As the business environment of the telecommunications industry is facing a turning point by the further expansion of demand for smart devices and their related products, T-Gaia’s President and CEO Toshifumi Shibuya discusses its established aim at helping customers achieve rich “Smartphone Lives” such as smart device-related products and services.
What would you say has been the impact of Abenomics on the telecom sector, and T-Gaia specifically?
I agree with Abe-san that his first two steps, or arrows, as he likes to call them, have been pretty successful in turning Japan around. Employment is up, the corporate earnings are up, stock prices are up. But to the extent your question asks as to whether that impacted our business directly, I would just say that it is neutral. I’m only talking about our mobile phone business. I believe that mobile phones have become such a necessity for anyone in Japan that whether or not the company’s earning is up or down, or personal income is up or down, it is almost impossible for average Japanese people to live without mobile phones.
Looking forward, the Abenomics third arrow, the Japan revitalization strategy, has a lot to do with our industry. With Abenomics, Japan tries to achieve several goals, one of which is for Japan to be the most advanced country in ICT utilization. Because we are in the business of meeting with the users of smartphones and other ICT devices on a daily basis through our mobile shops, we can contribute to that. We are vital to the utilization of ICT through our shops. We can help Abe-san to achieve his goal.
The other goal in this revitalization strategy is the advancement of women in the workplace. In our mobile shops, more than 60% of the workforce is female. More than 30% of the shops are headed by women. Depending on how you look at it, the 30% figure may not be high enough. But, I think it’s much better than Japan’s average when it comes to advancement of women. This trend of promoting the female workforce in our shops and offices will continue. In these and other aspects, I think we can contribute to Abe-san’s strategy to revitalize Japan.
What opportunities do you see to grow T-Gaia within the Asia-Pacific region with the TPP’s new parameters for trade?
Well, until very recently, T-Gaia was a pretty domestic business. We sold cellphones from three major telecom carriers through our network of shops. I don’t necessarily agree with the concept that the cellphone market in Japan is saturating. But the growth rate is not like what we saw several years ago. For growth, we decided to go abroad with what we do best.
The idea of establishing shops in Shanghai is to take the Japanese way of selling cellphones with courteous high-quality service, overseas. We take a lot of time explaining to our customers how various phones work, how various plans work, and suggest to the customers various ways for the more productive use of the phones. The idea was to export that to China, and hopefully to the other parts of the world. Of course, we have to adapt to the various markets that were going into.
In Singapore, it’s the same thing. We have been pretty successful in payment solution business distributing PIN number as well as gift cards through various channels in Japan. Singapore is a country where the average personal income is the highest in Asia, and we saw some opportunities there. The Singapore operation is very successful. We are looking for opportunities in other parts of Asia.
As far as the TPP is concerned, some of the TPP’s elements like the deregulation and protection of foreign direct investment, international dispute resolution regime, and free movement of people, goods, and services, are something that might enable us to go out of Japan into various TPP member countries more easily.
Is it fair to say that the drive enforced behind T-Gaia’s internationalization is taking best practices learned here in Japan, and kind of moving them internationally?
It is. I think we have been successful as a phone distributor/seller, because we have a very high level of sales force within the company. We are very good at educating our employees. In April 2015, we established a subsidiary company called Career Design Academy (CDA). We carved out what we called TG Academy, which was the internal educational and training division for the shop staff. Now that it is an independent company doing business of its own, the Career Design Academy provides educational and training services to its clients. Of course, the largest client as we speak is T-Gaia, but the CDA will offer some training program to customers to corporate clients other than T-Gaia.
T-Gaia was founded in 2008, less than 10 years ago. You’re already expanding internationally. One interesting development is the Smart Life business division that you established in April. Can you outline this new division and its importance to T-Gaia’s future?
T-Gaia actually has a history longer than 10 years. It is a company established as a result of mergers of three mobile phone distributors, each owned by three leading Japanese trading companies: Sumitomo Corporation, Mitsubishi Corporation, and Mitsui and Company. Mitsui had a company called Telepark which they founded in 1992. Sumitomo had Sumisho Telemate, established in 1995. And MCTelenet was established by Mitsubishi Corporation, back in 1994. Telemate and Telenet merged in 2001 to form MS Communications. Then MS Communications merged into Mitsui’s Telepark in October 2008 and the entity renamed itself as T-Gaia Corporation. So our corporate root actually dates back to 1992 when Telepark was established.
The Smart Life Business Division was created to enhance the experiences of our smartphone users. They do a lot of things. We talked about our Singapore operation. It is an extension of what they do in the payment solution business in Japan. They also have contents business.
The smartphone accessory business is within that division as well. Starting from the covers and cases for the cellphone, we sell a lot of accessories, including high quality headsets and audio, memory cards, and wearables. They also sell drones, by the way. We have two different sales channels for accessories. One is through our mobile shops. The other is through our independent brand of shops, called Smart Labo. Currently, we have 12 real shops in different parts of Japan and an E-Commerce site. We plan to open more shops. Smart Labo is our own brand, and our own sales channel. One of the shops started selling the MVNO SIMs and SIM-free smartphones.
We talked about 110% of the population already having cellphones. Indeed, there’s been a lot of regulation. This competition has led to partnerships being formed. T-Gaia is actively involved in all of this. Can you outline maybe your strategies and partnerships and the potential you see to gain more market share through these sorts of adventures?
I think one of the strengths of T-Gaia as opposed to our competitors is that we have a very good mix of three major carriers, Docomo, KDDI and Softbank. We represent all of them. I think internal shares are approximately 40% for Docomo, approximately 40% for KDDI, and 20% for Softbank. We have a very close relationship with each of the carriers. Many of our competitors, mostly focus on a single carrier, but we represent all three.
We understand the differences among the carriers. Of course, we have the Chinese wall between the business lines so that we don’t divulge proprietary information of one carrier to the other.
As I said, we are a company that was formed as a result of major mergers and we are in a position to represent the three carriers in a well-balanced way. We are always looking for further M&A opportunities as well, although as we speak, we have no actual potential deal.
As far as current relations with the other industry players are concerned, we have a very close relationship with Apple. I think we are one of the largest sellers of the iPhones and the iPads in Japan.
Why do you think these major American IT companies chose T-Gaia for their partners?
As I said, we sell their products very well. I think one of our other strengths is our roots in trading companies: Sumitomo, Mitsubishi, and Mitsui. They are all very active in and out of Japan. We have a DNA in our companies in which we’re not very afraid to go out of Japan to do business or enter into new businesses. We have people who lived in and did business in foreign countries, myself included.
This is the essence of Abenomics of course, to international, as to globalize, Japan’s economy. Companies like T-Gaia are actually taking that policy and putting it into practice. Do you feel that you have a role to play in sending this message of globalization, of trust and confidence, for Japan?
Well, as an industry leader we feel responsibility to represent not only the industry, but also Japan when we are out of the country. We would like to say that we are very keen on making profits but in an appropriate and responsible way. We put that into practice in and out of Japan.
Can you tell us a little about your company name? Because we found this very interesting: T represents tomorrow, Gaia is earth, and the combination of this really brings full circle of the entrepreneurial spirit of your company.
I like the name. But when you go to the carrier shops in Japan, you don’t see the name of T-Gaia, or for that matter, other corporate names of the operating company. Many people think those shops are operated by the carriers such as Docomo, KDDI and Softbank.
As much as I like our corporate name, I would rather that each of our brand names to be familiar with the consumers and business partners. We already talked about our accessory business and the Smart Labo brand. I would like that brand name to be very familiar among the Japanese customers. Let’s take an example, Uniqlo. Everyone knows the Uniqlo brand and what it is. Not everyone knows the corporate name of the company that operates the chain, Fast Retailing, but I am not sure if Mr. Yanai cares.
Coming back to Smart Labo, when we open a shop, location is everything. Our current strategy is to open a shop at a location where people we target as potential customers would most likely frequent. In the future, we would like to see a situation where Smart Labo shop may be in the middle of nowhere, but people go there because they want to shop at Smart Labo. But, currently we are in the stage of developing the brand image.
What are you trying to communicate with this? What would you like the Smart Labo to signal to your customers?
Well, I would like Smart Labo to be like a select shop for smartphone accessories. If you go to the electronic shops, the volume sellers, you’ll see a lot of carrier shops. Next to them are the long shelves of smartphone covers. They are nice and cheap. They serve their purposes, and customers can purchase them without consulting shop staff.
But we would like to have a list of products that people can buy only at Smart Labo. We are not really interested in mass marketing at Smart Labo. We’d like to see people who love the lifestyle around their smartphones, to come to our place, and talk to our shop people and get what they want, at an appropriate level of price. I believe we can be successful, with our experience of cellphone sales at carrier shops.
Is it maybe about the personnel, Omotenashi, the connection, the quality of the service? That’s what would separate Smart Labo?
Well I would like to see Smart Labo to grow into that kind of shop.
You mentioned earlier, although competition is strong in telecoms, that you don’t believe, maybe it’s saturated?
I wouldn’t use the word saturated. I would say, “a mature market”, although I may be saying the same thing. It is true that there are more cellphones than people in Japan. But the market is still growing yearly by approximately 8 million new contracts. I’m not seeing the curve as steep as it used to be, but it’s still a slowly growing market.
There is also room for growth for smart devices. The percentage of people who use smartphones in Japan, at nearly 60%, is slightly less than in the other developed countries. There are people who are switching at an old age from a conventional phone to smartphones. There are smartphones designed for use by senior people as well as kids. More and more corporate users are switching from feature phones to smart phones. And of course, there are tablets. I think there is still a frontier in the tablet market.
As you look out domestically and internationally, what do you see are the biggest challenges to contain, to grow T-Gaia?
Well, to the extent we have to go abroad, I think we have to have more people with foreign experiences and English abilities. As I said, this used to be a very domestic company. We are actively hiring new-grads, some of whom have foreign experiences. With the advent of MVNO and SIM-free phones and other movements, Japanese telecom markets are changing rapidly. I am looking for people with new ideas and flexible minds, and hopefully those new-grads can bring those qualities to our company.
When we met with former Minister Shimomura he talked about trying to increase the amount of not only internships, but also hires for technological-advanced companies and telecoms. Are you even working with universities, or kind of trying to partner to get graduates that will help you as you try to internationalize?
Well, the short answer to that is “not yet”. As I said, I think the type of people we want is changing. There are some myths about the cellphone-retail industry which some people think is a workplace with a lot of hardships. Long hours, low pays, and occasional abuse from the customers. This may be a cause for the occasional difficulties we face when we try to hire qualified people.
But by bringing some internships into this equation, people will know before they join us, that this is a company with a lot of opportunities. Something that they can get a lot of experience for their overall career. I’m definitely considering it.
I know you are still in the initial stages of the international push, but how would you evaluate so far that process, of trying to take Japanese policies and practices, and bringing them international? Do you think there’s been a positive, favorable, response from the market, in Shanghai and Singapore?
In Shanghai I visited several carrier shops and those of other distributors, and there’s definitely a difference. There are several customers, both Chinese and Japanese, who choose our shops over our competitors because of their experiences at our shops. But, translating that into the money is a little difficult. I mean, we’ve been there for five years and individual shops have started making profits, but it’s still a long way to go. Singapore is a little different story. I think they’ll have profits much more quickly than we had originally planned.
How do you communicate multi-nationally? When you’re setting up these operations, how do you tell your employees, customers, how to communicate multi-nationally? It’s a very intangible, kind of unique, Japanese virtue.
It is a combination of both the education and the empowerment. You know, there are employees in Shanghai who truly believe in the ways we do things. They are proud to be working at T-Gaia as opposed to other companies’ shops. Just the several shops in Shanghai, when I went into the shops, nobody really cares. You know, playing with their cellphone, even eating. That never happens at T-Gaia shops in China. Every time you come into the shop you are warmly greeted by our employees.
Do you even see beyond Asia-Pacific? Is there going to be a day where I can go to New York, and go to a Smart Labo shop?
Well, New York, or the United States, is a little different from Asia. We are looking for places geographically and culturally close to Japan. There are several countries where there are pro-Japanese feelings among people. I do not necessarily exclude other parts of the world, including the US but we would like to start from Asia.
Japan is synonymous with innovation, high-quality technology, advanced technology, robotics, cybernetics, but maybe it’s been overshadowed or at least in stronger competition with Korea and Singapore. Telecoms is really one of the sectors that they feel Japan can once again take the lead and provide advanced breakthroughs. Would you agree with this? As one of the leaders, how are you helping to facilitate this branding Japan?
For example, the cellphone manufacturers. We had dozens of them in Japan. We have very few now. As far as cellphones are concerned, we will perhaps not be back to where we were, where we had a lot of cellphone manufacturers. But the technology is here. Many parts of iPhones and other advanced devices are made in Japan.
T-Gaia is in the sales and distribution business and not in the manufacturing sector, so I may not be in a position to directly answer your question. But, the fact that we are close to the customers means that we can explain to our customers the various features of these cellphones, services, pricing, and I think most importantly how people can improve their lives through use of cellular phones. It’s not a mere device for talking and even communication. We would like to see Japanese people and people in the Asian countries to be more familiar with the cellphones, especially smartphones, in a way that exceeds their expectations. We are in the front edge of that movement. We like to see ourselves as such.
So much of Abenomics is instilled in trust and confidence. What would you say serves the international community who may still be hesitant about Japan’s recovery and Abenomics?
As I said in the outset, Abe-san has been very successful in his first and second arrows of his Abenomics. Personally, I think the key to his eventual success is, whether he can be successful in the deregulation of several government controlled and industry-backed regulations. That’s not going to be very easy. But, Abe-san has said that he’s going to do that. If he can do that, that Japan would be a more economically open, transparent country, in which foreign investors and our fellow trading partners can believe in and trust.
We were told by a lot of leaders that Abenomics is also a lot about changing mindsets and having the Japanese mentality to be more international and perspective. With companies like T-Gaia, were seeing this in practice.
We once were a purely domestic company, which is going overseas. That required a lot of change in our mindsets. By the way, another success of Abe-san is staying in his position for a very long time, as opposed to his predecessors. That brought some stability and predictability to the Japanese economy and market. That’s a very good thing for us and Japan’s trading partners.
Do you see this mindset being changed with your fellow contemporary business partners, CEOs?
Yes, it’s both ways for the Japanese companies to go out of Japan and do business abroad, and for foreign investors and trading partners to come into Japan. Tourism is blossoming, but I’d like to see more than just tourism. You know, foreign money coming into Japan, in terms of both spending and investment. I believe it is going to happen, but I think the biggest keyword is deregulation.
You’ve spent a lot of time living in America. What would you say are some of the main focuses or characteristics of a successful Japanese-American partnership?
I lived in the US for about 15 years I spent most of that time as a lawyer, and helping my clients/employer going through a lot of legal struggles in the United States. I was actually mostly a litigator.
I think the relationship between the US and Japan has changed over time. When I first went to the United States in 1970, as an exchange student to Bloomington, Illinois, I was amazed at the level of wealth and living standards in America, even in a small town in the Midwest.
Japan was a perhaps exporter of simple parts that were going to be used by American industries into a finished product. Japan has become a more stronger business partner, started demanding equality with the US. At some point in time we thought that we are the most successful country in the world, Japan as number one. The problem with that was we became a little too proud, and mistakenly believed that we were superior to the other countries, including the United States. We thought we were the winners. Then the bubble burst, and 20 years have followed. I think we are much more humble, even as our economy started rebounding.
We are now ready to learn from the US, China, Korea, and Europe. I think there are a lot of two-way communication with different parts of the world as far as Japan is concerned.
In the run up to the G7 in 2016, what is the new brand in Japan today that G7 leaders should be aware of?
Well I would like them to see Japan as a more open, transparent, and predictable economy. I think there used to be a lot of unwarranted regulations, and as I said, there still are. It may not be easy to lift all these regulations, but I believe we, as a country, will be successful in making a breakthrough.