The Beating Heart of Japanese Trading

One of the major challenges facing Japanese companies is the aging population, which is the oldest in the world. This is posing a number of challenges, especially in hiring staff and facing a shrinking domestic market for goods. How are you reacting to these challenges, and to what extent do you think Japanese companies need to look overseas to secure their long-term success?

GF Holdings has 34 years of history, and currently, the biggest issue we are experiencing is hiring people for our logistics center, which was the founding business of our company. To mitigate this issue, we have been actively introducing automation and robotics to reduce the manpower required on-site.

We are also shifting our logistics functions overseas. We have bases in China, Korea, and the ASEAN region of Southeast Asia. The reason for this is that we are now taking the work that’s been done in Japan to overseas. For example, when we were distributing products to different stores within Japan for MASH Holdings, we were packaging the items in Japan, but we are now doing packaging at the local manufacturing facilities in various countries, including China, Korea, and Taiwan. That way, we can ship directly from these countries to a MASH store in Japan without going through our logistics center in Japan. Actually, that arrangement with MASH has concluded, but it illustrates what we are now doing.

We also have a direct retail business selling a diverse range of products, and we recently acquired Mac-House, which is a listed company that sells casual jeans. By acquiring this company, we have gained over 600 stores as a sales channel. We also sell cosmetics, socks, and other accessories to drugstores. There are about 38,000 drugstores in Japan currently and with the shrinking population, I do not foresee an increase in that number, so it’s important that we diversify out of Japan for sales.

In Taiwan, we have a partner that operates 7-Eleven, and in Korea, we work with Olive Young, which operates the biggest drugstore chain in the country. We are supplying our products through these channels as well, so we are constantly trying to find new opportunities outside of Japan. For example, we gained the licensing rights to act as the agent for TSI Holdings in Southeast Asia, so we hope to promote these Japanese brands overseas actively.

Regarding overseas expansion, are there any new markets that you’re looking to enter?

We have our eyes on Southeast Asia. In Vietnam, we have three logistics centers in Hanoi, Ho Chi Minh, and Hai Phong. We are also in Myanmar, Thailand, Cambodia, Indonesia, and Bangladesh. We are currently in discussions about opening a logistics center in Laos, which is a landlocked country. The average population is only 21 years old, so it’s a very young country. With the initiative of Mr. Xi Jinping, a train route and system was developed from Laos to China, so in 24 hours, it was accessible by land with public transport. With that, we are considering what business we could do in Laos.

As for India, we have it in our longer-term plans. We once did a joint venture with Nippon Express in India, but it did not go well, so once again, entering this market and succeeding this time is our goal.

The apparel industry still has a high dependency on China, or China plus one, as is commonly said but reflecting on China's no-COVID policy, I consider that to be a disastrous policy that posed a huge risk. Myanmar had a military coup d’état, and Uniqlo is now pulling their production from Myanmar. Every country has its potential geopolitical risks, so it’s important that GF Holdings diversify locations to mitigate all risks. Toward that end, we’ll be working in Cambodia, Myanmar, Malaysia, Indonesia, and all around the region.

As part of your expansion efforts, you’ve undertaken joint ventures and investments in other companies. Does your strategy for overseas expansion include seeking new joint ventures and acquisitions, or are you more focused on working with local partners?

Did you know that 500 elementary and middle schools were abandoned in Japan this year and last year as well? It was 350 two years ago. So, 1,350 schools closed in the past few years. This will continue in the coming years. It’s a sign of the diminishing and aging population.

The new business that we are currently looking into is a collaboration with local municipalities because not using these closed school spaces is a waste. We are now working with Tateyama City in Chiba prefecture to use the closed school premises to grow kikurage mushrooms, which are high in nutrition, especially vitamin D, so we want to find ways like this to use the abandoned spaces.

Another interesting initiative that we are currently undertaking is the development of compact EV cars that run below the speed of 20 kph. The reason for this is that with the aging population, there are more elderly people causing car accidents, often leading to fatalities. Last year, it took me one year to convince my father, who is 80 years old, to return his driver’s license. However, living in the regional areas, it’s inevitable that you will require an automobile to sustain your daily life in the area, so developing a 20 kph slow car would reduce fatal accidents while still providing a convenient means of transportation. We are now working with a Chinese counterpart to develop a compact EV car that could be foldable, so whenever you’re not using it, you can fold it and bring it into your home, and you can charge it. We are still developing it, and the size is still too big, so we’re trying to improve that.

We started the discussion with local municipalities about leasing those EV cars to those who have returned their driver’s licenses, but that’s also still a work in progress. Once we finish development and work out the municipality partnerships, the logistics have already been arranged to ship directly from the site of production in China to Osaka. That’s our vision for creating a scheme to help solve the issues of aging.

We are constantly evolving our business. In 2001, we started our operation in Shanghai with apparel, and since then, I have been able to make many good friends and counterparts. We now also have eleven Japanese curry restaurants in Shanghai, which are doing very well, and we are trying to take this business model to Southeast Asia to spread this Japanese curry experience.

You call yourself a total logistics trading company specializing in apparel, but you do so many other things. How would you define your company?

Regardless of the product we deal with, whether it’s apparel, kikurage mushrooms, or anything else, we can provide transport since we have the logistics background. The business segment we tackle doesn’t matter as long as we can provide the logistics from the production to the consumer.

Apparel is still our dominant business, and with the shrinkage of the Japanese apparel market, we are looking to expand overseas to increase our overseas sales ratio. We have a brand called CLANE , which is an apparel leasing service, and we have started operating the same business model in China. Likewise, we sell apparel products and other miscellaneous goods in Taiwan, Korea, and other Southeast Asia countries.

We also have a business dealing with secondary logistics, meaning pre-owned clothing and products like samples. We are thinking of making direct sales in Laos since it is one of the lowest-income countries. These pre-owned clothes still have high value, so we hope to have a local sales channel, especially for children’s clothes.

We saw in our research that you have also set out to create a new business as a logistics trading company. This is where you want to marry your experience as a logistics company with a new network that has the functions of a trading company. Can you tell us more about this new business model and how it will differentiate your company in the market?

We now have our own retail brand business, but initially, our business model was to support the brands and all the aspects that were required, including planning, sales, manufacturing, packaging, and transporting. Those activities are usually done by separate companies, but our company is unique because we can handle all of those tasks. This comprehensive experience has allowed us to have an important asset, which is a network of counterparts. These connections and the know-how that we have accumulated have led us to be a dominant player in both logistics and trading and what I envision is for us to become a trading company with a logistics capability that could cater not only to apparel but also to many other industries. I want to become more of a general trader in logistics. If I say too much, people will say that I’m exaggerating or showing off, but I just want to share my dream.

That’s a great dream, and speaking of sharing it, what message would you like to convey to the world, or how would you like to be seen in the eyes of the global market?

I’m 58 years old, and it’s been 23 years since the company was established in 2001. During that time, we have been actively taking up new challenges, and when going to a new country, there is always a difference in the culture and in regulations. There are many hardships to overcome, so every country and experience is a learning lesson for myself and for the company. Currently, we are focused on Southeast Asia, but my vision is not limited to the Asian region. There are worlds I have never imagined or hadn’t had access to, so constantly expanding our realm and experiencing new learning lessons is part of my life’s mission and journey. I’m 58, so I don’t know how much I could achieve with the time I have left, but passing down this strong determination to the next generation and to my successor is my critical role and responsibility.

As for the message to the readers and to the world, it is to please have a high regard for the company, which is always constantly taking up new challenges. If I were reborn, I’m sure I would have taken the same path, so I have no regrets about taking aggressive steps and going overseas, and I think that having a constantly challenging spirit is important.

For more information, please visit their website at: https://www.g-f.co.jp/