Japan’s Quality DIY Tools Go Global!
Why DIY-tool.com chose to take on the world
by IGNITION Staff
Since starting their online store diy-tool.com in 2002, Daito Co. Ltd. Has gone from strength to strength, opening up a store as well as venturing into overseas markets. The long established tools wholesaler, specialising in DIY, is currently headed by the former CEO’s son-in-law, Takahito Yamada. With their revenues steadily increasing, we wanted to find out from Yamada why he chose to venture into overseas markets.
Purveyors of Japanese Quality
“It’s now around 10 years since we started diy-tool.com” explains Yamada “Since then I’ve come realise that tool makers in Japan produce some of the best, high quality tools around but these rarely manage to make it outside of Japan. Kyoto Tool Co. Ltd. for example produce automobile tools under the KTC brand but their export ratio is a few percent at best. On the other hand, if we look at foreign brands like Snap-On, they have a large presence here in Japan. I think this is mainly because Japanese manufacturers are more craftsmen than entrepreneurs. So to bridge that gap for them, we started targeting overseas markets in 2012.”
DIY-tool.com is currently the largest online DIY retailer in Japan and boasts a catalogue of more than 800,000 products. With this under his belt and his desire to make the products available to customers worldwide, Yamada was ready to take on the world. In 2013, he established an overseas division within the company and even formed a sub-company in the US, Daito tools U.S.S Inc. From there, he quickly setup an online presence with ecommerce giants including the likes of Rakuten.com (who bought buy.com), Amazon.com, Alibaba.com as well as Rakuten Singapore.
“Our initial plan was to target the south east Asian market and/or countries. But we soon realised that while our products were second to none, developing countries simply couldn’t afford the quality tools we had to offer. That’s when we decided to venture into the US market.”
When comparing the DIY market in the US to that of Japan, the former belittles the latter by around 30–40 times over. Naturally, taking on a market of this size inherently presents its own challenges. “I think there’s still a lot of room for growth in the Japanese DIY market. Using the same resources we could probably make more money in Japan than in the US. I’ve found that just because we put a lot of effort into overseas markets, it doesn’t necessarily translate to increased revenue straightaway. But I still think it’s important to keep investing in these markets and try to keep it going for as long as possible.”
E-commerce saved the business
Yamada was 27 when he took the reigns as CEO of Daito Co.Ltd., a tools and hardware wholesaler that’s been trading for around 78 years. “My father-in-law said that if I am to marry his daughter then he would like for me to take over the business. I had always thought about starting my own business but never gave it much thought so I thought I’d give this a go.” This how Yamada recalls the beginnings of his involvement with the company.
However, things were not as he had expected. He was expected to follow numerous rules and practices that to him were inefficient and/or outdated; hand written invoices, fulfilling daily orders worth only 100 yen or so (around 1 US Dollar) etc. Yamada’s past work experience and practices had no place here.
The turning point came when the company was on the verge of foreclosure. His father-in-law didn’t want to foreclose the business no matter what and entrusted the company’s future to Yamada. On the condition that he would be allowed to implement whatever he had in mind, Yamada took on the responsibility and e-commerce was the pioneering idea.
“I had no clue about the internet. I would spend the day running the business as usual then at night I’d sit in from of the computer and frantically try to scrape together as much information as I could.”
Unlike wholesale where clients order in bulk, with e-commerce customers can order single units. For this reason, most of those around him thought his approach made little business sense and frowned upon his decision. Little did they know that the young CEO’s idea would save the company. “Because we order direct form manufactures, we’re always the first to have the latest information about upcoming products. Being a wholesaler means we can offer these products at lower prices too. I think this is one of our strongest selling points.”
A year and a half later, his decision was paying off with revenues reaching 1 million yen a month. It was then he employed an additional staff member and revenues have continued to steadily increase ever since.
A DIY bridge between Japan the world
DIY-tool.com aims to bridge the gap between Japan and rest of the world in the DIY markets. They not only export top quality tools made in Japan but also import top tier tools from overseas that have yet to establish their brand in Japan.
“In Japan, wholesalers dominate the market. This makes it extremely difficult for brands and manufacturers from abroad to establish themselves here. That’s where we come in. Hardware stores in Japan are our biggest competitors but you’ll notice that they’re all domestic brands and chains. This is all due to the complex process overseas brands have to go through to sell their products here.”
This is often referred to as Galapagos Syndrome, a form of isolationist development and is what diy-tool.com is overcoming by importing DIY products into Japan. It’s also what’s helping the company balance its books, acting as a counterweight for its higher risk overseas ventures. “If you looked at just our overseas business on its own, we’ll probably be in the red. But by selling imported products I think our revenue balances out nicely. Of course, selling products in Japan yields higher and immediate revues; exports have added costs such as shipping which makes them just that little bit more troublesome.”
Yamada went onto explain that he plans to expand his overseas business to beyond the US and wants to have another go at the south east Asian market. Much like Manga and Anime, there are currently many counterfeited Japanese tools available there. Within the last 3 to 4 years, they’ve reached a level where they’re now almost indistinguishable from their genuine counterparts at first glance. However, there are those who want the real, genuine high quality items and Yamada wants to establish a place where these can be purchased.
“There’s definitely a market there, it’s just a case of being able to tap into it. The market there certainly won’t get any smaller, if anything it will continue to grow year on year. Countries in the west have also set their eyes on this market so now it’s a case of finding a way to survive the completion.”
Embedding DIY culture in Japan
“We currently have around 200,000 registered users on our diy-tool.com site but I can see that quickly reaching 1 million with the way things are going. Beyond that is really down to how the DIY culture settles in Japan.”
Aside from his overseas ventures, Yamada is also putting a lot of effort into widening the scope of DIY in Japan. In April 2014, he opened DIY tools shop ‘DIY FACTORY OSAKA’ in the Nanba area of the city with the goal of creating a hub for enthusiasts in the real world. The store doesn’t just sell tools, they also show customers how to use the tools to show just how fun DIY can be.
This all flows from Yamada’s observation of the somewhat superficial DIY culture in Japan; lots of people what to try it, they just don’t know where to start. Tools can be had at any hardware or DIY store. But Yamada’s approach with the store in Osaka differs from its competitors in that they take the time to show customers how to use the tools as well.
“Its small steps like these that help expand the scope and scale of DIY culture. There’s recently been a lot of interest in DIY, particularly amongst young women. So much so that there are now even DIY articles popping up in magazines. Although it might seem like a fad to some, I really want it to develop into something more than that, like in the US. There are also a lot of people these days buying and renovating homes with many opting to go the DIY route; from painting walls to building shelves etc.”
Yamada is currently working on DIY renovation projects in conjunction with apartment blocks in Osaka. Through his work, there’s been a marked interest by real estate agents and landlords in DIY renovation. “I think the current state of the real estate market there is also what’s causing the trend. Around 13% of rental apartments in Osaka are currently vacant but more and more new residential blocks are being built. The government recognised the potential problem this causes and changed some of the regulations surrounding this*.”
* In 2014, Ministry of Land, Infrastructure, Transport and Tourism published the ‘Tenant funded DIY lease’. This gave birth to rental properties which do not require the tenants to return the property to its unmodified state.
Backed by the recent DIY boom, diy-tool.com’s revenue continues increase. Their online sales generate more than enough profit and one would question whether opening shops, working on residential projects and venturing overseas is even entirely necessary. However, in doing so, they’re able to tap into a pool of previously dormant potential customers as well as attract new ones.
“We want to make a positive contribution to society as a whole through DIY. We want to teach our children how to make things and opening an actual store is a crucial part of achieving that. We plan on opening a Tokyo store in April 2015 and were in talks with the Urban Renaissance Agency to develop apartment blocks with workshops attached for the residents to use. This is how we want to expand and show to the people just how fun DIY can be. The DIY renovation market is a huge one and one that cannot be satisfied by e-commerce alone; it’s just as much about taking action in the real world to deliver a lifestyle. With the way things are going, I think it’s just a matter of time before open a store overseas.”
(translation: Atsushi Fujii)
Originally published at ignition.co
