Doshisha is a trading company that deals in a broad range of household items, such as storage furniture, daily necessities, consumer electronics, cosmetics, wristwatches, handbags, accessories, and single-price items. The company has two segments: the Product Development Model Business and the Wholesale Model Business. In FY03/21, the former accounted for 53.0% of sales and the latter for 42.7%. The company has an extensive network of business partners, including some 2,100 suppliers and 4,800 wholesale customers (mainly retailers).
In the Product Development Model Business, the company sells private-brand products such as steel storage racks, thermal bottles, frying pans, home appliances (including fans, heaters, and humidifiers), televisions, and skincare cosmetics. The company also sells single-price items (destined for 100-yen shops) and food and alcohol. The core of this business is niche items the company designs and develops to differentiate its products from the generic items other companies offer. Examples include talking globes, LED ceiling lights with fans, and baked sweet potato makers. Doshisha manufactures these products mainly in China, at commissioned factories and the factories of its own subsidiaries.
In the Wholesale Model Business, the company conducts wholesale business operations (i.e., the sale of name-brand products purchased from sources in Japan and overseas and products obtained from major Japanese manufacturers; operation of a matching business that involves selling and planning sales promotions). Specifically, the company arranges and provides mid-year and year-end gift packages (for Japan’s two traditional gift-giving seasons in summer and winter) of national-brand products from multiple food manufacturers. The company also sells well-known overseas brands, as well as private-brand watches, handbags, and other items.
Doshisha’s has a well-diversified arrangement of sales channels, with home improvement centers constituting 14.5% of sales in FY03/21, major discount stores 13.5%, e-commerce 11.4%, single-price stores 10.8%, general merchandise stores 8.8%, large supermarkets 7.9%, electronics volume retailers 4.2%, stores specializing in watches and accessories 3.1%, and others 25.7%.
In FY03/21, OPM was 9.4% and the recurring profit margin was 9.6%. Over the past decade, Doshisha’s recurring profit margin has been in the 6–9% range, outpacing the 2.6% average for wholesalers and retailers over that same period (according to a FY03/21 Ministry of Finance report on corporate statistics) and making it one of Japan’s most profitable trading companies. The company attributes these high margins to its ability to develop unique products, the cost competitiveness of its contract manufacturers, a highly profitable brand product business, and strong bargaining power due to the sourcing of large quantities of products in specific categories.
The company’s focuses are threefold: heightening management stability to eliminate the risk of insolvency, avoiding excessive competition by developing unique “niche” products, and concentrating on high-margin products. Doshisha’s corporate vision is to “be an unrivalled company worldwide” that sells unique “niche” products, hedges management risk, and maintains high profitability.
Sales peaked at JPY110.8bn in FY03/16, and have since been dropping through FY03/20 due to a falloff in purchases by inbound tourists since 2015, sluggish domestic demand, discontinued sales of some brand products, and the spread of the novel coronavirus pandemic (COVID-19). Recurring profit continued to drop since peaking at JPY8.9bn in FY03/16. Despite this trend, sales in FY03/21 rose 5.2% YoY, and operating profit increased 58.8% YoY. Over the course of FY03/21, the company achieved progress in terms of business portfolio optimization by leveraging the manufacturing capabilities of its product development model and the trading company capabilities of its wholesale model. At the same time, the company demonstrated its ability to respond to change amid impact from the COVID-19 pandemic.
In FY03/21, sales were JPY101.3bn (+5.2% YoY), gross profit was JPY30.5bn (+14.1% YoY), SG&A expenses were JPY20.9bn (+1.1% YoY), operating profit was JPY9.5bn (+58.8% YoY), recurring profit was JPY9.7bn (+55.5% YoY), and net income attributable to owners of the parent was JPY6.6bn (+56.4% YoY). Sales generated by “new products based on unique ideas” showed growth; sales generated by Cat Tongue Tumbler (launched in November 2020) and Smart Frying Pan Sutto (February 2021) were favorable. Performance from infection prevention products exhibited growth throughout the year, as did results generated by fans, circulators, humidifiers, air purifiers, and sterilizers/deodorizers. Meanwhile, sales stemming from hot plates and the Evercook range of non-stick frying pans expanded due to growth in stay-at-home demand.
For FY03/22, the company anticipates increase in sales and decrease in profits, with sales of JPY103.4bn (+2.1% YoY), operating profit of JPY9.0bn (-5.5% YoY), recurring profit of JPY9.1bn (-6.5% YoY), net income attributable to owners of the parent of JPY6.1bn (-7.4% YoY), and EPS of JPY173.59. In Q1 FY03/22, the company expects a fall against a strong comparative in the previous year which was boosted by a sharp increase in demand for sanitary products such as masks due to pandemic. However, from Q2 onwards, the company expects both sales and profit to rise partly because it has seen a rise in competitiveness stemming from its product development model business and partly because it projects recovery in performance from brand-name products such as watches and bags. The expected dividend is JPY60.0/share, an increase of JPY5.0/share from the previous year.
Shared Research believes Doshisha’s strengths are its ability to develop unique, niche products; the pricing expertise to monetize added product value; superb agility enabling prompt reaction to drastic changes in business conditions. We see its weaknesses a delayed move into e-commerce; a high degree of dependence on the Japanese market; and a focus on profitability leading to missed earnings opportunities.
|Gross profit margin||24.7%||24.3%||23.2%||23.5%||24.3%||24.5%||26.3%||26.5%||27.7%||30.1%|
|Operating profit margin||8.6%||6.8%||6.9%||6.3%||7.9%||6.6%||7.5%||5.6%||6.2%||9.4%||8.7%|
|Recurring profit margin||8.7%||7.5%||7.1%||6.9%||8.0%||6.7%||7.7%||6.1%||6.5%||9.6%||8.8%|
|Per-share data (split-adjusted; JPY)|
|Shares issued (year-end; '000)||37,376||37,376||37,376||37,376||37,376||37,376||37,376||37,376||37,376||37,376|
|EPS (fully diluted; JPY)||-||-||-||-||155.3||131.8||151.1||114.5||-||-|
|Dividend per share (JPY)||30.0||60.0||30.0||40.0||45.0||50.0||50.0||50.0||50.0||55.0||60.0|
|Book value per share (JPY)||1,227||1,319||1,408||1,533||1,557||1,657||1,779||1,857||1,922||2,087|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||20,526||23,665||26,233||26,736||32,993||32,207||35,986||40,250||37,549||47,870|
|Total current assets||43,841||47,522||50,440||54,165||60,423||60,342||64,694||67,698||60,668||72,020|
|Tangible fixed assets||11,659||11,746||11,656||11,297||13,591||15,434||18,914||19,280||18,894||18,677|
|Investments and other assets||2,448||2,151||2,716||2,667||2,671||2,758||3,249||2,887||2,592||2,813|
|Total current liabilities||9,092||8,493||8,038||9,321||10,747||9,459||11,093||17,378||10,437||11,394|
|Total fixed liabilities||3,073||3,183||3,520||797||7,894||8,944||9,297||2,396||1,328||7,866|
|Total net assets||45,930||49,885||53,416||58,161||58,163||60,255||66,594||70,405||71,032||74,767|
|Total interest-bearing debt||2,863||2,994||2,961||240||7,212||8,210||8,634||8,830||1,791||7,255|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||7,313||3,917||4,511||4,741||5,483||4,682||7,072||5,864||8,583||8,855|
|Cash flows from investing activities||914||104||-735||581||-2,775||-2,299||-3,805||-601||-538||-483|
|Cash flows from financing activities||-2,571||-921||-1,276||-4,914||3,634||-3,093||536||-1,088||-10,647||1,884|
|Total asset turnover||184.5%||165.8%||166.9%||155.6%||152.8%||137.7%||125.1%||111.4%||111.3%||114.5%|
On November 19, 2021, Doshisha Corporation announced a decision regarding a share buyback.
At a meeting held on November 19, 2021, the company's Board of Directors decided to buy back its own shares. The purpose of the share buyback is to allow for a flexible capital policy in response to changes in the business environment.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||% of Est.||FY Est.|
|Gross profit margin||29.3%||28.2%||27.7%||27.7%||32.0%||30.9%||30.2%||30.1%||31.6%||29.7%|
|Operating profit margin||8.1%||6.5%||7.2%||6.2%||12.6%||10.4%||10.7%||9.4%||9.8%||8.1%||8.7%|
|Recurring profit margin||8.3%||6.5%||7.3%||6.5%||12.7%||10.6%||10.9%||9.6%||10.4%||8.5%||8.8%|
|Gross profit margin||29.3%||27.1%||26.8%||28.0%||32.0%||29.7%||29.1%||29.6%||31.6%||27.7%|
|Operating profit margin||8.1%||4.7%||8.4%||2.0%||12.6%||8.0%||11.2%||4.2%||9.8%||6.2%|
|Recurring profit margin||8.3%||4.7%||8.6%||2.9%||12.7%||8.3%||11.4%||4.3%||10.4%||6.4%|
|By segment (cumulative)||FY03/20||FY03/21||FY03/22||FY03/22|
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||% of Est.||FY Est.|
|Product Development Model||12,067||23,496||36,390||47,078||13,091||26,164||41,018||53,679||13,863||26,171||47.2%||55,400|
|Product Development Model||1,002||1,619||2,783||3,285||1,537||2,902||4,681||5,605||1,461||2,297|
|By segment (quarterly)||FY03/20||FY03/21||FY03/22|
|Product Development Model||12,067||11,429||12,894||10,688||13,091||13,073||14,854||12,661||13,863||12,308|
|Product Development Model||1,002||617||1,164||502||1,537||1,365||1,779||924||1,461||836|
The severe consumption environment continued, due to a state of emergency declared from July to September 2021 and unseasonably prolonged rains in August.
1H sales fell JPY1.1bn YoY to 49.0bn. Sales rose JPY7mn YoY to JPY26.2bn in the Product Development Model Business but fell JPY1.0bn YoY to JPY20.8bn in the Wholesale Model Business.
In Q2, sales fell by 5.9% YoY in the Product Development Model Business but rose 2.8% YoY in the Wholesale Model Business.
1H operating profit dropped JPY1.3bn YoY to JPY4.0bn. Operating profit fell JPY605mn YoY to JPY2.3bn in the Product Development Model Business and JPY420mn YoY to JPY1.6bn in the Wholesale Model Business.
Q2 operating profit decreased 38.8% YoY in the Product Development Model Business, and increased 0.8% YoY in the Wholesale Model Business.
The company made steady progress toward its full-year FY03/22 forecast. It has not amended the full-year forecast.
In consumer electronics, demand continued to be robust for summer home appliances such as fans and indoor ventilation. Meanwhile, demand for air purifiers and sterilizers/deodorizers settled down, decreasing from 1H FY03/21.
Sales continued to grow for evercook frying pans and sutto smart frying pans as people spent more time at home.
The declaration of a state of emergency during the summer holiday period led to strong sales of home snow cone makers and nagashi somen machines, where the thin, white wheat noodles move around in a circulating water bath.
Sales of watches and brand-name handbags rebounded YoY on favorable comparisons as some customers’ stores that were closed in Q1 FY03/21 reopened. The company noted that results are on a recovery track. Sales of jewelry grew as consumers looked to treat themselves.
T.D.Early, the company's own brand of sweets, which has been sold at Tokyo Station, Haneda Airport, and department store events, opened its first store in Shin-Osaka in June 2021. Sales to retailers including supermarkets across the country also expanded.
Sales of sanitary products, such as face masks and antibacterial goods, fell substantially as manufacturers adjusted their supply systems.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||1H Est.||2H Est.||FY Est.|
|Product Development Model||23,496||23,582||47,078||26,164||27,515||53,679||26,550||28,850||55,400|
|Cost of sales||34,665||34,866||69,531||34,687||36,109||70,796||35,000||38,100||73,100|
|Gross profit margin||28.2%||27.2%||27.7%||30.9%||29.3%||30.1%||29.9%||28.8%||29.3%|
|Operating profit margin||6.5%||6.0%||6.2%||10.4%||8.5%||9.4%||8.8%||8.6%||8.7%|
|Recurring profit margin||6.5%||6.5%||6.5%||10.6%||8.6%||9.6%||8.9%||8.7%||8.8%|
For FY03/22, the company anticipates increase in sales and decrease in profits, with sales of JPY103.4bn (+2.1% YoY), operating profit of JPY9.0bn (-5.5% YoY), recurring profit of JPY9.1bn (+2.1% YoY), net income attributable to owners of the parent of JPY6.1bn (-7.4% YoY), and EPS of JPY173.59. The expected dividend is JPY60.0/share, an increase of JPY5.0/share from the previous year.
In Q1, the company projects saw both sales and profit decline due to residual downward impact from special demand for hygiene products that occurred in Q1 FY03/21. However, inventories were disposed of by the end of the previous term, and related losses are on course to shrink. The company also forecasts YoY growth in sales and profit starting in Q2 partly because it has observed an increase in competitiveness associated with its Product Development Model Business and partly because it projects recovery in performance from watches, bags, and other name-brand products.
Taking impact from modest discounting losses incurred in FY03/21 into account, the company anticipates a small YoY decline in gross profit but also expects support from recovery in sales of name-brand products. Taking into account conditions at retailers, the company is budgeting for an increase in sales promotion expenses, travel expenses, and other operating expenses. Based on the above factors, the company forecasts YoY decline in operating profit, recurring profit, and net income.
The vaccination of company employees was completed by early August 2021. The company expects to increase its efforts to maintain sales floors and secure prime locations.
Segment profits had been trending downwards, but the company reported record-high operating profit of JPY9.5bn in FY03/21 (+58.8% YoY). During the same fiscal year, the company encountered unprecedented circumstances, such as retailer closures implemented in accordance with states of emergency declared in response to the COVID-19 pandemic. The company maintains that it was able to achieve record-high operating profit despite these circumstances in part because of the progress in terms of business portfolio optimization by using the manufacturer capabilities of its product development model and the trading company capabilities of its wholesale model. As another contributing factor, the company mentioned the successful adaptation to change that it demonstrated throughout the fiscal year.
The company has not disclosed a medium-term management plan.
For FY03/22, the company has established a management policy that calls for efforts targeting transformation into “a company that will grow continuously and never fail.” In accordance with this policy, the company will strive to raise its corporate value by achieving further groupwide growth while drawing support from its Spirit of Foundation (“Building a company with aspirations that will never fail”) and its Code of Conduct (“The Spirit of Shiho-yoshi” [the Four “Goods”]). Meanwhile, the company will also strive to become a company that can contribute to the creation of a society characterized by long-term sustainability in terms of ESG (Environment, Social, and Governance).
Starting in FY03/22, the company will leverage its new leadership team to accelerate business growth and enhance its development of unique and exciting products.
Since April 2021, Masayuki Nomura has held the title of president, CEO, and COO. Leveraging the authority of these positions, he has called for the company to conduct the following three initiatives at a higher speed than ever before.
The company will optimize each business by expeditiously overhauling organizations and product categories, focusing on business characteristics, business models, and optimal personnel deployment.
The company will actively consider more than ever, conducting M&A and forming business alliances with the goal of increasing the competitiveness of existing businesses and creating new businesses.
The company will automate and improve the efficiency of back-office operations to support marketing activities. At the same time, it will hire mid-career specialists and strengthen IT system development.
Doshisha puts emphasis on developing products that are unique and exciting by asking three key questions when creating new products: what do consumers want, what is “new,” and what is “interesting?” Examples of this approach include its Cat Tongue tumblers and Sutto frying pans, but the company plans to further strengthen its development capabilities to create other standout products. Doshisha maintains that delivering unique and exciting products that impact the daily lives of its customers is its raison d'être.
Cat Tongue tumblers
The growing popularity of convenience store coffee has made it easier to get freshly made coffee, but the company conducted a survey to test its theory that some people do not drink it because the serving temperature is too high. The company started developing its tumblers after roughly 50% of respondents said convenience store coffee was too hot. The concept was to create a tumbler that rapidly cooled down very hot beverages and kept them at the ideal temperature for drinking. The tumblers proved to be a hit with consumers thanks to interest on social media and in other channels.
Sutto frying pans
Doshisha’s eye-catching Sutto frying pans have been developed to help consumers use kitchen space more effectively. There are other square-shaped frying pans on the market, but this product’s unique design for storage in tight spaces attracted attention, helping to drive sales.
In line with its aim of maintaining a leading share of niche markets, the company has defined a strategy of generating JPY10bn in annual turnover in each of 30 different businesses.
Drawing on experience and lessons learned since establishment, the company believes sales of about JPY10bn per year allow it to add value to the products while maintaining the ability to respond swiftly and flexibly to daily market changes. In Doshisha’s experience, this level of sales also enables the company to achieve top market share in niche markets.
By increasing the number of businesses that generate JPY10bn per year, the company aims to diversify risk and provide a setting for employees to pursue their own dreams.
The company’s business strategy is to sustain its current business model and keep building the Product Development Model Business, sales of specially priced national-brand spot products, the e-commerce business, and overseas business. Conversely, the company has identified well-known brands, gifts (national-brand products), and the food and alcohol business as businesses to revamp, since it believes changes to the business models will contribute to growth.
Doshisha aims to strengthen and expand its Product Development Model Business, sales of specially priced national brand spot products, the e-commerce business, and overseas business.
The company will concentrate on developing online-only products. It plans to collaborate with dedicated e-commerce sites that have solid sales expertise.
In this area, the company intends to step up its solutions for handling surplus inventories. By making cash purchases of large surplus inventories held by manufacturers and wholesalers, it intends to offer products for wholesale without disturbing retail selling prices.
The company aims to improve business efficiency and revamp earnings structures in businesses involving well-known brands, gifts (national-brand products), and food and drink.
With sales of high-priced watches down due to a supply shortage, the company intends to boost business efficiency by promoting a “brand bazaar” strategy.
Doshisha intends to step up development of private-brand products and revamp the earnings structure.
The company plans to improve the earnings structure through regional and category-specific strategies. It aims to ramp up planning to attract more customers and use retail spaces—those typically reserved for mid-year and year-end gifts—throughout the year.
By collaborating with technology-rich startup companies and local industry, Doshisha believes it can offer new selling proposals that leverage IT and develop higher-value-added gifts by highlighting local characteristics. The company intends to boost market share through more fine-grained marketing and by augmenting initiatives that target retailers and manufacturers of national-brand products. It will also use sales data to offer consulting related to retail spaces.
Doshisha also aims to encourage gift-giving outside the traditional mid-year and year-end gifts. For this reason, it plans to augment its lineup of Mother’s Day and Father’s Day gifts, as well as gifts given to hosts when visiting. The company is also developing products for use with digital gift cards.
Digital gift card: The recipient receives a card that entitles them to order certain products over the internet. This approach can be used to create a new customer base.
Visiting gifts: In Japan, it is customary to bring a small gift for one’s host. The company is developing assortments of sweets, and aims to strengthen the drugstore channel for this purpose. Doshisha aims to enhance quality and strengthen branding. It plans to increase the number of customers by promoting such gift offerings at department stores, in train station shopping areas, and at expressway service areas.
With this strategy, the company aims to divide about 150 brands it handles into four categories, tailor marketing and procurement efforts to individual retail spaces and stores, and configure an optimal brand portfolio. It intends to make use of digital marketing and support sales efforts by configuring retail spaces.
The company aims to reinforce brands it has developed, including Furbo, Rubin Rosa, and Brilliant Arrow.
Doshisha develops products under license from such brands as Hunting World, Giuliettaverona, Kaepa, U.S. Polo Assn., Orobianco, and Trans Continents. It plans to strengthen product design for these brands.
The company sells various brands on an agency basis, such as Guess, Police, fitbit, Furla, fitflop, and Bally.
In this category, the company secures branded products it expects to become popular and also identifies brands for future cultivation. It successfully sources such products, leveraging its experience and skills to identify authentic value.
To augment its earning power, Doshisha recognizes the need to boost profitability and use management resources effectively through the following efforts.
Energize the product portfolio. Revise the weighting of business models.
Enhance branding. Promote the “Doshisha’s here, too!” message to consumers.
Use management resources effectively. Reconfigure the personnel system to involve all employees in management and eliminate barriers to generating and realizing ideas. Market to a diverse supply network and sales routes.
Doshisha’s overseas sales have grown in recent years, reflecting overseas economic expansion despite the deceleration of consumption in Japan.
Current initiatives include collaboration with SGO48 (a Vietnamese idol girl group) and mosh! Bottle in Vietnam. In Singapore, the company is using TV shopping to promote evercook. In Indonesia, the company is increasing its e-commerce efforts.
Over the medium term, Doshisha aims to expand its overseas sales to JPY10.0bn.
Doshisha is considering business revitalization for its AV products. The company acquired an electrical product design and development division from Orion Electric in January 2019 and is currently working to turn the division’s business around.
For mainstay televisions, the company develops main boards at the Doshisha R&D center (Echizen, Fukui) and is working toward commercialization at Orion Co., Ltd., a wholly owned subsidiary. Doshisha aims to accelerate sales of Orion-brand televisions.
To highlight Japanese attention to detail and accuracy in this process of developing and manufacturing televisions, the company has dubbed these televisions “designed in Echizen.” In recognition of the high technical and quality levels of its LCD televisions with built-in 4K tuners developed in November 2019, Orion-brand products have been named “products that promote the image of Echizen” by the city of Echizen.
Doshisha handles a variety of lifestyle items, such as furniture, daily necessities, consumer electronics, cosmetics, wristwatches, handbags, accessories, and single-price items. The company has two segments: the Product Development Model Business and the Wholesale Model Business. In FY03/21, the former accounted for 53.0% of sales (+4.1pp YoY) and the latter for 42.7% (-4.2pp YoY). The Wholesale Model Business breaks down further into well-known brands, which accounted for 14.3% of total sales (-3.5pp YoY), and gifts (national-brand products), making up 28.5% (-0.6pp YoY).
Doshisha says its sales network spans around 4,800 companies in a host of industries and business categories, including most of Japan’s retailers. The company further explains that it can mobilize in-group and outsourced factories at some 2,100 companies to supply a broad range of goods. Drawing on its design and development capabilities, retail spaces remain a central focus in the company’s management of its business flow. The company arranges the overall product distribution process, ranging from product design, development, and sourcing, to the configuration of retail spaces and provision of sales support and after-sales service.
Shared Research understands that the company has a framework that achieves high profitability. Three elements of the business model facilitate this are: 1) avoiding general-purpose staple products that attract fierce sales competition, 2) operating in fields that require rapid product development, such as seasonal items, and 3) selling unique, impactful, and differentiated items.
In FY03/21, the Product Development Model Business accounted for 53.0% of sales and the Wholesale Model Business for 42.7%. The Wholesale Model Business breaks down further into well-known brands, which accounted for 14.3% of total sales, and gifts (national-brand products), making up 28.5%.
The company sources products for its Product Development Model Business segment and private-brand business from its own and commissioned factories in China. The company selects outsourcing partners based on their ability to deliver consistent quality at low cost.
It sources well-known brands from overseas wholesalers and gifts (national brand products) from major food-product manufacturers across Japan.
Sales are well diverged into various sales channels, with sales via large home improvement centers accounting for 14.5% of the total, large discount stores for 13.5%, e-commerce for 11.4%, single-price stores for 10.8%, general merchandise stores for 8.8%, large supermarkets for 7.9%, electronics volume retailers for 4.2%, watch and apparel stores for 3.1%, and other channels for 25.7%.
Doshisha focuses on designing and developing distinctive, unique products in the apparel, food, and household goods categories. In particular, the company concentrates on developing products that satisfy niche demands from consumers in areas large companies do not seek to enter. Rather than long-selling items, the company says its strength lies in seasonal and other “short-selling” items.
The company aims to develop products quickly, and has a policy of disclosing information about products under development to business partners early on. The company does so, it explains, because the value of early customer feedback and ideas it receives outweighs the risk of product development information leaking to other companies. It notes that product lifecycles tend to be shorter in Japan than in Western countries, making the large-scale manufacture of long-selling hit products difficult. For this reason, the company explains, steadily developing a string of new products is the key to success.
Product categories include storage furniture (such as steel shelving racks), cookware, home appliances (heaters, humidifiers, fans, and cooking appliances), unique consumer electronics, cosmetics, and single-price items.
Doshisha manufactures products in China, at its own factory and those it commissions from other companies (producing such items as snow cone makers, Christmas lights, and thermal bottles). The company says profitability is fundamentally high in the Product Development Model business because its own and commissioned factories are highly cost competitive.
Sales channels include home improvement centers, large discount stores, electronics volume retailers, and e-commerce.
Much of the lineup comprises seasonal items, such as fans and heaters, snow cone makers, baked sweet potato makers, and Christmas lights. Shared Research understands that few companies seek to offer seasonal products due to the potential for inventory risk to substantially affect earnings. We think that it hedges inventory risk by supplying products to wholesalers such as large retailers that can sell all the products they receive, as well as by manufacturing flexibly in response to information retailers provide by using a point of sales (POS) system.
In this business, Doshisha leverages its sourcing capabilities to handle a variety of brands. Price ranges vary widely, with well-known watch brands selling for several thousand yen to tens of millions of yen. The company tailors its brand portfolio to match retail spaces and stores and supports retail spaces and sales promotion to match this portfolio.
Private brands: The company holds all the rights to products such as Furbo, Rubin Rosa, and Brilliant Arrow, which it designs, manufactures, and sells itself.
Licensed brands: The company has licensing agreements in place for such brands as Hunting World, Giuliettaverona, Kaepa, U.S. Polo Assn., Orobianco, and Trans Continents. The company designs, manufactures, and sells products under these brand names, paying licensing fees to the brand owners.
Brands sold on agency basis: The company conducts agency sales of Guess, Police, fitbit, Furla, fitflop, and Bally products.
Spot brands: The company sources product brands flexibly on a spot basis to match market demand. Doshisha sometimes procures items strategically to measure demand for a brand.
Doshisha imports well-known brands of watches, handbags, and jewelry when import prices are lower than prices at directly managed stores in Japan. This business is highly profitable, but requires the ability to gauge product authenticity, as products are sourced from trading companies overseas.
Importing well-known brands: Importing authentic products through routes other than stores managed directly by brand owners. The company and other importers purchase well-known brands overseas that have been manufactured and sold legitimately under local law, and then import these products for sale in their home country, procuring items from routes other than directly managed stores. The larger the difference between overseas and domestic retail prices, the more importers profit.
The business of developing brand products under license is also highly profitable, as the company utilizes outsourced factories that are highly cost-competitive.
Doshisha notes that its strong sales record has attracted licensing overtures from a number of brands.
Sales channels include home improvement centers, major discount stores, e-commerce, supermarkets, major electronics volume retailers, and stores specializing in watches.
The company takes an all-around approach to helping retailers sell, by combining existing sales channel marketing with digital marketing that seeks to harness potential consumer demand.
For gifts (national-brand products), Doshisha sources national-brand products individually and creates gift assortments from its inventories according to various themes and designs, such as mid-year or year-end gifts. The company is cultivating the market for mid-year and year-end gifts by creating assortments of products from different manufacturers. It purchases national-brand products at low prices by targeting spot pricing and manufacturer sales promotions, then adds a premium by combining these products into varied assortments, earning high margins.
Spot products: Products sourced through non-official routes for such purposes as clearing out inventories. Purchasers need to have strong selling capabilities, as such products cannot be returned.
Doshisha’s marketing strategy hinges on creating business opportunities that take advantage of various product angles and selling styles.
In line with increasingly diverse consumer demand, the company divides the huge market that new value and potential demand represent into smaller segments, and then develops products tailored to these segments.
In the apparel, food, and household goods categories, the company develops niche products that combine different functionalities that “seem like they should exist, but do not.”
Doshisha focuses on niche markets that large companies are reluctant to enter to secure a leading share and boost profitability.
The company explains that its business focus is on selling product plans rather than products.
The Product Development Council is made up of chief directors of business units, department heads, sales and product directors of individual divisions, people in charge of development, and personnel from the Quality Assurance Division.
To help important ideas surface, the Product Development Council meets only twice during a development cycle: to approve development and to approve sales.
Essentially no products are cut at the ideas stage.
The council’s fundamental policy is to “start with a light touch, and decide swiftly.”
The company believes that meeting more frequently would encourage participation and commentary by more naysayers, raising the risk of halting development.
The company is promoting its corporate brand using the catchphrase “Doshisha’s here too!” The company revamped its website in April 2019. The site’s concept is ongoing communication with consumers through products. Consumers feel a sense of closeness as they enjoy their lives and find products that make their lives better and more convenient. “Doshisha’s here too!” is meant to encapsulate this feeling. The company aims to boost corporate value by providing the environment to encourage this sense and grow closer to consumers.
In recent years, SG&A expenses have been rising despite falling sales. The principal reason is ongoing increases in freight rates. To make distribution more efficient, to date the company has operated a logistics system with two centers: Sennan and Kanto. The Sennan logistics center (Sennan, Osaka) began operations in 1988. A second facility opened at this center in 1997, followed by a third warehouse in 2004. The Kanto logistics center (Kisarazu, Chiba) commenced operations in November 2017.
The use of these two centers has enabled the company to lower warehouse storage fees by switching from outsourced providers to its own logistics centers. It has also lowered outsourcing fees by taking over some of the receiving and processing operations. In addition, the company has worked to ship products from the best locations, aggregate shipments, and make joint deliveries. These efforts have lowered transportation costs and helped curtail distribution expenses.
However, since 2H FY03/18, logistics costs have grown faster than Doshisha expected, with SG&A expenses rising by approximately JPY1.0bn in FY03/19. The main reason is that the company has been unable to optimize operations during the shift from outsourcing to operation of its own logistics centers, and operations were unexpectedly inefficient. Now that the company has succeeded in normalizing operation of its own logistics centers, logistics costs are gradually being curtailed. The company’s logistic cost ratio in FY03/21 fell 0.2pp YoY to 7.4%.
Focus on managing cash flow, managing receivables, and maintaining high profitability.
Maintain a high equity ratio, which helps to enhance management stability.
Lower the risk of bad debt via thorough management of business partners’ credit.
Respond to rapid market fluctuations, restructure to ensure operational flexibility, and always optimize.
Source high-quality products at low cost mostly through outsourced production at the factories of superior partner companies in China.
Doshisha describes itself as “a manufacturer that designs, develops, and sells lifestyle products and services, as well as a trading company.” To generate hit products, the company focuses on creativity and ideas that are new, interesting, and based on a consumer perspective. The catchphrase “Doshisha’s here too!” is meant to embody the idea that the company is an integral part of consumers’ everyday lives.
Rather than products, Doshisha seeks to be an organization that sells product plans.
Without focusing overmuch on any of the apparel, food, and household goods categories, the company aims to continue delivering products that are undisputed leaders in small, highly specialized markets. Doshisha intends to be unique for this approach.
Masaharu Nomura, a founding member of Doshisha and its current chairman, previously worked at a company that had gone bankrupt. As a result, he, many other employees and their families, and creditors have personal experience of being turned adrift. For this reason, creating a company that would not fail, where work felt worthwhile, and that had a sense of adventure were key aspirations he instilled into the company in 1974, when Doshisha was established as a wholesaler of daily essentials.
The precept, “a company with aspirations that will never fail,” reflects this spirit.
We are all a family: Work together, sharing joys and sorrows, understand each other’s perspectives, and join hands to prosper together with the company.
Win the customer’s confidence: Trust in our company must be built by each employee. Put yourself in the customer’s position, and carry out your work quickly, correctly, and with kindness.
Create your own work, and draw in those around you: Doshisha needs no observers on the sidelines. Take responsibility for your own words and actions, and always be committed to carrying things boldly through to the finish.
Achieve practical benefits by improving the turnover of funds: Avoid frivolity, learn your limitations, cut waste, and save for a rainy day.
Fulfill your spirit, and protect your health: Work hard and relax well, and create a cheerful, clean workplace with your coworkers.
|Product Development Model||54,602||50,251||52,573||50,809||51,161||49,129||49,958||50,161||47,078||53,679|
|% of total||53.2%||50.6%||49.8%||49.0%||46.2%||45.9%||48.2%||50.8%||48.9%||53.0%|
|% of total||44.4%||46.4%||46.8%||47.2%||50.7%||50.8%||48.9%||46.1%||46.9%||42.7%|
|Operating profit margin||8.6%||6.8%||6.9%||6.3%||7.9%||6.6%||7.5%||5.6%||6.2%||9.4%|
|Product Development Model||5,421||3,695||3,016||2,707||4,370||2,961||3,839||3,235||3,285||5,605|
|Operating profit margin||9.9%||7.4%||5.7%||5.3%||8.5%||6.0%||7.7%||6.4%||7.0%||10.4%|
|% of total||60.6%||52.7%||39.8%||40.0%||48.6%||41.1%||47.6%||53.6%||50.6%||55.1%|
|Operating profit margin||7.2%||6.6%||7.8%||7.5%||7.1%||6.5%||7.9%||6.0%||6.0%||8.8%|
|% of total||36.4%||43.3%||50.6%||53.9%||44.2%||48.9%||49.4%||45.4%||41.7%||37.6%|
Over the past 10 years, OPM in the Product Development Model Business has been around 6–9%. Similarly, OPM has been around 6–9% during that period in the Wholesale Model Business. Although wholesalers (which source and sell products) typically have lower margins than companies that develop and manufacture products, Doshisha’s profit margins in those businesses are essentially the same. One reason is that profitability in the gift (national-brand products) and branded-product businesses is higher than in traditional wholesaling.
The company designs products (interior goods, consumer electronics, and daily necessities), outsources production to factories in China, and wholesales them to major discount stores, electronics volume retailers, and major home improvement centers. Doshisha also uses e-commerce, selling products via Amazon, Rakuten, and its own website.
The company’s Luminous brand is the market leader in steel shelving racks. The company says its racks are highly competitive because they are reasonably priced (between JPY4,000 and JPY40,000) and high in quality. Initially developed for commercial use, Doshisha says Luminous racks have gained a broader consumer appeal because they are rust-resistant and easy to assemble. The company has also added color variations to its lineup.
The company develops and sells thermal bottles designed as fashionable vessels for transporting liquids and keeping them cool or warm. Doshisha also offers the evercook brand of fluorine-coated frying pans.
In FY03/21, sales generated by the company’s Cat Tongue tumblers and Sutto-series smart frying pans grew as these items gained popularity as “new products based on unique ideas.” The Cat Tongue tumblers (released in November 2020) were developed to maintain beverages at 60–69°C for individuals who have sensitive tongues. This product became a hot topic on social media platforms and various forms of media, and its sales were strong, resulting in ongoing inventory shortages in stores.