Secondhand alchemy: Japan's Anchor Networks recycles junk into cash

Japan, Inc., Jan, 2005 by John Dodd

JAPAN'S obsession with the latest consumer products, coupled with its throw-away culture and tightening government regulations, has created an entire industry around recycling and exporting "junk." The most notable segment of this industry is the secondhand car industry.

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IN 2003 JAPAN SLIPPED abroad 720,000 used vehicles, accounting for 20% of sales. This amounts to 30 monthly shiploads of vehicles to New Zealand, the UAE, Russia, Peru, the UK, the Philippines and elsewhere.

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But not everything that is pre-used is exported; there is also a healthy market in Japan. The Nikkei Shimbun, a respected financial daily, reckons that annual sales of recycled goods will reach [yen]50 trillion (US$45 billion) in 2004, about 10% of Japan's nominal GDP. Much of this is in the auto industry. The overall domestic market for vehicle parts and accessories, including tires and audio systems, was [yen]55.5 billion (US$504 million) in 2002. Indeed, used vehicles (5.36 million) exceeded new vehicles in number of registrations by 33 percent in Japan during 2003.

Just as the used car market is changing the economic landscape for auto manufacturers, the personal computer and office automation recycle market is transforming the PC/OA Industry. Analysts estimate that the domestic market for used PCs will double in the next 12 months, reaching a value of some [yen]200 billion (US$1.8 billion) within FY2005. The Nikkei says that 90% of used PCs and OA equipment is sourced from leasing firms upon the expiry of four-and five-year leases and companies upgrading their infrastructure to stay up to date on the software side. Luckily for international traders of secondhand goods, because Japan is so far ahead in this technology, what is junk to local firms still has value and can be pressed back into service overseas. Examples of still useable equipment being trashed in Japan include 17" LCD displays, color photocopiers, intelligent factory automation equipment, and all kinds of electrical equipment.

The main barrier to international buyers wanting to source reasonable quality used goods from Japan is the cost and complexity of gathering sufficient stock. Not only is there the need to actively seek out sellers of such products and pay for them in advance, there is also the need to warehouse, check equipment functionality, repair broken units, and handle sufficient volumes of similar models so as to make overseas shipments commercially viable. One company which has perfected its collection, control, and resales system is Anchor Network Service, based in Kanamachi, Katsushika-ku, Tokyo's eastern-most ward.

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Floating Recycling as a Business

The CEO and founder of Anchor Networks Service is 44-year old Tokyo native Takashi Ikari. He came up with the idea of a recycling business while working as a salesman for Matsushita Denki. He couldn't help noticing the high volume of perfectly useable equipment customers were trading, and which was simply being scrapped--at high cost to the company. He realized that he might be able to start up a niche business saving both the manufacturer and frugal customer money. In 1993, he started his own firm, Anchor Networks Service. He decided to launch with two lines of business: recycling and real estate, the latter a backup in case the business went bad. However, he needn't have worried because he wound up catching the front end of a massive shift in consumer awareness toward recycling as a virtue. Just 10 years later Anchor Networks Service would be a multimillion dollar business.

The early days were spent seeking out sources of old PCs and working out a system for refurbishing and then selling them. Back then it was easy to find unwanted equipment, but the sources were small and highly dispersed, making collection difficult. He overcame this by spending a lot of time and energy working relationships with the big leasing firms, who handle the bulk of Japan's business-driven PC/OA sales. At first the companies were suspicious and concerned that Ikari's firm would compete with their new product sales. But when they realized that there was a lower end user in the market whom they couldn't service economically, they started opening up their inventories to him.

The other major early hurdle was how to sell the ex-lease units. Ikari's initial idea was to sell direct to consumers, and indeed over time he has been able to achieve more than 50 percent direct sales over the Internet. But back in the early nineties, the solution was exporting container loads of equipment to Southeast Asia and India. Business was slow but steady, and gave him a base to build his business.

By the late nineties, other companies, including some manufacturers, began to realize that Ikari had a noteworthy business, and competition appeared. Anchor, ever the innovator, met the challenge by getting a broader trading license to process and recycle industrial waste. While not an attractive business at the time, the expertise gathered then allowed Anchor to set up a comprehensive "soup to nuts" approach to recycling materials that came to him. Today the company boasts a recycling utilization rate of 97 percent.