From a family-run paintshop to a leading trader of paints, painting equipment, adhesives, building materials, Nishii is looking to expand its business globally by bringing its high-quality products to new markets, particularly in the ASEAN region.
As a trader of coating materials such as paint, what are the strengths and weaknesses of Japan's chemical sector today?
Okitsumo is located on the outskirts of Mie Prefecture, but it has remarkable and highly functional chemical production. I feel that Japanese companies still have the basic technologies and innovative spirit to create unique products.
In the next 15 years, 1 in 3 Japanese people will be over the age of 65, presenting two main challenges for Japanese firms. The first is a labor crisis as there is a smaller pool of talented young graduates to whom seasoned workers can pass their skills onto, and the second is a shrinking domestic market. What are the challenges and opportunities that Japan's demographic shift is presenting for your business?
Japan's population of 125 million will continue to decrease. However, European countries like France, Germany and the UK, with a population of 70 to 80 million, have a strong global presence. Maybe it is not a matter of the declining population, but rather emphasizing educating talented personnel and creating an environment that can foster innovation. The restructuring of Japanese SMEs will result in the majority of them going out of business, which could stir changes in the market. As an SME, we need to welcome transformation and be flexible in catering to the market. I think it is Japanese politics that hinder companies from being more innovative. Elon Musk has built multiple rockets. Even with many failures, he said that it was still a success because he was able to gather relevant data and use that experience for the next opportunity. On the other hand, Japan makes a big deal of failures like what happened with Mr. Horie. His failures while building rockets in Hokkaido for experimentation were very much publicized. Venture companies do not have much room for innovation due to the government holding them back. It is crucial to request a change in politics; meanwhile, companies need to readjust. Our paint and chemical business is only about JPY 20 billion in the market, so we need to diversify our business to survive.
Can you elaborate on how your company is being flexible and which industry are you looking to diversify into?
As a trading firm for paints, we are very quick and flexible in responding to the needs of our customers. Since the paint industry is diminishing, we want to diversify out of being just a trader of paints. We focus on other industries like automotive, agricultural machinery & commodity, semiconductor and food processing. Our paint factory uses electricity, paint, air and water. Nishii employees are sales representatives and specialists of their dealing products. In the industrial region, Nishii's sales employees also provide consulting services to maximize production efficiency by advising customers on how to improve the efficiency of production energy in their plants.
In addition, we have set up a compressor machine maintenance division in-house to provide services to our customers. We are trying to diversify our business to less restricted areas. As long as we do our business in Kyushu, we can sustain our partnerships and supporters. Because paint and chemical businesses are more local, expanding to Tokyo would mean fewer supporters because of the existing routes. Hence, it is vital to expand our business to areas that are not restricted to locality.
About 10 years ago, your plant division started the Nishii Farm Service, which notifies customers when their air compressors need to be taken in for maintenance. What motivated you to develop the Nishii Farm, and what added benefits does it bring to your customers?
Our farm services provide maintenance for air compressors and important components to contribute to the business continuity of our customers. If something breaks down, we immediately provide a functional replacement that our customers can use until we fix the broken component. We were looking for a business that would have a long-lasting relationship with our customers. Since machines perpetually require maintenance without being affected by the economy, we thought it would be a great area to expand. Servicing 1,000 to 2,000 machines is profitable. It reflects the concept of having cows on a farm, which requires food and maintenance. When some cows die, they have to be replaced. We have been looking for those cows for a while. Having found them, we started this business.
Can you tell us more about your original brand product, the AZ brand?
The AZ brand products are being produced in China, and it is a less expensive commodity we have developed based on customer needs. The initial purpose of this brand is to support local, small and family-run paint shops. These shops are important in local areas, so we imported the paints in lots and packed them in smaller quantities for easier purchasing and distribution. Because the number of family-run paint shops is dwindling, we are gathering customers online through our e-commerce services. We used to focus on the Kyushu area, but we are able to reach remote areas with less population density in Japan like Shimane prefecture. We foresee growth in this area.
In our business expansion, we do not jump over to an extremely different sector. Our strategy is gradually shifting our business and derived from our company’s strong points like our compressor and AZ brand business.
What strategies are you using to grow the AZ brand further? Are you looking to export to overseas markets?
We are not looking to expand our AZ brand overseas, but we are trying to branch out through our architectural and industrial paints. In Taiwan, we have established a joint venture with a local company that deals with optical cameras. We discuss the specifications with their headquarters in Japan while our local companies deliver and assist the local factories in China and Taiwan with machinery maintenance, troubleshooting and training. With the same partner, we have established a local subsidiary in Vietnam, where heat-resistant paints that can increase air-conditioning efficiency are in demand. We are trying to expand to other hot countries like India and Thailand.
Can you tell us more about your R&D strategy? Are you currently working on anything that you would like to showcase to our international readers?
It serves more like a support center, where we train our customers. We have an R&D center in the north of Kyushu, Kitakyushu, for the industrial field. We have introduced the cutting-edge French heater and drier from Sunkiss Matherm, which is a unique technology. Conventionally, the construction machinery metal has to be heated up to dry the paint. However, this machine saves energy because it skips that step. We have been sending our employees to search for innovative approaches in numerous facilities and devices in Europe and the US. Due to the pandemic, however, that activity has been interrupted.
For the one in Kurume, there is a lack of human resources in the construction sector, so we are trying to maximize our efforts with less manpower by using machinery from the US and providing maintenance services for construction paints. And the support center has a role of training center for our customers to learn about the machine.
What role does collaboration or co-creation play in your business model? Are you looking for any co-creation partners in overseas markets?
We are looking to emphasize collaboration from here onwards, such as working with heat-resistant paint companies in Vietnam to continue our business partnerships domestically and internationally.
What other countries or regions have you identified for further expansion into, and what strategies will you employ to do so?
Our bases in Taiwan and Vietnam are still small, so we want to expand through partnerships because we do not fully understand the local conditions. Instead of establishing a local subsidiary with high hurdles, we would like to build partnerships with motivated companies that have built credibility in the region.
One of our greatest advantages as a paint company is having paint engineers who have a technical perspective. Paint manufacturing utilizes the most amount of energy and involves a lot of failures and losses. Making improvements on the line is important, and we can provide consulting and related services. It would be a great opportunity for us if we can find customers overseas who want to improve their production line.
Imagine we come back in seven years and have this interview all over again: what would you like to tell us? What are your dreams for this company, and what legacy would you like to leave to the next generation?
As the president, I do not have a specific numerical target because we began as a small family-run paint shop. I am actually amazed that we have not gone out of business. The core essence of the company is our people who continue to work hard. The other three fundamental elements of a company which are said to be things, money and information come from the people. As management, we need to raise the capacity of our human resources. The important thing is to have employees who could be innovative while having strong bonds to overcome future difficulties. My utmost dream or mission is to create an environment in the company that makes our employees happy and proud to be working at Nishii.
For more information, please contact us; https://nishii.co.jp/inquiry