There's profit in junk: welcome to Eigo Nosaki's Treasure Factory - Sponsored Section

Japan, Inc., Feb, 2004 by John Dodd

AS I WALK INTO the "recycle" shop, essentially a themed junk store, I am hit by the sensation of having walked into a messy version of Crate & Barrel. Lighting is good, the merchandise is laid out in categories and couples are browsing just because it's fun to do. No feelings of depression, desperation or destitution as might be felt in a similar store in Middle America. Indeed, within a few minutes, I find a number of things that I would like to buy, including a beautiful piece of pottery that was an unwanted gift, for the knockdown price of just [Ren]600 ... Welcome to the Treasure Factory.

We interview the CEO of Treasure Factory, Eigo Nosaki, a 31-year-old native of Saitama, about how he has been able to build his up-market junk store concept into Japan's third largest recycling chain, with yearly sales of [Ren]1.8 billion [US$16million].

Can you give us some personal background?

Well, my Dad was a "shosha" man [trading company employee] and I spent my preteen years in Singapore. After I returned, I had to get back into the system in a big hurry, and somewhere along the way, when I was around 13 years old, I decided that I wanted to establish my own company. Then, when I got to university, my thoughts started to jell and I produced a business plan and talked to various mentors.

Then I interned for a year at a marketing research company in Tokyo. This was in the bubble period in the early 90s and they had been funded to go out and test products and ideas on university students. I learned a lot there. So by the time I was ready to graduate, I was ready to start a company.

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How did you come up with the idea of recycling as a business?

When I was a university student, I had to do some part-time work. One of these jobs was collecting old furniture and other trash for a junkyard. I was amazed at how Japanese throw away things which are still usable and which others would pay money for. In those days recycling did exist, but only on a volunteer basis--so my insight was to do it for a profit. Of course, there were junk shops at that time, but they weren't the sort of place you could take a family. People would kind of skulk in through the back of the place, not wanting others to see them.

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What about your initial funding?

Around the time I graduated, in 1995, I saw a newspaper article about a local real estate developer setting up a venture fund, and I wondered if he would be willing to back my first company. I called him, and he very kindly listened to my ideas and agreed to put in some cash. The initial investment wasn't much, about [Ren]300,000. But thanks to my investor and other angels, the amount started increasing each year that we did business, until we became profitable.

How do you get your finance these days?

Mainly from banks, although we may do a round of mezzanine capital next year.

So you're looking for investors?

Possibly.

Any memories about the early days?

After getting the cash, I set up the first store in August, in a warehouse owned by my first investor, the real estate developer, out in Saitama. This was a 2-hour commute for me, given that I was living in Yokohama at the time, and sometimes I slept over at the store. Boy, it gets cold in Saitama in winter! But you've got to do what you've go to do to get started.

How did you get stock in the beginning?

We had no money in the beginning, so every Wednesday, which was trash day, I'd get up at three o'clock in the morning, hop into a borrowed truck and drive around the neighborhood looking for good stuff people had left out on the side of the road for collection. You're not really supposed to do this, but since everything was going to the municipal dump anyway, I thought people wouldn't mind. When I got the goods back to the warehouse, I'd clean them up, fix any broken bits and put them up for sale.

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To get customers, I'd call friends and tell them what was available, and invite them in to browse.

I remember one big break came when a 60-year-old man called me and said he was closing down his store and had a whole bunch of new stock and fittings that I could have at a good price. I borrowed another truck and picked everything up. We ran out of storage, so I had to put the boxes in my apartment--we could barely move around!

After two years of this, we finally started turning a profit. Then we opened the next store.

Was it hard to find good people once you started other locations?

Typically it should be. But for us, because I'd been in the news so often, young people used to seek me out looking for a job. So we did OK. One good thing about getting great talent coming to you is that you can ask them to do more. For example, my people do their own purchasing [direct from consumers bringing products in] and run the stores in a decentralized management style.

You mean that you allow them to decide how much to pay someone?

Yes. Of course, since they pay in cash, the controls are quite strict, and there is a set manual, online, on how to value each type of product. Everything is overseen by the store manager.