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March 20, 2012
Box Industry carves out niche as pallet distributor
Masahiro Tawara transformed Ishikawa Prefecture-based Box Industry Co. from a plant equipment maker into a mesh pallet distributor in 2008.
|Masahiro Tawara, president of Box Industry Co., is interviewed in Tokyo on March 5.
A mesh pallet is a steel-framed basket, often with four wheels, and typically used to carry or store anything from papers and logs to auto parts and fish.
It is lightweight and collapsible and thus easy to move around.
Tawara's grandfather founded Box Industry, which produced plant equipment made from steel, in 1938. Tawara's grandfather and father served as president before the younger Tawara assumed the post last December.
However, before becoming president, Tawara, 38, realized the need to start an alternative business despite Box Industry having done well until the 2008 collapse of Lehman Brothers triggered a financial crisis that reverberated around the world.
The reason he chose mesh pallets as an alternative was just a coincidence.
"My friend bought several hundred mesh pallets, and he complained that they were expensive and said secondhand pallets would have been good enough. That's when I thought about doing business with mesh pallets," Tawara said.
"Actually, I had thought about dealing in pallets before the Lehman Shock, as I thought the brisk economy would not last," Tawara said. Then, in September 2008, the Lehman Shock happened — just four months after Tawara started the pallet business. "Because of the Lehman Shock, I shifted the company's focus to developing the pallet business."
He and a clerical assistant are the only people engaged in the pallet business division, and the remaining five employees are engaged in the plant equipment business.
Although Box Industry entered the pallet business just four years ago, it now accounts for 70 percent of the company's entire revenue, Tawara said.
The biggest challenge was to establish routes to procure mesh pallets, but word of mouth helped him with his business.
"After all, the fact that I took action was a trigger for growth," Tawara said.
About half of the pallets Box Industry sells are secondhand ones obtained from pallet users. The other half are new ones made in Chinese factories.
Tawara's focus on secondhand mesh pallets is helping the company to grow and move forward, and sales rose about 40 percent last year, he said.
Prices for Box Industry's pallets range from several thousand yen to about ¥50,000 apiece, but the average price is about ¥10,000, Tawara said.
"Big pallet makers rarely sell secondhand pallets, but there is a big demand for them," he said. "Also, many customers say they don't mind using secondhand or damaged pallets, but big makers don't want to sell these."
Box Industry gets its customers — mainly small companies which need only a small numbers of pallets — mostly through the Internet, but Tawara personally visits companies that order a large volume. Recently, inquiries and orders have been on the rise.
Tawara opted not to ignore any small orders, even though the majority of his bigger rivals are typically reluctant to deal with small volumes, he said.
Box Industry probably accounts for about 1 percent of the entire market for pallets in Japan, Tawara said, adding that 90 percent of the company's pallet sales come from small orders — 30 pieces or less.
As Ishikawa Prefecture is well known for its marine products, Tawara wants to help the local fisheries industry export to China and other countries, he said.
Box Industry has connections with many Chinese companies as well as with trading and logistics firms, and such connections should help build up exports, he said. It also is collaborating with logistics companies to provide better services by developing containers that are easy to remove and load onto mesh pallets.
This series has been prepared in collaboration with Enjin Co., which produces and operates a video website, kenja.tv, specializing in profiles of up-and-coming entrepreneurs.