Tokyu Department Store Co., Ltd. History

Company Perspectives:

Beauty is the criterion that the Tokyu Group will use to guide us into the coming age. The beauty we pursue arises from harmony among individuals, society and nature to move the hearts of all, spanning nations and generations. We at the Tokyu Group are putting all our energy into achieving our goal of creating a sound, healthy, and beautiful living environment that moves the spirit. We want to play our part in building a harmonious and compassionate society, where each individual can live a happy and fulfilling life. 'Toward a Beautiful Age' represents the Tokyu Group's resolve to keep striving toward that ideal, and our commitment to take the lead in creating a beautiful living environment for all. Key Dates:

Key Dates:

1662:

Shirokiya, a drapery shop, is founded in Tokyo.

1919:

Shirokiya incorporates as Shirokiya Gofukuten Co., Ltd.

1934:

Tokyo Yokohama Electric Railways Co. opens the first Toyoko Department Store.

1948:

Toyoko Department Store Co., Ltd. forms.

1951:

Toyoko opens Tokyo's first shopping arcade.

1958:

Toyoko Department Store and Shirokiya merge and form Toyoko Co., Ltd.

1959:

Company establishes Shirokiya Inc. in Hawaii.

1967:

Toyoko changes its name to Tokyu Department Store Co., Ltd.

1967:

Company opens a new store in Shibuya.

1973:

Tokyu opens its first store outside Tokyo, in Sapporo.

1989:

Tokyu completes the building of the Bunkamura cultural center in Tokyo.

1993:

Restructuring plan announced to strengthen the company's operations includes reducing workforce by about 20 percent.

1999:

330-year-old Nihonbashi store closes.

Company History:

Tokyu Department Store Co., Ltd. operates a chain of department stores in Japan and is the core of the retail and distribution division of the Tokyu Group. With a flagship department store in Shibuya, Tokyo, Tokyu runs 15 stores in Japan, primarily situated in the Tokyo and Yokohama region. The company is also involved in real estate, food processing, the bakery business, information services, and other retail operations. Because of poor economic conditions in Japan in the late 1990s, Tokyu is focusing on diversification and innovation and plans to invest in the increasingly popular suburban shopping malls.

From Drapes to Railways: Early 1900s

Tokyu Department Store's most venerable antecedent dates back to the 17th century. This ancestor was a drapers' shop, Shirokiya, founded in 1662 by Hikotaro Omura in the Nihonbashi area of Tokyo, or Edo as the city was then called. In 1919 this business was incorporated as the Shirokiya Drapery Shop Co., Ltd. Four years later, the store, like most others in Tokyo, was devastated by fire following the Great Kanto Earthquake. Operating under the new trading name of Shirokiya Co., Ltd., the company redeveloped the old site to create a new and more up-to-date store, which opened in June 1933.

The evolution of Shirokiya constitutes one strand of the Tokyu Department Store's history. The other principal strand began in the 1930s, a boom period for Japanese department stores. At this time Tokyo's suburbs were growing rapidly, and railway lines were stretching out from the center to serve them. The railway companies often used the land adjacent to their commuter stations to build department stores, which they financed with money from their transport activities. One of the earliest railway companies to spot this opportunity was the Tokyo Yokohama Electric Railways Co., Ltd., owned by entrepreneur Keita Gotoh's Tokyo Corporation. In 1934 the Tokyo Yokohama Electric Railways Co. opened Toyoko Department Store, the first department store to be sited at a railway station; 'Toyoko' was a portmanteau word formed from 'Tokyo' and 'Yokohama.'

After World War II the Allied occupying forces pursued a policy of dismantling the large combines or zaibatsu, which in the Allies' opinion had contributed to Japan's entry into the war. Many Tokyu operations were reconstituted as semi-independent companies. One such company, Toyoko Kogyo, assumed control of Tokyu's department store business in 1948, shortly afterwards becoming known as Toyoko Department Store Co., Ltd.

Another company originating in 1948 and later affiliated with Tokyu Department Store was Tokyu Foods. Forty years after its foundation, Tokyu Foods became a significant manufacturer and retailer of bakery goods, operating 140 bakeries in Japan and elsewhere under the name 'St-Germain,' also selling delicatessen-style meats. Tokyu Foods also built up several restaurant chains. Tokyu Department Store's other important food-manufacturing affiliate, Gold Pak, whose award-winning products were all based on fresh fruit and vegetable juices, began trading in 1966.

Boom Times in the 1940s and 1950s

After the immediate postwar hardships, Japan's prosperity grew rapidly. Department stores flourished because they offered convenient one-stop shopping; from being primarily dry-goods suppliers before the war, they now came to supply everything from food to consumer durables. They also catered to the westernization of Japanese tastes by bringing in imports in a way that smaller retailers could not afford to do. Department stores were typically situated at railway stations, as were Toyoko's stores.

It was against this promising background that Toyoko Department Store opened its Ikebukuro store in 1950, which was to close after only 14 years of trading. In 1951 the company inaugurated Tokyo's first shopping arcade under the name Toyoko Norengai. The west wing of the main Toyoko store was also extended during the early 1950s.

The two strands of Tokyu Department Store's history came together in the late 1950s. Shirokiya Co. joined the Tokyu group of companies in 1956. Two years later, after a period of intensive modernization and expansion of the Shirokiya main store, Shirokiya and Toyoko Department Store merged, adopting the name Toyoko Co., Ltd. The company took an initial step towards globalization with the creation of Shirokiya Incorporated in 1959. In the same year, this new affiliate opened Tokyu's first overseas store, the Hawaii Shirokiya in the Ala Moana Shopping Center. Over the years Shirokiya Incorporated opened another three stores in Hawaii, two of them in shopping centers and one in a hotel. That Shirokiya became a valued part of Hawaiian life was indicated by the fact that the city of Honolulu designated October 15, 1989, as 'Shirokiya Day' in honor of the original store's 30th anniversary.

Continued Growth in the 1960s and 1970s

On the domestic front, the early 1960s found department stores facing unprecedented demand for household goods such as televisions and washing machines. However, the stores were also presented with growing competition from the newly arrived supermarkets and superstores which, sited away from town centers as they tended to be, could often provide shoppers with a more relaxed environment and lower-priced goods. Despite this competition, Toyoko continued to grow, both through acquisition and through construction of attractive new stores. In 1966 Toyoko formed a joint venture with Nagano Maruzen, which in 1970 would change its name to the Nagano Tokyu Department Store Ltd.

The company adopted its current name of Tokyu Department Store Co., Ltd. in 1967, the year in which it opened a new main store in Shibuya at one of Tokyo's largest railway stations. Both this and the original Toyoko Store nearby were to undergo an important expansion program in the late 1960s. Also in 1967, the 300-year old Shirokiya shop changed its name to the Nihonbashi Tokyu Department Store. Its advantageous site, adjacent to the intersection of three subway lines and in an important shopping and business district, continued to make it one of Tokyu's busiest enterprises.

The 1973 oil shock precipitated a period of stagnation in the department-store sector. In spite of this, the 1970s were notable for the opening of several new Tokyu stores. In 1973 came the new Sapporo Tokyu Department Store, situated across the road from Sapporo Station in Hokkaido. This was the first Tokyu store to open outside the capital, and Tokyu made a point of staffing it locally to ensure a strong rapport with shoppers and a thorough understanding of their preferences. Initially a company in its own right, Sapporo Tokyu Department Store merged with Tokyu Department Store in 1978.

The Kichijoji store opened in 1974 at the Japan Railways Kichijoji Station in Musashino City, Tokyo. In 1980 the Machida Tokyu Department Store Co. began trading; it became part of the Tokyu Department Store Co. in 1989. Machida was one of Tokyo's most rapidly growing residential suburbs, and the store offered mainly sporting and leisure equipment to local shoppers.

During the 1970s and 1980s there was a trend toward specialization among Japanese department stores. A store catered to specific groups of customers, such as newly married women or teenagers. In 1979 Tokyu Department Store affiliate T.M.D. opened Shibuyu 109, a center aimed at the fashion-conscious woman and which by the 1990s contained 93 separate shops. Its success sparked off a series of similar enterprises, including the KOHRINBO 109 in Kanazawa, opened in 1985; One-Oh-Nine, opened in 1986; and 1092, opened in 1987.

Expansion and Diversification in the 1980s

In 1990 Tokyu launched the first of a new style of fashion store, 1 2 3 (pronounced 'un deux trois') in Shibuya. Among the boutiques it comprised was Trans Continents, an outlet for Tokyu affiliate Millennium Japan Ltd., also founded in 1990 as a retailer of fashion clothing and accessories. This exemplified Tokyu's participation in the trend for Japanese retailers to develop private-label fashion products, appealing to consumers in the way that designer-labeled goods do, but undercutting designer-label prices.

In the 1980s Tokyu added energetically to its overseas interests, starting with the opening of the Hong Kong Tokyu store in 1980 when it became the principal tenant of the then recently completed New World Center in Kowloon on the Chinese mainland. Then came stores in Bangkok and Thailand in 1985, and in Singapore in 1987. In each case Tokyu made a point of integrating itself into the local community--the slogan of the Singapore store was 'Born and Raised in Singapore'--while offering shoppers a taste of Japanese courtesy and quality. Outside Asia, the OK Gift Shop 109 opened in Auckland, New Zealand, in 1990.

As well as opening new stores, Tokyu expanded overseas through acquisition. It bought the Dragon Seed Co. Ltd., a Hong Kong department store company, in 1988 from investment company First Pacific. With Dragon Seed, Tokyu gained a valuable building in the central area of Hong Kong Island, as well as a ten-store chain. Tokyu bought an equity participation in the Ever Green Department Store Corporation of Taiwan in 1990.

Tokyu's overseas operations were not confined to its retail outlets. International buying operations and joint ventures became increasingly important. Tokyu acquired the monopoly for Jim Thompson Thai silk in 1985, opening a Jim Thompson boutique in its main store. In 1988 it formed an alliance with Williams-Sonoma, a U.S. catalog sales company, to establish Williams-Sonoma Japan. Williams-Sonoma specialties included household goods and furnishings.

Overseas buying was not exclusively a quest for exotica. Like many of its competitors, Tokyu Department Store sought to reduce its unit costs through imports and adopted a 'develop and import' system whereby it joined forces with local interests to produce goods for sale initially in the local marketplace and, when a sufficiently high standard had been attained, for import to Japan. Goods imported in this way included knitwear from China, clothing from Hong Kong, and fruit from Thailand.

The 1980s was a period of recovery in the Japanese consumer market. Tokyu's expansion in the 1970s had left it well placed to benefit despite continued fierce competition from supermarkets. New Tokyu department stores continued to open. The Kitami Tokyu began trading in 1982 and the Komoro Tokyu store in Nagano prefecture, part of the Nagano Tokyu Department Store Co., began trading the following year, as did the Tama Plaza Tokyu department store. The Tama Plaza Shopping Center, constructed by Tokyu Corporation, was adjacent to Tama Plaza station in Yokohama, and the department store was its principal occupant. The Tama Plaza Tokyu Department Store Co. became the Seinan Tokyu Department Store Co. in 1989, though the store itself continued to be known as Tama Plaza.

Remodeling of stores was a keynote of Tokyu's activities throughout the 1980s. In 1984 it celebrated the 50th anniversary of the opening of Toyoko Department Store with a radical remodeling of the main store in Shibuya. By then the store contained a range of specialty shops under one roof. The Shibuya store's food department in the basement was greatly extended in 1990. The Toyoko store was refitted in 1985 and 1986. This, too, housed a mall of specialty shops, including concessions such as Benetton and the first Williams-Sonoma Japan retail outlet, which opened in 1988. The store's exterior was renovated in 1989.

Outside Tokyo, too, shops were constantly being restyled to keep abreast of consumer preferences. The Nagano Tokyu store was extended in 1986 and a new annex called Cherchez was added, making this the largest urban department store in the Nagano prefecture.

In 1988 the Kichijoji store was redecorated, and the Sapporo store embarked on an extension and renewal program. Thanks to the opening of a new subway line, the store's food floor in the basement was now directly connected to Sapporo station. The Nihonbashi store, too, underwent a dramatic transformation, reopening complete with La Plasis, a huge customer service mall offering postal, travel, and other facilities. The renovated store also boasted a greatly expanded women's clothing department. A couple of years later the Nihonbashi store was crowned with the imaginative addition of a rooftop golf school.

During the 1970s and 1980s the Japanese department store sector, which had previously dominated the retail industry in terms of both sales and profitability, began to lag behind the supermarket companies with their out-of-town superstores. This tendency was attributed partly to the supermarkets' faster conversion to information technology. In 1988, however, Tokyu introduced a Point of Sale (POS) system to all its department stores to automate stock control and keep track of local customer preferences.

Tokyu was also innovative in finding ways to woo the shopper back from the superstores. In February 1987, for instance, the Economist reported that four Tokyu stores had introduced door-to-door sales teams of housewives selling on commission. This personal approach was so successful that several other department stores quickly followed suit.

Japanese stores tried to lure shoppers through their own doors by helping to improve the area of the city in which they operated; for example, an adjunct of the Toyoko Store renovation in 1985 was a project to improve and promote the whole street in cooperation with local government. This form of competition became known as the 'Commercial Block War.'

Tokyu played a major role in the revitalization of the Shibuya area, where its headquarters and largest stores were situated. Perhaps Tokyu's most spectacular contribution was the Bunkamura, or Tokyu Culture Village. A cooperative venture between a number of Tokyu companies, it involved the construction of a large complex, including art gallery, concert hall, and theater. It opened in 1989 on a site adjacent to Tokyu's main store, and the Japan Company Handbook soon reported that takings at the main store were shooting up under the influence of the Bunkamura.

Facing New Challenges in the Early 1990s

In the early 1990s, healthy turnover of goods such as jewelry and fine art reflected the luxurious ambience which Tokyu endeavored to project in its stores and malls. New stores continued to open, usually in the proximity of stations. In 1990, for instance, Nagano Tokyu Department Store Co., Ltd. opened its Nagano Tokyu Life Store at the Japan Railways Kita-Nagano Station. Tokyu also pursued an active policy of expansion in and beyond the Pacific Rim area. There were four Hawaii stores and one each in Hong Kong, Bangkok, and Singapore, as well as a further six representative offices worldwide by the early 1990s. A second Thai store opened in 1993.

Tokyu Department Store was one of the most important of the Tokyu Group, a complex group of businesses of which Tokyu Corporation was the nucleus. These companies, of which there were nearly 400, were divided into four main groups: retailing and distribution; development; transportation; and recreation and leisure. Tokyu Department Store was the nucleus of the retailing and distribution group, which represented almost 40 percent of the Tokyu Group's total sales in 1990. The retailing and distribution group also comprised a supermarket chain and the Tokyu Store Chain, with more than 100 stores in the greater Tokyo area. Like the department stores, most of these adjoined the Tokyu Corporation's railway lines. Tokyu also operated specialty stores such as Tokyu Time Co., started in 1965 to sell and repair watches, and Sports Tokyu Co., started in 1970. Both of these were affiliates of Tokyu Department Store Co., while a number of other specialty stores, such as Top Shoes, were more closely linked with the Tokyu Store Chain Co. All these specialty stores were available for inclusion in Tokyu Department Store's shopping malls.

The slogan of the Tokyu Group was 'Creating a well-balanced life for the 21st century.' This aspiration was reflected in Tokyu Department Store's community and lifestyle-oriented approach to its customers. The stores did not simply try to sell individual products and services; they offered lectures, cultural events, and educational programs to the public to reinforce the sales message and at the same time improve the quality of life. The stores used local staff to emphasize that the business was rooted in the customer community.

Writing in an August 1990 Business JAPAN, in his capacity as chairman of the Japan Department Stores Association, Tokyu Department Store's president, Mamoru Miura, discussed legislative changes and warned that Japan was about to encounter an 'increasingly sinister' economic environment with labor shortages, rising interest rates, and unstable stock and foreign exchange markets. He identified the internationalization of the marketplace and the need for better information management as the two main challenges facing the department store industry in the coming decade. In contrast, analyst Ken Egusa of Morgan Stanley & Co. predicted continued growth and success for Japanese department stores in the 1990s. Egusa told HFD-The Weekly Home Furnishings Newspaper: 'The 1990s will see consumer demand remaining firm and the marketplace as a whole will be driven, starting in the mid-1990s, during the period when the first and second baby boomers will become full members of the labor force.' Egusa also indicated that changes in the Large-Scale Retail Store Law would open up opportunities for larger stores and shopping outlets in suburban areas.

Soon after these predictions were made, Japan's economy began to deteriorate, creating difficult conditions for Tokyu and other Japanese retailers. For the fiscal year that ended January 31, 1992, Tokyu indicated that though sales grew 8.2 percent over the previous year, its pretax profit declined 18 percent. The higher-end merchandise that consumers so readily sought in the late 1980s and early 1990s became less desirable as people tightened their spending budgets, and Tokyu's marketing expenses and management costs grew more quickly than sales. Tokyu fared no better the following year, and pretax profit slid 27 percent. Net profit was affected by a new land tax, which required Tokyu to pay ¥670 million in land taxes alone.

As a result of slumping revenues, Tokyu devised a three-year restructuring plan in 1993 to strengthen the company's operations. As part of the restructuring, Tokyu announced plans to reduce its workforce by about 20 percent, about 1,000 jobs, over a three-year period. Tokyu planned to accomplish the task by refraining from hiring new recruits, including high school and university graduates, in spring as was traditionally done, as well as through attrition.

Increasing Challenges in the Late 1990s

Tokyu experienced a brief respite in 1995 as consumer spending picked up slightly. The company reported a net profit of ¥1.84 billion for fiscal year 1996, and during the first half of 1996 sales rose 1.1 percent over the same period a year earlier. Increased sales promotions and extended store hours in the Tokyo region helped generate revenues. Tokyu announced that clothing sales increased 1.8 percent and food sales rose 1.5 percent.

Despite increased revenues, Tokyu noted that sales were still relatively weak and complete recovery could not be anticipated in the near future. Indeed, Tokyu's upturn was brief--the company announced pretax profit for 1997 of ¥1.7 billion, a drop of 32.8 percent from 1996. Tokyu blamed continued slow personal consumption as well as the weather; an unseasonably warm winter resulted in poor clothing sales, and stores failed to meet sales targets in December and January.

To battle the poor economic conditions, Tokyu endeavored to better serve its clientele, hoping its efforts might translate into improved sales. After a five-year moratorium, Tokyu announced it would hire about 100 new employees beginning in the spring of 1998. The company believed introducing a younger employee to its personnel would create a better age balance. New recruits were also needed to accommodate Tokyu's extended hours. Though the Large-Scale Retail Store Law recommended that department stores take a minimum of 24 holidays per year, many ailing department stores believed offering more hours was the key to increasing sales. Tokyu hoped to decrease its holiday closures from 22 to 18 days at three stores in the Tokyo metropolitan area beginning in the summer of 1998.

In addition to the sluggish economy, Tokyu had suburban shopping centers to blame for its struggles. Once the ultimate destination for shoppers, urban department stores began to lose customers to shopping malls and superstores that cropped up in the suburbs. The convenience of suburban shopping appealed to the increasingly car-oriented shopper, and statistics indicated that suburban shopping was not a fluke. The Asian Wall Street Journal reported that between 1985 and 1994, the market share of six superstore chains increased from 4.6 percent to 5.3 percent in the overall retail industry. The market share of eight major department store chains, however, dropped from 2.9 percent to 2.6 percent. While most of the major department store operators shunned expansion into suburbs, Tokyu hoped to capitalize on the new trend and began making plans to open stores in suburban shopping centers. The company announced plans to build a shopping mall in the Tokyo suburb of Kohoku New Town with a Tokyu Department Store as a key retailer.

Hard times continued for Tokyu as the economic recession persisted. In 1998, after ten years in Japan, Williams-Sonoma announced it would end its joint venture with Tokyu. Slow expansion--there were 15 Williams-Sonoma stores in Japan--was believed to be one of the reasons for the break. Tokyu posted its first pretax loss since 1949 and sales fell 12 percent for the six-month period ending July 1998, spurring the company to develop a five-year restructuring plan. The plan called for the liquidation or sale of most of its international subsidiaries, including the Hong Kong operations, Merchandising Development USA Inc., a real estate company in the United States, and some operations in Thailand. Tokyu also announced it would close the Nihonbashi store. The Nihonbashi store was the third largest of Tokyu's department stores in terms of sales and contributed about 11 percent of Tokyu's revenues in fiscal 1998. The company also planned to eliminate about 900 jobs by 2002, many through voluntary early retirement.

The closure of the Nihonbashi store was significant news in Japan. The store, which had existed for more than 330 years, held a month-long closing sale in January 1999 that generated unprecedented sales. On the sale's first day on January 2, the store reached record sales of ¥739 million. On the final day of business about 160,000 consumers visited the store. January sales reached a total of ¥16.5 billion, about half of the store's total 1998 sales. In September Tokyu indicated it had found a buyer for the Nihonbashi building; Mitsui Fudosan Co. planned to convert the store into a high-rise office building, with stores on the lower levels.

Though Tokyu shed unprofitable businesses to streamline operations, earnings continued to be bleak throughout 1999. Sales in fiscal 1999 dropped 6.3 percent, and during the first half of 1999 the company reported an unconsolidated pretax loss of ¥713 million, nearly double its year-earlier loss of ¥361 million. Net losses also increased, from ¥1.04 billion during the first half of 1998 to ¥5.07 billion in 1999. Closure of the Nihonbashi store contributed to poor sales, which fell 14 percent. Tokyu hoped to offset losses with the sale of the Nihonbashi building.

In April 1999 Mamoru Miura stepped down from his post as chairman to signal his responsibility in Tokyu's poor performance. Miura had previously resigned his role as president in 1992 and assumed the chairmanship when Tokyu suffered large losses in investments. Tokyu predicted it would continue to rack up losses and forecast an after-tax loss of ¥2.9 billion for fiscal 2000. With the company's efforts to pare down overhead and its openness to take risks&mdash+ans to develop suburban shopping centers and to explore the community antenna television (CAT) industry continued--Tokyu appeared armed for the coming millennium.

Principal Subsidiaries: Sapporo Plaza Co., Ltd.; Tokyu Foods Co., Ltd.; Yokohama Tokyu Department Store Co., Ltd.; Gold Pack Co., Ltd. (66.67%); Nagano Tokyu Department Store Co., Ltd. (45.64%); Kitami Tokyu Department Store Co., Ltd. (98.24%); Millennium Japan Ltd. (60%); Seinan Tokyu Department Store Co.; Toyoko Bussan Co., Ltd.; T.M.D. Co., Ltd.; Shibuya-Chikagai Co., Ltd. (66.67%); Tokyu Time Co., Ltd.; Estate Service Co., Ltd.

Principal Competitors: Mycal Corporation; Seiyu Ltd.; Takashimaya Co.; Hankyu Department Stores Inc.; Jusco Co.; Mitsukoshi Ltd.

Further Reading:

• Diamond's Japan Business Directory 1991, Tokyo: Diamond Lead Co., Ltd., 1991.
• 'Doorsteps, the New Point of Sale,' Economist, February 28, 1987.
• Gilbert, Les, 'Analyst Looks at Japan, 1990s Style,' HFD--The Weekly Home Furnishings Newspaper, April 9, 1990, p. 14.
• 'Japan's Department Stores Report Dismal Earnings,' Asian Wall Street Journal, April 26, 1993, p. 4.
• Miura, Mamoru, 'Department Stores Must Act As Integrated Life Industries,' Business Japan, August, 1990.
• Ostrom, Douglas, 'Consumer Spending in the Dumps, Poised to Get Worse,' JEI Report, October 2, 1998.
  Retail Distribution in Japan, Tokyo: Dodwell Marketing Consultants, 1988.
• Shirouzu, Norihiko, 'In Retailing, Risk Takers May Be Japan's Safest Bets,' Asian Wall Street Journal, September 26, 1997, p. 15.
• 'Tokyu Department Store Expects Loss of $141.5 Million for the Year,' Asian Wall Street Journal, January 26, 1998, p. 4.
• 'Tokyu Dept. Store to Close Major Tokyo Retail Outlet,' Japan Economic Newswire, September 16, 1998.
• 'Tokyu Dept. Store to End 330-Year History with a Bang,' Japan Economic Newswire, January 25, 1999.

Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.

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