Selling safety gets serious: security giant Secom soars on a mix of media hype and menace - Upfront

YOU DON'T HAVE TO observe Japan for very long to realize how powerful its media can be. Newspapers, TV and magazines play a central role in societies worldwide: They inform, influence and dictate a dramatic proportion of the way we see the world. But in Japan, they frequently create that world from scratch.

A vast cross-section of the Japanese public has a remarkably low level of native skepticism. The Japanese media can thus get away with stunning liberties because their pronouncements, however absurd, will often be credited as cast iron fact. For example: One child stabs another at school and the weekly magazines solemnly report a surging wave of bullying. Or a woman leaves her child in a car while she plays pachinko and the Sunday TV programs are full of professors decrying the rise of a negligent, gambling-obsessed class of dissipated housewives. Across the country, viewers and readers react nervously as they look around at their families: Is little Eiji being bullied? On what did Makiko spend that [yen] 50,000?

Their reactions are entirely forgivable. The "trends" they are hearing about are terrifying, especially so in a country that has in recent decades prided itself on an abiding sense of harmony and social order. But the hard statistics--which inevitably arrive some months after the story has moved on or been forgotten--tend to make the incidents seem a lot more isolated than the media hype would suggest.

There is an insatiable appetite for the one great Japanese media feast that refuses to run its course: crime.

Reported crime in Japan is indeed on the rise, partly as a societal side-effect of the long-term economic downturn, and partly due to greater reporting of crime--particularly the increased exposure of "long-term" white collar crimes such as bribery, corruption and embezzlement.

But the media-induced perception, backed by an undeniable but incremental rise in break-ins, robberies and other crimes, is that the Japanese are under siege in their very own homes. And the only people making more capital from this than the media are the small handful of competent home security firms.

Secom, Japan's largest home and office security company, has entered a new era of accelerated business activity. Virtually overnight, the apparent "crime wave" has turned a fairly mundane business into a company that now claims to be at the cutting edge of security technology.

Secom has good luck (i.e. bad news) and the "keeping up with the Tanakas" norms of Japanese society firmly on its side. The media is pumping up the fear, and worried families are opting to spend any spare cash they have on turning their houses into high-tech fortresses. Locks, bolts and closed-circuit videos are the new fashion statement.

For the last financial year, Secom saw for the first time the number of new security contracts for homes exceed that for corporations. Home security services are growing 20 percent on the year in Japan; a total of 250,000 households are now covered by such services.

Secom has also stepped up its sales strategy from door-to-door selling to retail enterprises. The company recently opened its first sales outlet for home-use security products in Tokyo, and has plans to increase the number of Tokyo outlets to six by the close of fiscal 2003. In addition, Secom plans to expand the chain of outlets to major cities nationwide in and after fiscal 2004.

The first Secom Shop outlet will open in Tokyo's Setagaya ward, with floor space of about 200 square meters and selling about 100 anti-crime products like cash boxes, stronger door locks and window sensors. The outlet will also promote home security systems, robbery insurance policies and other security services.

Secom expects sales in its security services business to rise 6 percent to [yen] 372.8 billion in fiscal 2003, spurred by growth in a service that employs an alarm on the customer's property notifying security personnel whenever it senses imminent trouble.

"Concerns about public safety are believed to be behind the increase in demand for security systems," says a senior analyst for Daiwa Institute of Research.

Sohgo, the second-largest security services firm in Japan, projects its sales of security services will increase 4 percent to around [yen] 138 billion. Until now, its growth in new contracts had been about 6 percent. But this fiscal year, Sohgo expects a 10 percent increase. Business contracts will likely rise 9 percent, while household contracts will surge 16 percent. The company plans to boost its sales force and expand partnerships with homebuilders.

Secom and Sohgo are not alone in latching onto the money-making potential arising from the fear of crime. With the market now approaching about [yen] 1 trillion annually, many companies are moving in, offering state-of-the-art equipment and services using information technology.

Alpha Corp, for example, will begin marketing keyless doors in October of next year. The affiliate of Nissan Motor has developed doors that are unlocked via remote control (like some car doors) in response to the grow ing number of cases of lock-picking. Asahi Glass, meanwhile, has developed special window glass with built-in sensors. It began marketing the glass for houses for [yen] 400,000 to [yen] 500,000, including installation charges. Daiwa House Industry and Sumitomo Forestry have already made hard-to-break glass (sans sensors) standard features.

Next spring, Mitsubishi Heavy Industries will begin trial shipments of a home robot that will let owners know by phone or e-mail about any big noises or moving objects detected when no one is home. Its camera images will be viewable via mobile phone and personal computer. The firm plans to launch full-scale marketing in 2005 at a price level of [yen] 1 million.

Competition is growing fierce in the business, with surging demand prompting many companies never before involved in the security market to join the fray, intensifying a gold-rush style price war.

Kansai Electric Power, which started offering home security services in June of last year, offers monthly charges starting from [yen] 2,900 to customers who buy sensors and other equipment, 40 percent below rates charged by competitors. It has cut costs by using its own fiber-optic network and won 1,500 contracts in just over a year.

But it is Secom that continues to push ahead with new technology, busily forming joint ventures to provide a range of other services. The group has now joined forces with NTT Communications to launch a multifunction smart card system. The eLWISE card, which has been developed by NTT Communications and records up to 1MB of data, can be used to authorize access to buildings, personal computers and corporate networks. The two firms will issue it to companies, organizations and government agencies, but both companies are understood to be looking into ways of pushing the system towards the home market.

Secom has also partnered with Nomura Real Estate Development to create a condominium-use intercom system that records images of visitors who stop by while residents are away.

The popularity of condos in Japan's urban areas is on the rise, especially among wealthy retirees. Both companies plan to market the system as a way to boost the security of easily accessible condominium buildings on busy streets.

The system can record up to 16 visitors for more than 10 seconds each. Burglars often use intercoms to see if condo residents are home. The companies believe that the expanded recording function will help thwart break-ins before they begin--making for some very good news, indeed.

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