CEO Interview - The Future of ApparelX

The original blog post is here. (Japanese) 

EXCY Group consists of three corporations: Yamamoto Co., Ltd., Okura Shoji Co., Ltd., and Design X Co., Ltd. Yamamoto Co., Ltd. is a wholesaler of men’s garment accessories such as linings, buttons, and formal accessories. Yamamoto Co., Ltd. also has a brand that produces custom-made suits. On the other hand, Okura Shoji Co., Ltd. is an apparel materials trading business. Last but not least, Design X Co., Ltd. is a business that engages in the development and operation of IT services. EXCY Group’s philosophy is “Customer Always First,” “Sincerity,” and “Creation and Perform.”

President Haruhiko Yamamoto, the head of the three corporations, comes from an IT industry background. As the third-generation successor of Yamamoto Co., Ltd. and Okura Shoji Co., Ltd., he has applied IT to digitize business operations such as ordering, billing/payment, inventory management, and creating groupware for the entire group.

Catching up with new IT has always been a problem in the textile and garment industry, and to help solve those problems, ApparelX was launched by EXCY Group in January 2018. ApparelX currently has more than 4,000 corporate account registrations, with cumulative orders totaling over 10,000 cases. There are 7,500 products and 51.8 million stock keeping units available on ApparelX.

EXCY is not only focusing on applying IT in practice, but is also growing overseas strategies, M&A strategies, and manufacturing strategies. EXCY Group’s annual sales are around 1.4 billion yen, and the main customers are domestic garment manufacturers, clothing factories, specialty stores, and tailors.

We have the chance to interview President Yamamoto, who aims to lead EXCY to become a top business in the industry. Let’s hear about EXCY’s current state, priority measures under the coronavirus crisis, and EXCY’s medium- to long-term strategies for the future.

Q: Could you tell us about EXCY Group’s history and how it was founded?

A: In 1947, an affiliated wholesaler for tailors, Yamamoto Co., Ltd., was founded by my grandfather, Mr. Tokuji Yamamoto. At first, Yamamoto Co., Ltd. focused on accessories such as buttons and lining for custom-made clothing. However, that period was also when ready-to-wear clothing started to become popular, so in order to take charge of this department, Okura Shoji Co., Ltd. was established in 1958.

Since then, our group has grown while expanding its target to apparel products, and continues to this day. Both Yamamoto Co., Ltd. and Okura Shoji Co., Ltd. have the same management and operate as if they were one company. In the 21st century, IT has become an essential part of our daily life, and I want to apply more IT to our business, which is what Design X was focusing on.

Looking back at our history since our founding, the biggest transformation we faced was changing from custom-made clothing to ready-to-wear clothing. At the peak, there were around 40,000 tailors nationwide, and Yamamoto Co., Ltd. had five branch stores all over Japan. Right now, the number of tailors has decreased significantly to less than 1,000 domestically. In response to such a big change, we also adapted and innovated our business format.

Q: Is it true that ApparelX has contributed significantly to business performance?

A: ApparelX has been developed in-house since the latter half of 2017 with the help of our engineer friends. Currently, ApparelX is covered by internal resources, including maintenance and operation. Since no existing packages such as cart systems are used, it is possible to develop and provide deeper services in line with industry customs.

We aim to become a BtoB platform in the industry that sells wholesale products including ApparelX users’ apparel products while providing unique social functions such as blog services and business matching. We will also provide an online exhibition function that corresponds to this coronavirus era.

ApparelX is preparing for global expansion by having foreign members join our team and making use of my experience working at a foreign-affiliated IT corporation. ApparelX Global will be a platform where you can order all apparel textiles, trims, and accessories at once, going beyond the boundaries of location and distribution channels. The first phase is exporting Japanese products to the international market, the second phase is importing international products to Japan, and finally we hope to create a true global network for the clothing industry by opening office branches, warehouses, and building distribution channels in each country. ApparelX Global is currently in trial operation, but we expect to fully launch this fall.

ApparelX started with the idea of introducing historic and small-scale Japanese manufacturers and factories to the world. To build an alliance with those corporations and be active in the global market, we have to increase productivity to the maximum through digitization. And no wonder, it is one of our many strengths. We have been using AI for image recognition and language analysis throughout ApparelX and our internal system, iTeams. Not to mention that our internal training for AI human resources has already started.

Q: Could you tell us more about ApparelX users? What kind of corporations are they?

A: It’s not surprising that the number of apparel businesses and factories run by the younger generation is increasing, including well-known brands participating in Tokyo Fashion Week. Recently, under the COVID-19 crisis, many apparel factories started to produce masks. As similar cases arise, more and more users who were previously unfamiliar with trim and accessory procurement have found our platform on the internet and started trading.

Q: What are your thoughts on the future development of ApparelX?

A: Even though ApparelX Global is still in the final stage of development, we have already released the trial version to the United States, the United Kingdom, Australia, and South Korea, and have started to receive our first international orders. ApparelX Global is a cross-border e-commerce platform that is being developed in-house. With special features like multilingual support, multi-currency, and international logistics, together with our domestic partner corporations, we hope to bring Japan’s clothing industry to the world.

Another function of ApparelX that we have introduced is price changes when purchasing in large quantities. As a BtoB platform, we hope to meet the diverse needs of our customers. Recently, our e-commerce service has attracted quite a number of smaller customers, but from now on, we hope to utilize our human resources and target more mid-sized businesses.

Q: Please tell us about your business performance for the previous fiscal quarter (March 2020).

A: Sales in the previous fiscal quarter increased only slightly, by 0.7%. Operating income also increased by 3.0%, but the final income decreased by 7.6%, which is quite disappointing. After all, the whole industry took a big hit from the COVID-19 crisis at the end of the quarter. Since the beginning of the current fiscal quarter, each month has been significantly affected compared to the same period last year.

Even in these tough circumstances, in the first fiscal quarter we managed to secure a slight increase in sales thanks to ApparelX’s sales performance. As companies started to telework, our company’s online searches began to grow significantly. Since the beginning of the current fiscal quarter, sales of face mask-making materials such as antiviral fabrics, elastic bands, and nose wires have been booming. Compared to the same quarter last year, ApparelX’s sales revenue is growing by 600%. Until now, the garment and textile industry has been said to be behind the digitalization revolution, but with our BtoB platform we were able to meet the diverse needs of customers in the middle of this pandemic.

Q: How about the outlook for this quarter?

A: At this point, our prediction is that sales will decrease by around 10% due to the impact of COVID-19. However, we are still able to remain profitable with the contribution from ApparelX’s performance. We are improving as a whole and using our human resources more efficiently since all e-commerce operations have been digitized thanks to the iTeams system.

Q: Please also tell us about your product policy.

A: Regarding our products, besides providing auxiliary materials for sewing such as trims and accessories, we have been handling textiles for several years. In conjunction with the assortment of trims and accessories, we have been receiving a large number of fabric orders. In the industry, trims, accessories, and textiles have been completely separated, but we believe that from now on this barrier will gradually disappear.

In fact, recently some newer BtoC clothing brands questioned why there were separate companies that handle trims and accessories and separate companies that handle fabric. Therefore, we combine trims, accessories, and fabric together and promote them as a whole. When handling both trims, accessories, and fabric, we can apply new initiatives for building logistics. Of course, in order to handle all trims, accessories, and fabric at once, we have to collaborate with other companies as well as stock products in our own warehouse. In the future, we hope to make fabric the main line of our business.

Q: Could you tell us about the future growth strategies of your business?

A: Our approach is to further expand ApparelX domestically and focus on growing overseas business. We were preparing to establish branch offices and distribution bases in the United States, China, and Vietnam, however this has been temporarily suspended due to the coronavirus crisis. For the time being, we are expanding internationally by selling on ApparelX Global. At present, we are in our trial phase with the international market, and this is a great challenge as well as a big opportunity for us, since we are facing many foreign brands and manufacturers.

Of course, to improve our productivity and efficiency further, our business has to reach a certain scale. Together with mergers and acquisitions, we will expand our business scale through sales revenue, and our 2023 sales target is 5 billion yen. Along with an e-commerce platform and actual distribution bases in each country, we hope to become a reliable ally for the garment and textile industry around the world.

Thank you very much!