June 30, 2003



Keywords: Newsletter 

JFS Newsletter No.10 (June 2003)

In order to sustain economic growth without damaging our finite global environment, the world must move beyond the twentieth-century model in which mass production and mass marketing supported economic and corporate growth.

Under the old model, economic growth inevitably required shorter product lives, encouraged repeated purchasing to replace old goods, and promoted throw-away products to consumers. It is now obvious that the old model cannot be sustained, given the planet's limited resources, energy and capacity to handle waste and emissions.

In this context, an increasing number of Japanese companies have started to develop and implement a new business model. What they now want to provide is functions and services, instead of the products themselves. In the past, these companies focused on manufacturing and selling physical goods. Today, however, they are beginning to realize that what consumers want is not products per se, but rather the functions and services that the products provide.

Such new business opportunities have been promoted by recently-enacted recycling laws (for example., the Law for Recycling of Specified Kinds of Home Appliances).

Also, changing mindset of consumers in Japan has contributed to the emerging new businesses. An increasing number of consumers have become interested in and concerned about global environmental problems, as well as local waste-related issues. An increasing number of people are also realizing the difference between "ownership" and "happiness," believing that owning many goods doesn't necessarily mean happiness or satisfaction.

This kind of emerging mindset of Japanese consumers could be attributed to the fact many people are now somehow materialistically satisfied. Some people might have been forced to think of their own true happiness because of the lingering economic recession in Japan.

Many people used to regard owning something as a symbol of status. But in recent years, increasingly, people tend to believe that true convenience and "coolness" exist in "emotional freedom from physical goods" meaning that they can use what they want to use when and where they want it, without being plagued by their own used-goods.

One of the typical businesses in this trend is the rental business. Duskin, old establishment in the rental industry, introduced a "cleaning cloth that requires no water" first in Japan. And they created a new distribution system for their rental service in order to make their product economically available to many consumers.

Duskin delivers cleaning mops and mats to individual households and offices and takes back the used ones. After being cleaned at the factory, mops and mats are delivered to customers again. This rental model decreases environmental impacts when compared to individual ownership and throwaway. They also add that mops and mats they collect from customers are cleaned in bulk, reducing water, detergent and electricity needed for cleaning to about one twentieth (according their estimate).

They have many items in the line-up of their rental service, including small vacuum cleaners. You can have the "cleaning function" of this small cleaner for only 150 yen (about U.S.$1.20) per month.

Nihonkai Gas. Co., Ltd., a medium-sized company in Toyama Prefecture, started a new business that sells "warmth" during the winter, instead of the usual gas heaters with fans. This business is very popular their customers. Click here to read more:
"We Sell Warmth, Not Heaters"

Toshiba Techno Network Co., a subsidiary of Toshiba, Japan's major electronics manufacturer, started in October 2001 to offer "home appliance rental packages" that allow users to rent out a set of home appliances typically needed by those who live alone, such as students and workers away from home. The number of users of the service has been on a rise, they say. Click here to read more:
Toshiba Appliance Rental Service Targets People Living Alone

Ito Yokado, a major supermarket chain, in February 2003, started to offer home appliance rental packages to families, as well as to people who live alone.

Other companies have started rental businesses that include furniture and interior goods. Meanwhile, Matsushita Electric Industrial Co., Ltd. , targeting companies, started a service in April 2002 called "Akari Anshin Service" which sells "lighting" as a service to factories and office buildings. Customers no longer buy fluorescent lights themselves, but rather the lighting provided by them. Click here to read more:
Matsushita Sells Lighting Services

In such rental service schemes, customers don't buy physical good (such as fluorescent lights or refrigerators). They only use their functions (such as lighting or cooling), and in return pay a fixed monthly fee. When the customers don't need the services any more, they just return the items to the service provider without any effort or extra cost.

It is interesting to note that in these schemes, title and ownership of the products remain with the service provider. This arrangement gives the providers the incentive to design products with longer product lives and greater ease of collection and recycling.

Matsushita says that "the hardware-oriented business model is a legacy of twentieth-century." Many applications of innovative twenty-first-century business models will appear in various sectors in the market. Japan for Sustainability will continue to report new developments. Keep an eye on the JFS website for updates!