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Sep 30, 2020

CEO Interview - The Future of ApparelX

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The original blog post is here. (Japanese) 

EXCY Group consists of three corporations, including Yamamoto Co., Ltd., Okura Shoji Co., Ltd., and Design X Co., Ltd. Yamamoto Co., Ltd. is a wholesaler of men garments accessories such as linings, buttons and men's formal accessories. Yamamoto Co., Ltd. also has a brand that produces custom-made suits. On the other hands, 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, is coming from an IT industry background. As the third generation successor of Yamamoto Co., Ltd. and Okura Shoji Co., Ltd, he has applied IT and digitalized the business such as ordering, billing/payment, inventory management and creating groupware for the whole group.


Catching up with new IT has been a forever problem in the textile and garment industry, and aiming to solve those problems, ApparelX was launched by EXCY Group in January 2018. ApparelX currently has more than 4000 corporate account registrations, with the cumulative number of orders over 10000 cases. There are 7500 products and 51.8 million stocking keeping units available on ApparelX.


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

We have a 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 corona 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 found?

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 the time when ready to wear clothing started to become trending, 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 the target to apparel products, and continues until 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, and that 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 time, there were around 40,000 tailors nationwide and Yamamoto Co., Ltd. had 5 branch stores all over Japan. Right now, the number of tailors has decreased significantly, less than 1000 domestically. In response to such a big change, we also adapted and innovated our business format.


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

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 there were 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 B to B platform in the industry that sells wholesale products including ApparelX’s 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 We are preparing for global expansion by having foreign members joining our team and making use of my experience when working at a foreign-affiliated IT corporation. ApparelX Global will be a platform where you can order all apparel textile, trims and accessories at once, going beyond the boundaries of location and distribution channels. The first phrase is exporting Japan products to the international market, the second phrase 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 in this fall.


ApparelX started with the idea of introducing historic and smaller scale Japanese manufacturers and factories to the world. To build an alliance with those corporations and be active on the global scale market, we have to increase productivities to the maximum through digitization. And no wonders, 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’s users ? What kind of corporations are they?

A: It’s not surprising that the number of younger generation apparel businesses and factories is increasing, including well-known brands participating in Tokyo Fashion Week. Recently under the COVID-19 crisis, a lot of apparel factories started to produce masks. As the similar cases come, there are more and more users who were unfamiliar with trims and accessories procurement before, but 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 on the final stage of progressing, we have already released the trial version to the United States, the United Kingdom Australia and South Korea and started to receive our first international orders. ApparelX Global is a cross-border Ecommerce platform that is being developed in house. With special features like multilingual, multi-currency, international logistics, together with our domestic ally corporations, we hope to bring Japan's clothing industry to the world.


Another function of ApparelX that we have introduced is the 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 a quite number of smaller customers, but from now on, we hope to utilize our human resources and target more to mid-sized businesses.


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

A: Sales in the previous fiscal quarter only increased slightly 0.7%. Operating income also increased 3.0%, but it is quite a disappointing result with 7.6% decreasing in the final income. After all, the whole industry took a big hit from COVID-19 crisis at the end of the quarter. Since the beginning of the current fiscal quarter, each month has been significantly affected if you compared to the same period of 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 online searches began to grow significantly. Since the beginning of the current fiscal quarter, sales of face mask making materials like antiviral fabrics, elastic bands and nose wires have been blooming. Compared to last year’s same quarter, ApparelX's sales revenue is growing by 600%. Until now, the garments and textile industry has been said to be behind the digitalizing revolution, but with our B to B 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 our sales would decrease around 10% due to the impact of COVID-19. However, we are still able to make it profitable with the contribution from ApparelX performance. We are improving as a whole and using our human resource more efficiently since all the E commerce operations have been digitized thanks to iTeams system.


Q: Please also tell us about your product policy.

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


In fact, recently some newer B to C 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 carrying both trims accessories and fabric, we can apply new initiatives for building logistics. Of course in order to carry all trims accessories and fabric at once, we have to collaborate with other companies as well as stocking products at our own warehouse. In the future, we hope to make fabric become 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, Vietnam, however it has been temporarily suspended due to the Corona crisis. For the meantime we are expanding internationally by selling on ApparelX Global. At the present we are on our trial phrase 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 level further, our business has to reach a certain scale. Together with mergers and acquisitions, we will expand our business scale through sales revenue, as our 2023 sales target is 5 billion yen. Along with an E-commerce platform and actual distribution base in each country, we hope to become a reliable ally for the garment and textile industry over the world.


Thank you very much!

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