Established in 1908, Morito is a Japanese trading firm that has evolved with the times in order to build a thriving international company engaged in the supply and manufacture of apparel accessories.
We would like to use your words and your point of view to challenge the misperception that Japan has somehow lost its innovative or quality edge in the eyes of an international audience. As a trading company, where do you believe the competitiveness of Japan comes from today?
Japan dominated the market with its quality snap fasteners for the apparel industry about 30 or 40 years ago. Since the quality of the snap fasteners made elsewhere in the world were not adequate to be utilized in clothing, many chose made-in-Japan products. In the past 20 years, however, the level of production in emerging countries has improved. We used to cater to a stream of customers from the bottom to the very top of the pyramid, but we were forced to focus on middle to high-end products. These days, having good quality products is not enough. Costs and delivery time have to be considered as well as giving value to our products through a sense of security that we provide as a company. Combining high-quality products with our company value is necessary to penetrate new markets. We are working with our customers to keep building their trust and assurance through our products and relationships. One of our strengths is our ability to cater to global companies. Our snap fasteners are used in the apparel industry, and many of our customers are located outside Japan. Being able to readily cater to overseas sites is important. The production to attach the snap fasteners to cloth is automated, so in order for the machinery to function properly, the snap fasteners must be within certain specifications and comply with certain standards. Made-in-Japan is still excellent in meeting the strict high demand for quality. We avoid products getting misplaced or stuck in the machinery. If the quality is inadequate, the part could get stuck and block the path when it is rolled within the hopper of the automated machine or goes through the rail, which can cause a malfunction of the machinery. Therefore, providing high-quality products is our strength and advantage. Sometimes the drawings and specifications we prepare beforehand may not be suitable when you see the clothing on site. The fabrics may be too thick, and a different type of hook is more appropriate. Hence, we make a proposal and give advice on the site about the use of the most appropriate parts. That is the overall service we provide, which gives value to our company and assurance to our customers. We are one of the unique companies that can provide an overall service.
We may be considered as an apparel parts trader. However, our company was founded in 1908, during the time when the Japanese started to wear Western shoes. Before that, the Japanese wore geta, traditional slippers in Japan. Shoes require parts like eyelets, snap fasteners and shoelaces. All our products are based on the concept of our founder which is to create products that connect, fix or decorate. Snap fasteners are especially used in apparel, but they are also utilized in the automotive field. Car floor mats use eyelets and snap fasteners to hold them in place. Sofas have eyelets or small holes for ventilation. Moreover, our snap fasteners are used in the curtains in airplanes, and our ropes and laces are utilized in hooded outfits. We also provide the mesh net that employs our weaving technology used behind cars and Shinkansen seats.
We have heard repeatedly in interviews for this report about how the role of the trader is evolving. In the past, traders were primarily responsible for financing and logistics. However, now, they are expected to add value in new ways, whether through co-creation, making proposals, consultation or R&D. How do you foresee the role of the trader evolving? Can you give a specific example of how you are adding value on behalf of your clients?
There are several types of traders. Major traders are often involved in public works overseas, but our firm focuses on the trading of products manufactured in Japan by SMEs who often do not have enough capability to do the sales. They would rather pay more attention to improving their engineering division or products than fortifying their sales department. Our role as a trader is to be the bridge between the manufacturer and the customers. We can provide information on what kind of market requires specific products and give new ideas and hints to manufacturers for innovation. While it is important for us to raise our company's value, we also need to have a definite reason for our existence in the market. We have to be an entity that reassures and builds trust among manufacturers and buyers with our ability to create a new business environment. Morito is unique because aside from being a trader, we are also a manufacturer. In fact, 20% of our revenue comes from manufacturing our products, especially metal-processed parts. We are a trader that is close to manufacturing sites. By fully leveraging this mindset and approach, we want to create new innovations among the SMEs we work with. The Japanese business sphere and business transactions are very complicated, so the role of traders is still required. Since society is changing, manufacturers are trying to directly sell more to end-users. Our company will also continue to evolve as a manufacturer and do more direct sales. Nevertheless, we are certain that our role as a trader would still play a vital role in the domestic market.
From an outsider looking in at Japan, one of the major question marks is its aging population, and shrinking market. As such, many SMEs that manufacture in Japan are looking overseas to compensate for the reduced domestic sales. How have you been able to take advantage of your strength of being able to cater to overseas sites and companies and help connect Japanese SMEs with foreign customers?
Japan's population decline is leading to a drop in national power and the shrinking of the scale of the economy. With the change in the demographic percentage, things required in society have been changing. With the keywords welfare, staying healthy, environment, safe & sound and functionality, developing products in Japan is crucial. However, the production is delegated to our overseas sites or subcontractors that target the domestic and overseas markets. We are mainly B2B, but expanding to B2C is vital to compensate for the shrinking domestic market within Japan. In order to be competitive globally, we need to secure our patents. These are some of the approaches we are taking as a trading firm.
Another advantage a trader can offer is access to its network and connections as it serves as the bridge or doorman for these markets. Are there any particular markets, whether that means a physical location, country and region or types of a commodity that you are looking to increase for your network?
We are trying to provide and supply to various industries, but we envision growth in the medical field. We are not planning to provide any life-critical components. Rather, we want to focus on the wares and other devices that we already have. The heartbeat measurement device used in hospitals in Japan is made up of a rubber part that is placed directly on the skin. In the emergency vehicle, a sticker or sealant is used. There is a metal part connected to the cord that measures the blood pressure and the heartbeat. We make the metal part that connects the seal and the cord, which we currently produce in Japan and the US. We foresee a growth in the demand in this field. Our product lineup is so diversified, but our philosophy is to grasp the current need and provide something that is a little bit ahead of time to satisfy the needs of society.
The strength of the Japanese yen over the past year has been another recent development that has really impacted the export of Japanese manufactured goods abroad. Do you see the weak yen as more of a challenge or an opportunity for your business?
We are not experiencing the impact of the fluctuation of the Japanese yen since we have a very good balance of imports and exports. Our imports may be a little bit more than the export, but they are basically about the same percentage. Furthermore, we maintain and implement risk-hedging strategies because we have predicted this potential disruption.
Nevertheless, like many other companies, we have been impacted by the rise in price and the increased difficulty of procuring raw materials. Energy costs have also gone up. The conflict in Ukraine, among other things, has raised logistic costs for air and sea freight. Since these effects are common in the industry, customers are more understanding when we raise the price of our products. Under normal circumstances, it would have been harder for us to increase our prices. However, the present environment has enabled us to do so and compensate for this disruption. Since we have over 20 subsidiaries overseas, the foreign currencies are converted to the Japanese yen in our consolidated financial report, giving us a more positive boost. One of the greatest hits we experienced due to COVID or the lockdown in Shanghai was the delivery of our products. Even when both sea and air freight was blocked, and we were not able to deliver on time, we took measures within our subsidiaries. We went through other ports when we could not pass through Shanghai.
What is the current focus of your international development? Is there a particular region you are looking to grow and strengthen, or are there any new markets that you are considering entering?
As a trading firm, it is easier to create a sales base when we find the need. Through our information network, we are determining the right market where there is a need for our products. China is serving as a vital point and a sales channel for us. Because its population is about 1.4 billion to 1.5 billion, it is a massive market. We have a factory there, but due to geopolitical reasons, manufacturing in China is becoming more difficult. In addition to that, their labor wages are increasing, so we are trying to shift to other ASEAN countries like Vietnam. To grow as a company and improve our capability, M&A is always a good option.
What do you identify as key characteristics or qualities of companies for M&A?
In our criteria for M&As, we are looking for companies within the scope of our business or very much related to what we do. With that, we can create a synergistic effect or the company can have a higher potential for growth. We have turned into a holding company, which means that the department is now independent as a company. We are actively reaching out to new companies and information in order to find new M&A opportunities. We always anticipate things 20 years ahead to create new businesses that can be our pillar. It could be a business that is somewhat similar, yet something new in the field.
Imagine we come back in six years for your 120th anniversary as a company and have this interview all over again. What would you like to tell us? What are your dreams for this company, and what goals would you like to have accomplished by then?
Our target is to become a JPY 100 billion company and the number one niche company globally. Putting the finance part aside, we can reach those targets by continuing with the M&A of three to four companies a year. Of course, we are not only doing M&As. Our company's philosophy is not only to actively seek growth but also to steadily grow. The current worth of our company is JPY 50 billion. In order to double that in the near future, each company must strive to pursue and excel in its individual market with its own uniqueness and innovation. At the same time, we have to fully utilize our network to serve our global customers. For example, our customers' headquarters may be in the US, but they have factories in China, Hong Kong or somewhere else. We have the capability to directly go to each of our customers from our local base by providing value-added service, such as consulting or backing up solutions on the factory side. We also want to provide a comprehensive service that caters to global companies. On top of that, we aim to provide safety and assurance even with regard to environmental regulations, as it is critical in our current business. We do not want to only think of it as a trend, especially because it is something that we need to embed within our company to grow sustainably.