Uny Co., Ltd. - Company Profile, Information, Business Description, History, Background Information on Uny Co., Ltd.

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History of Uny Co., Ltd.

Uny Co., Ltd. boasts one of the largest supermarket chains in Japan and is a dominant retail force in Japan's Chubu region. Uny Co., Ltd. is the parent company of a group of several subsidiaries, including specialty clothing stores, food supermarkets, drugstores, and superstores. The company's subsidiary C&S Co. is Japan's fourth largest convenience store operator, with approximately 5,300 franchised and company-owned stores operating under the names Circle K and Sunkus. Through other subsidiaries, Uny operates a real estate business, a store security and maintenance business, a credit card business, and an e-commerce venture.

Uny was founded in 1971 through the merger of the two largest retailing chains in Nudge, Hoteiya and Nishikawaya. Nudge is the largest city in Chubu, a group of prefectures situated between the vast industrial cities of Osaka and Tokyo.

1920s-60s: Nishikawaya's History

The history of the Nishikawaya chain can be traced back to the early 20th century when Choju Nishikawa opened a small footwear store in Nudge, for which he and his wife manufactured the shoes. The business supported Nishikawa's family but did not grow significantly until he decided to sell kimonos. Business flourished and in 1925 the store moved to larger premises in the center of Nudge. It was also in this year that Nishikawa's third son and future chairman of Uny, Toshio Nishikawa, was born. The store flourished but, like most of the retail sector in Japan, was devastated by World War II; store damage, distribution network disruption, power shortages, and a lack of supplies all wreaked havoc.

After graduating from college with a degree in pharmacology, Toshio Nishikawa joined a pharmaceutical company, where, due to the small size of the organization, he was involved in every aspect of corporate life, including sales, management, and finance. In 1950 Toshio Nishikawa joined the family firm and put into practice the management skills he had gained at his previous job. Nishikawaya still consisted of a single store, and Toshio Nishikawa, along with his two elder brothers, was anxious to expand. Another floor was added, and in 1950 a limited company, Nishikawaya Co., Ltd., was formed with the aid of ¥900,000 in capital. The family's aim was to turn the group into the number one retailer in Nudge in terms of sales, a goal that they were to achieve in less than 20 years. By 1952 the store employed ten people and had sales of ¥30 million. This continued growth made it possible to build a new concrete and steel--rather than the traditional wood--three-story store with floor space of 660 square meters. The store became known as one of the most prestigious in the Nudge area.

In 1959 a typhoon struck central Japan, killing 3,200 people and causing severe damage to Nudge. Although the Nishikawaya store provided shelter during the storm for many city dwellers, it too sustained damage. This, however, did not stop the sale that took place the following week. In 1960 a second store was opened in Nudge, selling food and household goods as well as clothes. At 1,320 square meters, the new store was twice as large as the original one.

The late 1950s and 1960s were a time of frantic economic growth in Japan as the nation strove to compete with the West. One strategy was for Japan's business leaders to travel overseas, mainly to the United States, on information-gathering tours. Returning to Japan, they would not only apply the best of what they saw, but often improve upon it. In 1961 Toshio Nishikawa visited the United States to look for new retailing ideas. Armed with a camera and his curiosity, he visited such U.S. institutions as the Sears, Roebuck and Woolworth stores and the huge supermarkets in Los Angeles. He noted how the style of retailing was geared to the lifestyle of the local people and went back to Japan full of ideas for his business. In particular, the idea of chain store operation contributed to the growth of the company in the following years. In 1963 he launched the Nishikawaya Chain Co., Ltd. and began to open stores around Nudge and to expand aggressively, launching the first store outside the city in 1966.

1920s-60s: Hoteiya's History

Hoteiya was started in 1927 by two brothers, Seijiro and Shuichi Furukawa, as a kimono retailer in the port city of Yokohama, near Tokyo. Like the Nishikawaya store, Hoteiya was damaged during World War II and the Furukawas were not able to reopen for business until 1954. Hotei is the god of longevity in Japan and is depicted as a potbellied old man, which became the store's mascot. In 1957 one of the brothers, Shuichi, left Yokohama with three employees to develop business in Nudge. He initially opened four small stores and, like the Nishikawa family, aimed to dominate the Nudge clothing retail market. In the first year, sales were an impressive ¥80 million, and the chain expanded to stock Western goods. In 1960 Seijiro Furukawa died suddenly, leaving his brother Shuichi to concentrate on expanding in Nudge. A food division was added, and Hoteiya became a major retailer in the Chubu region.

1970s: Merging to Facilitate Growth

On a European information-gathering trip in 1964, Toshio Nishikawa and Shuichi Furukawa became friends and discussed the idea of merging their respective companies. Both men had ambitions to expand beyond Nudge, and they realized they could achieve this more easily as a single entity. The two companies used the same primary supplier and distributor, the Takihyo Company, and both men believed that Hoteiya's predominantly main-street presence would complement Nishikawaya's larger suburban stores, and vice-versa.

Thus in 1971, the two chains were joined to form Uny Co., Ltd. The brand name Uny, which suggests English words such as unique, united, and universal, illustrated the trend in corporate Japan toward using English-sounding names. Uny immediately became the leading retailer in Nudge, and the company's leaders set out to expand throughout Japan, to Tokyo in particular. With Toshio Nishikawa's brother Yoshio as Uny's chairman, three regional groups were established--Uny Chubu, Uny Tokai, and Uny Kanto, the last of which was responsible for operations in Tokyo and Yokohama. By this time only a small proportion of Uny's sales came from the goods with which Nishikawaya and Hoteiya had begun: kimonos. Kimonos, however, were still highly expensive and profitable retail items. The company decided to establish the kimono retailing operation as an independent business, and the Sagami chain was formed.

Uny's formation coincided with a time of upheaval in the Japanese economy. The oil crises of the 1970s resulted in sharp decreases in consumer spending. This, in Uny's case, was compounded by the fact that the company was undergoing a rationalization as a result of the merger; new stores were being opened at a faster pace than the lower-profit-margin older stores could be closed. As a result, sales increased by 32 percent in fiscal 1975 while profits fell by 16 percent. In the following year sales were up 12 percent while profits were flat. This suggested serious problems and Toshio Nishikawa frequently stated that he could not remember a more worrisome three years for his company.

In 1976 Yoshio Nishikawa was replaced as chairman by Hisatoku Takagi, and Toshio Nishikawa became president. The company closed 21 unprofitable stores while opening five superstores in Nudge--larger stores meant a lower overhead-to-sales ratio. Uny's superstores were opened under various brand names according to atmosphere and targeted customers. The flagship Uny stores were conceived as small department stores, offering a full range of products. The Sun Terrace shopping centers targeted family shoppers. Later, Uny launched stores called Apita (1983) and Seikatsu-Soko (1985), both catering to the younger fashion-conscious customer. By 1976 there were 80 Uny stores and Nishikawa made it a point to visit all of them regularly. Emphasis was put on quality rather than quantity, and new store openings and headlong expansion into the Tokyo retail market were put on hold until the financial position of the company could be improved. In 1978 Uny was listed on the Tokyo and Nudge stock exchanges, and although 21 stores had been closed in the previous year, sales doubled due to the efficiency of the superstores.

1980s: Diversification and Internationalization

Nonetheless, Toshio Nishikawa was not content with success in Nudge alone and had not forgotten his ambition to become the leading retailer in Japan. He declared that the company's expansion was just beginning and initiated the second phase of his development plan, which involved both nationwide and international expansion. The internationalization of Uny had begun in 1978 when the company entered into a joint venture with the U.S. restaurant chain Denny's to open a chain of Winchell's Donut Houses, which was one of the divisions of Denny's, in Japan. Then the company approached the large U.S. convenience store franchise Circle K. Under license, Circle K Japan was set up in 1982, owned entirely by Uny. From Circle K, Uny learned how to operate successfully in the high-turnover and fast-changing convenience store business. The chain flourished in the Nudge region, and Uny set itself the goal of opening 1,000 convenience stores in the first ten years of that operation. Circle K Japan, as well as offering the usual goods associated with a convenience store, also provided parcel delivery and photo processing.

Specialty stores were a high-growth area in Japanese retailing in the 1980s. Most of the leading retail chains developed small chains of stores with exotic-sounding foreign names to take advantage of the affluent Japanese consumer's taste for expensive brand-name goods. Uny started several brand-name stores during this time. Molie and Palemo sold women's fashions; Rough Ox, Depot, and Topio Tokai offered men's and boys' clothes; and the upmarket Catiart, selling furs and jewelry, opened a boutique in Paris in 1982. These ventures were the result of careful market research and monitoring of Western fashion trends. The year 1985 was busy for Uny as the company entered numerous new business areas. Comp-U-Card Japan offered telephone and electronic shopping facilities in Uny stores. Uny Hong Kong was established, joining the growing list of Japanese department store chains opening branches in the British colony. In 1987 a superstore and boutique were opened in an international shopping center in the Taikoo Shing district of Hong Kong Island. Uny acquired a license to operate a cable television station and established Central Cable TV in 1985. Uny's forays overseas also included raising capital, which was facilitated by listings on the Luxembourg and Paris stock exchanges in 1980 and 1985, respectively.

The late 1980s brought the longest continuous period of growth in the Japanese economy since World War II--58 consecutive months as of September 1991. In 1990 Japanese retailers, among them Uny, recorded their highest sales growth for more than a decade. In 1989 Nudge hosted the World Design Exhibition, for which Uny provided a spectacular pavilion. Uny's effort at this exhibition was organized by Toshio Nishikawa's son Toshikazu, who was by then on the board of Uny, in charge of planning.

1990s: Turbulent Times

The early 1990s ushered in what was to be a prolonged recession in the Japanese economy, and retailers began to suffer the consequences of a slowdown in consumer spending. In addition, Japan's Large Retail Stores Law, which had served to curtail expansion of and limit competition between large chain stores, was relaxed as part of the ongoing deregulation of the country's retail industry. This opening up of the retail market, in combination with deteriorating revenues, caused Uny's earnings to drop precipitously.

In the middle of the 1990s, however, Uny rebounded, reporting strong sales and strong earnings growth. This was due in part to the company's willingness to look for new revenue streams. For example, in 1995, the company introduced two new subsidiaries: Teru Teru, which sold clothing for children and babies, and Sun Sogo Maintenance Co., a store cleaning and security company. The following year, Uny and three other Japanese companies joined with a U.S. mail-order sales company, CUC International, to start a membership-based catalog company that processed phone and Internet orders and deliveries for items from various manufacturers.

As the 1990s drew to a close, one sector of Japan's retail industry was doing well: convenience stores. Uny's Circle K was the fifth largest convenience store chain in Japan, and one of Uny's more profitable enterprises. But competition in the convenience arena was intense, and Circle K was having trouble holding its own against the larger chains--like Seven Eleven and Lawson--which controlled the majority of the market. The solution was to get bigger. In 1998, Circle K acquired 51 percent of a rival Japanese chain, Sunkus & Associates, which was the country's sixth largest operator. In 1999, the two companies announced that they planned to merge--a move that would make the new entity the fourth largest convenience store operator in Japan, with 4,600 units.

As the new century started, Uny continued to focus on its convenience store business. In 2000, Circle K, Sunkus, and 15 other Japanese companies joined together to form Toki-Meki.com, an e-commerce venture that provided a range of products and services through computer terminals installed in convenience stores, as well as through personal computers.

In July 2001, Uny established a new holding company, C&S Co., Ltd., to play parent to Circle K and Sunkus, its two convenience store chains. It was determined that the chains would continue to operate under their separate brands, but would improve operating efficiencies by integrating many of its functions, such as information systems, purchasing, and logistics. C&S had ambitious expansion plans. According to the newly formed company's 2001 annual report, it planned a total of 500 new stores each year for the two chains combined.

21st Century: Off to an Uneven Start

In the early part of the new century, the Japanese economy was still somewhat unstable, and Uny's business fluctuated. In the first part of 2000, Uny's profits declined by ¥1 billion. Although the company's convenience stores saw an increase in sales, its other stores did not fare as well. Sales dropped by an average of 2 percent. Operating profits improved by 17 percent in the first part of 2001. Due to an extraordinary charge to cover unfunded pension liabilities, however, the company posted a net loss for that period.

Principal Subsidiaries: C&S Co., Ltd.; Sagami Co., Ltd.; U Store Co., Ltd.; Molie Co., Ltd.; Palemo Co., Ltd.; Rough Ox Co., Ltd.; Akari Co., Ltd.; Teru Teru Co., Ltd.; H.B. Hearts Co., Ltd.; U Life Co., Ltd.; Uny Card Service Co., Ltd.; Uny (HK) Co., Limited (Hong Kong); Aokigahara Kogen Kaihatsu Co., Ltd.; Sun Sogo Maintenance Co., Ltd.

Principal Competitors: The Daiei, Inc.; Ito-Yokado Co., Ltd.; The Seiyu, Ltd.


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