The company behind the renowned Sankosha and Ajax brands of dry cleaning machines, Sankosha has been an global ambassador of ‘Made-in-Japan’ quality for 30 years.
Traditionally Japanese monozukuri has been famous worldwide due to its attention to detail, as has the kaizen philosophy of the swordsmith working on the katana so that it is perfectly crafted. Now of course in modern times, it is totally different, and all about providing products that meet market needs, with quality, cost, and delivery (QCD) being critical to success in the business world today. As a company at the forefront of commercial cleaning machinery, can you give us your take on monozukuri? What advantages does it give you in the international arena that allows you to compete?
First and foremost, the strength of Sankosha’s monozukuri is that we do 95% of our manufacturing in-house. We also take care of design, sales, and maintenance by ourselves. We sell globally through our original network. Compared to other companies, we are unique in the way that we have been able to establish a group network, which allows us to take care of everything by ourselves. This is something that other companies are not doing. However, this is not the business model we initially intended to set up.
Tracing back our history, there were five major companies in Hino, and the companies that are now located in Hachioji are the spinouts of those companies. In Hachioji, some companies were initiated under the roof of the farmland storage area, and these companies evolved by using their technology. Finding a subcontractor within Hachioji is very difficult. This is because the spinout companies that are located in Hachioji are research and development entities. The subcontractors that we need are mainly present in the automotive field. The reason why we have such a high percentage of in-house production is that we are located in Hachioji. If we were located in areas where the automotive or shipbuilding industries are prevalent, then we would have been able to have a subcontracting model.
As you know, the founder of our company owned a dry-cleaning shop. That was why he was highly knowledgeable when it came to dry cleaning machines. Coming up with an idea is one thing, but it takes 10 times more work to make the actual product, and ten times the effort to make the production line. It also requires ten times more energy to do the promotion. Therefore, we need to invest accordingly. For example, if the idea is one, you have to invest 1,000 times more effort to manufacture and promote the product. This applies to all companies. Sankosha was not able to absorb all the costs by realizing this one idea within Japan. That was why we expanded overseas. Since we could not invest so much money into advertising, we exhibited ourselves at the exhibitions in overseas localities. We were able to find dealers and create a network. If we were Coca Cola for example and had a massive market, we could invest. However, our market is niche. Therefore, mass marketing with large advertising expenses will not pay off. We are a global niche company that is known by those in the know.
The relationships and friendships that we built over the years expanded into a dealership in the long run. Thanks to this dealership, we can reduce the amount of investment per production. Centralizing our development and production in Japan has also made it more efficient.
Your company first established a base in the US in 1993. You have that niche leadership and are representative of the “made in Japan” brand overseas. Could you tell us a little more about your experiences there in the past 30 years? What has been the biggest lesson, and how do you further plan to continue to grow in the US market?
We entered the US market in 1993, and in 2007, the ratio of domestic to overseas sales was 50:50. Currently the ratio is 20:80.
The second interviewee answers
In 1993 when we first went to the US, “made in Japan” was considered of high value. That was the case for all products that were made in Japan. Sankosha’s quality control was highly valued by our customers. However, the business model in the US was a little different from our business model. Our main competitors were Unipress, which is based in Tampa, Florida. They and other American finishing equipment companies do not make machines that last very long. Their business model is for the machines to be able to work for two or three years without any problems. However, after this period some of the parts break and need to be replaced. The replacement of these parts with spare parts is their second business. Our brand Ajax which we took over in 2006, was a giant manufacturer in the US. They were number one. However, their customers were unhappy, as the new equipment they bought did not last very long, and as a result, they needed to regularly pay for maintenance. This was also the business model of Unipress and the other companies in the sector. Then we entered the market there.
In the US, it is very difficult for foreign companies to enter the community, as the people there prefer to deal with US companies. Our first customer was a Korean who had been in the US drycleaning industry since the 1970s. At that time, the US government accepted Korean people. However, the Korean people had difficulties finding work. When US dry cleaning companies began to lose their sales, they decided to sell their businesses, and as a result, many Korean people entered the dry cleaning business. That is the reason why today you see so many dry cleaning businesses owned by Korean people. While there were many Korean-owned dry cleaning businesses in the 1970s and 1980s, a lot of the distributors were American, who had a relationship with Unipress or Ajax, for example. The Koreans could not buy through them. They needed to buy through a Korean distributor. However, a Korean distributor could not be the main distributor of that equipment. In 1993, our company entered the US market, and immediately Korean distributors wanted to distribute our products, as this meant that they could be the main distributor for a manufacturer. We were very fortunate at that time.
We were also fortunate that our business model was different. Our machines can last from five to ten years. Sometimes no maintenance is required at all. This resulted in the customers choosing our equipment instead of the equipment from the US companies that did not last long and required regular maintenance. More and more customers began to choose our company. The “made in Japan” brand equipment had a great reputation, and many Japanese finishing equipment manufacturers started to go to the US. They saw how successful we were, so they wanted to follow suit. However, they were not as successful as we were. Our first manager in Chicago was Wes Nelson, and he still works there today. He was my father’s English teacher.
Our export experience started in 1988 in Birmingham in the UK. We used a small Japanese export distributor. They wanted to show our machines in Birmingham. The results were sensational, as many people paid a lot of attention to our machines, especially our shirt unit. This convinced my father that we could sell there. The next point was safety. Japanese safety levels are much lower than in the US. If customers received some serious injuries when using our equipment, they would sue us. That could have caused our company to collapse. My father was worried about this. When he went to the US, on a tour with Japanese drycleaners, he saw the drycleaners there using US brands with no safety guard. When he asked why they used the machines like this, he was told that the operators were educated and experienced in their use. He then decided for Sankosha to enter the US market. That was how we entered the US market in 1993.
My father decided that we should go there by ourselves. He wanted to learn English as he could not speak any before going there. He tried to learn by himself by listening to cassette tapes. However, he did not improve much, so he finally called an English conversation school and began private lessons with an English teacher. That teacher was Wes Nelson. As my father improved his English, he asked Wes to translate our brochures and other technical data. Finally, my father asked him to sell our machines in the US. Fortunately, Wes Nelson is more Japanese than the Japanese themselves, and he knew a lot about how Japanese companies operate. He understood the passion of the founder and he wanted to make it happen. His position today is president of Sankosha USA, and he is one of the most famous people in this industry in the US.
The first interviewee adds
Sankosha has always been associated with three characteristics. The first is quality. The second is cost performance, and the third is innovation. These three characteristics allow you to position yourself at the forefront at any age. The concept of our brand is to provide trust and assurance, and when it comes to future products, we want to provide new surprises to our customers. We highly value our company culture, which allows us to provide all of these aspects to our customers. We also have a strict human resource management (HRM) policy as well. We consider our employees to be our most important stakeholders and we place the maximum disposable income at the center of our management. We emphasize meritocracy and credentialing, and our corporate culture is one of our major strengths.
During our research, we saw that you produce about 2,000 units annually. As you explained earlier, you can do everything in-house from design to prototyping and production. When it comes to developing new machines, you must be very clear on what types of new machines you develop as you do not want to make something that does not hit the market and not provide new value. We saw in your blog that you have developed your press-free finisher the ST-9000, which allows you to open up new markets. Could you tell us where the insight came from to develop this type of machine?
The second interviewee answers
The idea originated when I took some Japanese dry cleaners to Cleveland, Ohio. There was a dry cleaning business there that was also operating a carwash business. There are differences between car-washing machines in Japan and car-washing machines in the US. In Japan, the car enters the gate and it takes between five and ten minutes to finish. However, in the US, there is a scrubbing area, and the process takes longer to complete. You also need more space. However, during the process, a second car can follow immediately. Therefore, productivity is much better than in the Japanese model.
We were facing a problem related to the reduction of the number of garments due to climate change and dress code change. People are taking their garments to the drycleaners less often. Therefore, in the future, we need to focus more on the washable garment business. It is time to change. Many dry cleaners do not want to take care of washable garments because they require washer extractors, tumble dryers, and ironing tables. These are the three simple processes that are necessary. We wanted to develop a machine to combine drying and finishing. That way, the customers only have to buy one piece of equipment. There is no need for skillful operators anymore. A part-timer can do the job.
We wanted to do something similar with washable garments such as polos and t-shirts or even chinos. Also, when it comes to ladies’ garments today, almost 90% or 95% are washable. However, the dry cleaners do not want to do that, due to the multiple processes that are necessary. That was why we developed our press-free machine, the ST-9000 series. This was a recent development of ours. As soon as I came back from observing the carwash business, I spoke to my brother and told him that we needed to do something similar.
We decided to start developing this product. First, we needed to develop it for dry cleaning purposes. However, then Covid-19 hit and the drycleaning business was very slow. We knew that even if we developed it for dry cleaning purposes, nobody would buy it. We needed to do something different, and I thought of developing it for washable garments.
The first interviewee adds
Even before Covid, we were always looking to the future. We try to envision the future based on our three principles of quality, cost performance, and innovation, and we are always looking for new business opportunities. We have three pillars for the operation of our business in the future. The first is robotics. The second is laundry, and the third is the aging population. Robotics allows us to save human labor. With the decline of the population, robotics will be key for laundry services. When it comes to laundry and fabrics, currently the number of sheep is also declining, and wool is now being replaced with polyester. In the laundry business, we have been focusing on this shift to polyester, as it is a pivotal turning point for our industry.
If we were to do business in any country, I would choose either Japan or Italy, as Japan and Italy are at the forefront of the aging population. Japan will be the front-runner in this aging society until it peaks in the early 2050s. Therefore, Japan will need to provide products and services that respond to the needs of an aging society.
Based on these three key elements, we are trying to develop and produce new machinery and new solutions so that we can cater to the changing society. We have already developed new machines such as our press-free machines (ST-9000) and our universal folders (AF-1000J). By enhancing and combining our technologies, we can develop new solutions.
The second interviewee adds
Please understand that we are not only focused on the aging society and labor-saving technologies. We are also focusing on how we can help existing dry cleaners to survive in this changing industry. I focus on the present, whereas my brother focuses on the future under the presumption that we cannot only stay in the drycleaning industry. We will need to expand for us to be sustainable in the future. While I have a short-term vision, my brother’s vision is for the long-term. Of course, we need to focus on both, and there must be a balance. They complement each other.
We have a large communications network across the world. Last week I traveled to four different countries, and next month I will go to the US to visit Chicago and Texas. The people in these locations want me to visit them as I have a lot of information from many different countries. However, by visiting these people I can also learn from them about their business models. The more that I travel, the more information I acquire. I want to know why some companies are making so much money and why some companies are not making much money at all. I am learning about the drycleaning business model.
I knew that we needed to develop a press-free machine because many dry-cleaning businesses are not making money. By making such a machine, we can help those businesses. We develop products for processes that cannot be done by hand. Instead, they must be done by machine. At first, dry cleaners may have doubts about this machinery, however, they quickly realize the benefits. That is the stage that we are at in Japan today.
In the US and Europe, the hourly pay rate is high. For example, in the Chicago area, the pay rate is roughly USD 25 to do a simple job. Otherwise, they would not get the labor. The labor costs are very expensive. However, if the dry cleaners buy our press-free machine, they can reduce their labor costs immediately. If we set the price of our machine at less than the labor cost for two people, the companies will want to buy our machines. That is our vision. I am currently checking these business models and speaking with my brother about them.
When it comes to opening up new markets, we know of course that the US is a very well-established mature market, but we saw from your blog that you are going to places such as Singapore and are traveling all over the world. How do you decide on which new markets to enter?
The second interviewee answers
I always travel to new locations and develop new markets by myself. My father, our company’s founder, always said that it is very difficult for company employees to go to new areas, as it is too risky. He said that they would probably spend too much money and see little results. Also because our business is a family business, it is better for me to go myself. I have a lot of experience from visiting many countries over the years. People from different countries come to speak to me at the trade shows that we attend and they can see how the business is changing. For example, when it comes to Israel, we have the number one market share. My brother and I have not visited there, but there was a distributor who believed in our quality and spoke to many customers in the area. While it is a small area with a lot of conflicts, there is a market there for our machines, and we have the highest share of that market.
You have developed two brands, the Sankosha brand, and the Ajax brand, with Ajax being a little more affordable from our understanding. We are curious about the separation between your premium brand and your more affordable brand and the reasoning behind that.
The second interviewee answers
First of all, when we decided to purchase the Ajax brand, we wanted to separate our premium line-up and our secondary line-up. This was based on the customers’ level. Some of our customers make a lot of money and are looking for the latest models. However, we have some customers that do not make as much money, so our other models suit their needs and situation. For instance, in the Asian market, many companies do not make a lot of money, and therefore cannot buy our premium line-up. Our premium line-up is targeted at the US and Europe. We decided to make a secondary line-up that is more affordable for companies.
After we purchased Ajax in 2008, the Lehman Brothers' Financial Shock occurred. It put an end to our project. Due to the financial crash, dry cleaners were not able to afford any model at all. However, in 2015 we started our Chinese business. We learned about the Chinese market in the preceding years. We hired a Chinese sales representative in Japan who could speak Japanese. He went to observe the Chinese market, which convinced us that there would be big opportunities in the Chinese market in the future. We established our base in Dalian in 2015.
We decided that Ajax would be good for the Chinese market, as the Chinese dry cleaners could not immediately buy our premium line-up. We needed to provide reasonable prices for the Chinese market to begin with. However, the reliability and customer service had to be the same as Sankosha. That is the reasoning behind our Ajax brand.
When it comes to R&D, it is clear that it is very important to be constantly developing new products. Japan is very famous for its level of investment with 3% of GDP annually going towards this endeavor. Could you tell us about the role that customer feedback plays and how you develop new products or other means by which you develop?
The first interviewee answers
Actually, we do not listen to the voices of our customers when it comes to R&D. Rather, we first envision the future and then make proposals to our customers. After we make our proposals, we then listen to our customers on how to make improvements. My job is envisioning an idea and then letting the designer design and shape it. We listen to and observe social trends and the direction that society is moving in. We propose our values to the customers and receive their evaluation. If the evaluation is good, then we need to pursue our idea. Of course, speed is crucial.
Are there any new products that you have envisioned for the future that you would like to showcase to our international readers?
The second interviewee answers
That would be our press-free machines.
The first interviewee answers
As I mentioned earlier, garments are now becoming more polyester based. However, if you use a tumble dryer, they can get damaged easily. When you wash those garments at home, you put them in a net. Using a tumbler to dry them damages the fabric. Our press-free machine can solve this issue. However, it is not for home use.
One of the big trends for all industries now is the switch to carbon neutrality. Former Prime Minister Suga said that Japan must be carbon neutral by 2050, and the goal is to reduce carbon emissions by 46% by the year 2030. We are seeing both large companies and SMEs experimenting with ways to do so in both their business operations and the products that they offer to clients. Could you tell us how your company is helping in that respect? For example, are you reducing electricity costs or reducing the use of chemicals in the cleaning process?
The first interviewee answers
We take action every day. These are common actions that we do as part of our daily business operations. Nowadays you hear about carbon neutrality and SDGs, but these are actions that we have already been doing. However, we cannot achieve carbon neutrality if we take away the comfortability of our workers or the innovation of our products. Our press-free machines use half the electricity for drying and tumbling. As a company, we have a social responsibility to take action to help the environment. Many employees are wearing SDG badges in other companies. However, I believe that those are the ones that are not doing it. We do SDGs every day, but we do not need to show off.
When it comes to your international expansion, you established your operations in the US in 1993, in Thailand in 2011, and in China in 2015. You now just mentioned how the press-free finisher will be big in Europe.
The second interviewee answers
We tried to establish a European office twice before, in 2000 and 2002. However, we were not successful. I did not know the market well at that time, as I only started in the industry in 1997. If I knew then what I know today, I would not have gone to Europe. In the US, there are 50 different states with the same language and the same currency. However, in Europe, there are many different languages and the market is also much smaller.
We talked to our distributors in Germany, and we decided to conduct a trial in Switzerland. The first installation was in December. I visited there last week to see how our four-month trial was going. We needed confirmation from the owners of the laundry, and he told us that it was so good that he did not want to release it. Therefore, we will switch this model to the CE version in the future. After we switch, we will sell to him. It will be our first showroom in the region. We are also going to install them in Frankfurt and Ghent, as well as in London.
In the future, which country do you think has the most potential for your company?
I believe that the country with the most potential for the future is still the US. There is also very good potential in the Southeast Asian market. The countries there are very hot, so they mostly wear washable garments. Therefore, they want good services that are not expensive. However, in Asia, the labor cost is much cheaper than in the US and Europe. Even in Japan today, the hourly rate is around JPY 1000, which is a lot cheaper when compared to USD 25 in the US. Our target is the countries with high labor costs.
One of the biggest reasons why drycleaners need labor is that there are no perfect machines to cover every kind of fabric or every garment shape and size. That is why they need an ironing table. They believe that it is the best way of doing things. However, I want to insist that this is wrong, and we have a solution to replace it.
As you mentioned, your company is a family business. This year you are celebrating your 45th anniversary. Imagine that we come back five years from now for your 50th anniversary as a company and have this interview all over again. What would you like to tell us? What are your dreams for the company and what goals would you like to have accomplished in the next five years?
The second interviewee answers first
We do not have a big ambitious goal. We want to continue to serve in the garment-related business. I am focused on the short term and how to increase the profitability of drycleaners now that there is a shift from wool-based fabric to synthetic polyester-based washable garments. With this shift, we are trying to develop new applications and make new proposals to help drycleaners survive in the industry. We have many plans for the future. I have asked our designers for next-generation seeds, but there are so many possibilities that they do not know where to start.
The first interviewee answers
Sankosha will continue to base itself on the three pillars of robotics, laundry, and the aging society. We want to continue to serve the community and society as a whole in a sustainable manner. We also want to make efforts to open up new business realms that are not related to ours. We foresee new opportunities in new fields in the future.
The second interviewee adds
What is happening in the US is going to happen in Japan. What happens there always serves as an example for the Japanese model. The dry cleaning business started in the US. The US introduced wrinkle-free garments in the 1950s. The reason for this was due to customers in the 1940s complaining to the drycleaners about how bad their services were. Garments were not ready on the delivery date, and drycleaners broke their promises quite easily. The quality was also not very good, as stains were not always removed. They would say that they tried but could not do so. Drycleaners in the US were very unprofessional in those days. Drycleaning shops were also not very clean. This was the same in Europe and Japan. Drycleaners had a bad image in that period. Garment manufacturers listened to this feedback from their customers, and that is the reason why they introduced wrinkle-free garments in the 1950s.
In 1969, at the International Drycleaners Congress, they wrote that the service was in crisis. The machinery associations, the drycleaning associations, and the laundry associations all reported on this. This is what is happening in Japan today. The same things happen in every country. If I go to the US I can see what is happening today. For instance, labor costs are very high and drycleaning volumes are lower than before. That is why many drycleaners in the US have started wash and fold services. They do not need our finishing equipment, as they are just washing and folding. However, they can use our press-free machine instead of a tumble dryer.
Right now, we have around 40 machines. We need to brush up more, but if we continue to make those units, then eventually like my brother said, we will be able to provide complete layout solutions. By preparing for the US market, naturally, we are preparing for the Japanese market too. That is why I keep traveling and visiting different countries. It allows me to see what problems people in our industry are facing today. For example, in the UK many Polish people were working in the laundry business. However, due to Brexit and Covid-19, many of these people have returned to their homes. This has created labor shortages in the laundry business there. When I saw this during my visit to the UK, I realized that our press-free machines would be able to reduce the number of hours that are required to work at the facilities. It was not a matter of the price, but rather how soon we could provide our press-free machines. This is an example of how we can provide solutions to the industry.
Interview conducted by Paul Mannion & Sasha Lauture
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