Contract manufacturers let the rising stars focus on innovative designs

TOKYO — Gone are the days when manufacturing powerhouses dominated the Japanese electronics market with gadgets packed with features. Today, emerging players such as Balmuda are building loyal fan bases with their ultramodern and simple product designs.

“We’ve been doing business on the theory that what consumers want is not products but experiences, and that was the right thing to do,” said Gen Terao, president of Balmuda, a startup that created a buzz with a toaster it introduced in 2015. The device, known for making perfectly toasted bread, has attracted quite a following. Terao on Wednesday unveiled the company’s latest gadget, a microwave oven, due out in late November.

Having also released an electric kettle and a rice cooker, Balmuda saw sales skyrocket nearly sevenfold between 2011 and 2016 — from 800 million yen ($7.35 million) to 5.5 billion yen.

Home electronics behemoths have been competing in product performance, loading their microwaves with automatic cooking features and different ways of heating such as steaming and other methods. These products “have too many buttons and are complicated to use,” Terao said. Balmuda put just a pair of dials and another pair of buttons on its new microwave, limiting automatic features to a bare minimum — such as defrosting cooked rice and heating beverages. The company instead put a premium on a simple and stylish design.

Founded in 2003, Balmuda outsources manufacturing, an arrangement that lets it concentrate on product planning and design. It is exploring ways to continue charming customers even at the dinner table, debuting an original curry sauce that it hopes consumers will eat with rice made in its cooker.

Niche market

Japan’s white-goods market has been stagnant since surpassing 2 trillion yen in 2010. Since then, startups have been meeting niche needs that long-established giants with the burden of maintaining their own factories cannot easily pursue.

Cerevo, established in 2008, has come up with a smart desktop lamp that responds to voice control and can change its lighting angles. Cado, founded in 2011, has developed a line of upscale chic air purifiers, finding fans elsewhere in Asia and in Europe, in addition to Japan.

The rise of these new players owes much to electronics manufacturing services (EMS) providers, many of them in China. These companies purchase parts in bulk and make products at low cost, allowing startups to mass-produce blockbusters.

Some appliance startups have already become market leaders outside Japan, such as iRobot, the U.S. maker of the Roomba robotic vacuum, and Dyson, the U.K. company behind the namesake cordless vacuum. These examples show that new entrants have the potential to grow into trailblazers synonymous with a particular product or field.

Balmuda expects to “achieve annual sales of 10 billion yen soon,” a bullish Terao said. But to remain competitive against larger rivals with more cash, startup appliance makers will need to anticipate changes in consumer lifestyle trends and come up with innovative ideas.

source: Nikkei