Japanese companies that have obtained this RJC certificate. When it comes to our main competitive advantages, as you have just asked me, this kind of certificate provides a guarantee for our product quality to our customers worldwide. Even major jewelry companies in Japan, let alone our competitors, have not yet obtained this certificate.
In regard to our expansion to overseas markets, we already have sales offices in the U.S., Germany, Hong Kong and Thailand. If you take look at our company profile, you would understand that we are not new to doing business overseas. Moreover, with availability of e-commerce platforms, we now can deliver all of our products manufactured in Japan to any place around the globe, not only from our sales offices overseas.
How important is e-commerce for your expansion strategy?
So far, we have focused on our domestic online sales via Japanese e-commerce sites. But with the emergence of e-commerce sites targeting consumers overseas, we now can sell our products more easily to overseas markets via such e-commerce sites. We no longer can ignore the presence of such e-commerce sites. Nevertheless, we will continue our business internationally via our sales offices overseas, with the aim of providing much better services than those available with e-commerce.
When it comes to the presence of your company in the U.S., Germany, Thailand, and Hong Kong, what strategies have you taken to achieve this presence in those countries?
We were the first Japanese jewelry company to enter an overseas market. We were a pioneer in the industry. We have expanded our sales channels overseas in cooperation with our business partners overseas. By continuing this diligent effort, we are increasingly admired in overseas markets for our craftsmanship and our product quality resulting from our persistence with monozukuri. Such admiration has allowed us to improve confidence in our products even in overseas markets.
When you envision your future growth in the years to come, what would be your strategy to keep this business expansion? Is it through your network of distributors or your sales offices located in Japan and abroad? Are you looking for opportunities for M&A and partnerships?
We have begun focusing on digital commerce as a tool for our business expansion, in addition to our existing sales offices. It is because digital commerce is the best way to distribute Japanese products all over the world. Our sales offices overseas have begun selling our products through SNS, in addition to their conventional distribution channels.
For us, there is no difference between the domestic market and overseas markets, when it comes to our products and our ways of selling. The Japanese jewelry business market shrank by about 50% compared with 20 years ago. We therefore must promote our business expansion overseas even more.
What percentage does your domestic operation represent in terms of your overseas markets?
Overseas sales account for about 30% of our company’s total sales. The European and the U.S. markets are still main arenas for the jewelry and accessory business; but, an increasing number of jewelry and accessory companies are moving their factories from China to Thailand or other Southeast Asian countries. Mos major European companies have already established their manufacturing base in Thailand.
Which sectors in the domestic or international jewelry and accessory market have more potential for your business?
Recently, we are shifting our business focus to precious metals. One of our strengths in business operations is that we can handle a wide variety of materials. As I have already mentioned, we deal with brass, titanium, stainless steel, silver or precious metals like gold and platinum. As the demand has been increasing for precious metals worldwide over the years, our company now focuses on this sector.
You have mentioned that your company can handle a wide variety of materials including precious metals. What makes your company different from your competitors in manufacturing processes?
We have two factories in Japan and one in Sri Lanka. We found labor costs in Sri Lanka were relatively low and Sri Lankan workers had good dexterity; these were the reasons why we chose to manufacture our products in Sri Lanka. When it comes to the Japanese jewelry and accessory market, requests from our customers are becoming very specific and professional, partially because of special sales channels we offer. In addition, we have to meet the strict quality standards required in Europe; but we are able to ship our products from the Sri Lanka factory whose quality is almost the same as that manufactured in Japan. We can capture the demand in overseas markets more easily from our sales offices overseas, not just those located in Japan; this is also our advantage.
How can you ensure the same quality of your products manufactured overseas as those manufactured in Japan? We often hear that this is a challenge for Japanese manufacturers.
The Sri Lanka factory is operated using the same manufacturing methods adopted by our factories in Japan. We regularly dispatch Japanese technical experts to the Sri Lanka factory for 3 to 5 years in turn, in order to have them teach local staff how to perform assigned work properly. This is the way how we secure and maintain necessary human resources. We also invite such locally employed staff to our factories in Japan in order to give them opportunity to learn the Japanese way of performing assigned jobs, and moreover the Japanese craftsmanship known as monozukuri. Upon returning to Sri Lanka, such locally employed staff are expected to teach the techniques they learned in Japan together with the Japanese craftsmanship of monozukuri to the factory workers there. These are how we have operated our Sri Lanka factory for over 40 years since its establishment.
Could you tell us about your R&D activities and upcoming products if you can share with us?
We have our own R&D division within our factories, but we don’t think we should rely solely on this division when it comes to development of new products. Therefore, we have organized a cross-sectional project team for product development within our company; we proceed with our product development activities with this team, where personnel from the sales and manufacturing divisions get together and exchange their ideas. We believe, by doing so, we would be able to proceed with development of new products flexibly, while directly approaching our customers and client brands.
How important is the role of OEM to your company, and how much potential do you see in the cooperation of foreign brands?
OEM business could contribute greatly to the growth of our company. In cooperation with many fashion brands and character brands, we supply various products and services for them on an OEM basis. The OEM business often enables us to make unexpected achievements. Some of the brands sometimes give us difficult requests beyond our imagination; but, by tying to meet their requests, we often could achieve much better results than expected. Such customers are very important for our company; by placing OEM orders with us, such customers make us expand boundaries and think outside the box. We hope we could have more opportunities for our growth by handling more OEM orders. We believe we could find and develop excellent techniques through our engagement in OEM.