The Daimaru, Inc. - Company Profile, Information, Business Description, History, Background Information on The Daimaru, Inc.

1-7-1, Shinsaibashi-Suji
Chuo-ku, Osaka 542-8501

History of The Daimaru, Inc.

At the center of the vast international marketing complex known as The Daimaru, Inc. (Daimaru) is a network of department stores that ranks among the five largest department store companies in Japan. In addition to its department stores, located in Japan and overseas, and its closely associated credit card, data center, and mail-order businesses, Daimaru encompasses chains of supermarkets, restaurants, and specialty stores that help make it one of the top retailers in the world. Daimaru operations extend to advertising and printing; freight shipment; fitness and sports; and the manufacture, import, and export of a variety of merchandise. The company also operates its own research center, where it develops and tests merchandise.

Early Days: Three Drapery Shops

From the opening of Daimaru's first store, a drapery shop in Kyoto, in 1717, the company has been known for the close ties it cultivates with the communities in which its stores are situated, and for its upscale, high-quality goods and services. These characteristics evoke comparison with another pioneering retailer, the top-ranking Mitsukoshi department store company.

Aside from the few stores opened by Mitsukoshi's predecessor in other areas in the 30-some years preceding 1717, the purchasing process in most of Japan was inconvenient and costly for both consumer and merchant. Only wealthy persons could afford to patronize the drapery purveyors, who, as traveling salesmen, had to haul their samples over rough terrain in all kinds of weather in order to show the fabric to customers in their homes. The costs involved in this time-consuming process ran up the prices of the goods. Earnings were meager, for few sales could be made relative to the number of hours worked.

Locating the business in a shop increased the pace of sales, lowered overhead, and provided customers with a greater selection of samples than could be carried in a salesman's backpack. The stores also became meeting places where customers could relax with a cup of tea and exchange ideas.

Hikoemon Shimomura chose a propitious place to open his drapery business. Kyoto in 1717 was the home of the imperial family and the nobles of the court. Although long bereft of political power, they were supported in style by Japan's ruler, the Tokugawa shogun. Far removed though they were from the new capital, Edo(later to be known as Tokyo), they had an ardent desire for traditional garments and fine fabrics. This provided a willing and able customer base at a time when purchasing power was largely held in a few widely scattered clusters of wealthy families.

Service before profit was a principle Hikoemon Shimomura announced to his customers. Daimaru's president, Shotaro Shimomura, in the early 1990s explained that it is still the stores' guiding principle to consider service to the customer first, in the belief that profits will follow. In 1726 Daimaru's founder opened a shop in Osaka, a busy trade center. Purchasing power was beginning to spread into the hands of a rising merchant class. This meant that the new business, given its start among titled and wealthy patrons, could continue to grow. The shogun's political power and isolationist policies had created a kind of stability that allowed Japan's economy time to recover from the drain imposed on it by centuries of civil strife. The country's stability and unity under the shogun also made it possible to establish a standard currency that helped accelerate the pace at which transactions could be made.

By 1728 Hikoemon Shimomura was able to open a third shop, locating it in Nagoya, another busy trade center. The name Daimaru-ya came into use for the first time.

During Daimaru stores' first 150 years, the shogunate's intricate web of restrictions held Japanese lifestyles in a fairly rigid pattern, but below the change-resistant surface of life in a feudal state, the nation's commercial economy was racing toward modernization. That became apparent in the mid-19th century, when the weakened shogunate government had to yield to foreign pressures to open its ports to international trade. By 1868, when the progressive Meiji emperor replaced the shogun, Japan had a number of commercial entities that were ready to compete in international markets.

Early 1900s: A Transformation

Western nations' styles at first repelled some segments of the Japanese populace, but increasingly the majority of purchasers of goods were attracted to imports. At the same time, just before and after the turn of the century, brief wars with China and Russia had brought increasing numbers of workers from rural Japan to urban centers for the manufacture of essential materials. Responding to their needs and to a new demand for variety in consumer goods, Daimaru transformed its shops.

Little by little, the transformation was reflected in Daimaru's organizational structure and, eventually, in its official name and written policies. In 1907, with ÂĄ500,000 in capital, Daimaru became a partnership, and took the name The Partnership Daimaru Drapery Store. The store management took some steps forward, hiring women as sales clerks for the first time in 1913 and accelerating the pace of business as Japan's victorious participation in World War I expanded the economy. By 1920 Daimaru was ready for another reorganization, this time as a corporation, with ÂĄ12 million in capital.

The new corporation also had a new name: Daimaru Drapery Store, Inc. Although the name did not hint at the widened variety of goods and services Daimaru offered, it conveyed continuity with the company's centuries of service.

The Great Kanto Earthquake of 1923 destroyed the Tokyo store. In 1925, when the rebuilding process was completed, the modernized premises, constructed to accommodate Daimaru's many types of merchandise, were obviously those of a department store. Three years later, the name was officially changed to The Daimaru, Inc.

Expansion and Diversification: 1930s-70s

Japan's rapid military-based expansion in the 1930s brought an influx of workers into urban and manufacturing centers, creating new customer bases. The company formed an affiliate, Daimaru Kogyo Co., Ltd. which started wholesale import and export operations in 1933. Japan's devastation and defeat in World War II, however, brought the nation's economy to a virtual standstill.

The nation's new constitution provided for the dissolution of the monopolistic zaibatsu and supported the development of individual enterprises. During the seven years of occupation by the Allied forces under U.S. General Douglas MacArthur, Daimaru reorganized, starting several new businesses and acquiring affiliates. In July 1947 Daimaru Creation Co., Ltd., was established as a subsidiary, to plan marketing strategies and provide printing and advertising services. A facility for leasing real estate and vehicles was added to Daimaru in October 1949. The following year, Daimaru began a furniture manufacturing and construction contracting business under the name of Daimaru Mokko Co., Ltd.

All the new businesses were centered in Osaka and began to expand their operations as the nation's economy recovered from the ravages of war. Postwar construction and repair of highways and the building of shopping malls through the countryside helped make a greater variety of merchandise accessible.

Interest in foreign fashions and accessories reached a new height in Japan's post-World War II period. With the economy's rapid recovery came expanded buying power. In 1953 Daimaru, with stores in Osaka, Kyoto, Tottori, Shimonoseki, Hakata, and Nihama, became the first retailer in Japan to sign an exclusive agreement with Christian Dior. The following year, a new multistory Tokyo store was opened. Daimaru began selling its own ready-made men's wear in 1959.

At the requests of local business communities, Daimaru opened stores in Hong Kong in 1960 and Bangkok four years later. In 1960, in Japan, Daimaru opened the first of a chain of supermarkets. In 1974 the Peacock Sangyo, with 24 shops, became Daimaru Peacock Co., Ltd., a subsidiary of Daimaru. By 1991 this company had 50 outlets. Daimaru formed an exclusive agreement with the fashion designer Givenchy and also began manufacturing its own line of women's fashions. With the opening of stores in Paris and Lyon and the addition of specialty stores and restaurants, Daimaru was well established by 1975 as one of Japan's top five department store companies. The company sustained its position through the ensuing years, despite such woes as the late 1980s stock market crash and some fluctuations in the value of the yen. Daimaru began the 1990s in third place.

New Markets and New Challenges: 1980s-90s

Close attention to changes in consumers' buying habits led to the remodeling and expansion of some of the stores and to the creation of new businesses. The increase in dual-career families with little time to visit department stores, for example, led to the organization of the Home Shopping Division, a mail-order facility, in 1983. In a sense, for these shoppers, the purchasing process had come full circle since Hikoemon Shimomura had set up his first drapery store in 1717. The popularity of the mail-order service soon exceeded the volume a division could handle, and the service became Daimaru Home-Shopping Co., Ltd., in 1988.

In 1987 Daimaru transformed its store in Machida, a depressed area in Tokyo, from a fiscally ailing outlet to a profit-making venture by reorganizing it and creating a separate corporation, Machida Daimaru Co. Ltd., to operate it. The reduced costs to Daimaru, resulting from its separation from the Machida store, have also to some degree offset the company's huge investment in the 1983 opening of its highrise, ultramodern Osaka Umeda store.

During the 1980s, Daimaru stepped up its activities in Southeast Asia. The company opened its second store in Bangkok in 1980 and a store in Singapore in 1983. The same year, it added an annex to the Hong Kong Daimaru, doubling its space.

In October 1991 Daimaru Australia was opened in Melbourne. Unfortunately, Australia's economic climate had changed considerably since Daimaru officials first decided, four years earlier, to move into that market. In the intervening years, the country had slid into one of its worst recessions of the century. The store got off to a slow start. Australian consumers perceived Daimaru as high-end and expensive—an image that frightened off recession-stricken shoppers. Within a year of opening in Melbourne, management began restructuring the store—laying off 15 percent of the total workforce, adding lower-priced merchandise to its product mix, and modifying the interior of the store to make it look less posh.

Meanwhile, Daimaru's domestic operations were undergoing their own trials. Japan's bubble economy had burst, driving consumer spending to damagingly low levels. For the fiscal year ended in 1993, Daimaru posted a 51 percent decline in net profit. The company began reducing expenses, announcing that it would cut 1,000 head office staff over the coming 18 months. It also partnered with Tokyo-based competitor Mitsukoshi Ltd. The partnership—which was to include the development of private-label merchandise, the importation of foreign goods, and the stocking of certain products—was designed to reduce development and procurement costs for the two chains. The joint venture was groundbreaking; up until that point, such cooperative arrangements had not existed in Japan's department store industry.

Daimaru suffered still another blow in early 1995, when an earthquake caused major damage to its store in Kobe. The resulting shutdown and lost sales only compounded the company's already depressed financial condition, and it had to trim costs further, eliminating another 300 jobs. The Kobe store was not fully rebuilt and operational until March 1997.

By that time, Daimaru had a new president. Tsutomo Okuda, previously the company's managing director, became its president on March 1, 1997. The change in leadership portended operational changes ahead. At a press conference, outgoing president Shotaro Shimomura explained that the move was designed to rejuvenate Daimaru's management.

Okuda wasted no time in his quest to turn Daimaru around. Just three months into his presidency, the company announced that it was closing down its operations in both Hong Kong and France—three stores, in total. The company also made plans to sell its stake in its Thai joint venture. These moves substantially reduced the company's overseas operations, leaving stores in only Singapore and Australia. Domestically, Daimaru moved to cut costs by closing down a nonperforming store in Wakayama, and again reducing its workforce—this time by almost 750 employees, or 11 percent of its total workforce.

Even as it withdrew from France, Hong Kong, and Thailand, Daimaru made deeper commitments to its Australian and Singapore operations. The company opened a second Australian outlet in 1998, on the country's Gold Coast. It also opened a third store in Singapore.

A New Century

As Daimaru entered the 21st century, it was still struggling against Japan's sluggish economy. The company continued to explore cost-reduction measures—some traditional, some innovative. In February 2001, it shut down still another unprofitable store, in Niihama. In a more unusual move, it entered into an alliance with three other Japanese department store operators to develop a joint distribution network. The network was designed to substantially reduce the partners' distribution costs, allowing them to close down redundant distribution centers and consolidate operations.

Principal Subsidiaries: Daimaru Home-Shopping Co., Ltd.; Daimaru Credit Service Co., Ltd.; Daimaru Information Center Co., Ltd.; Daimaru Peacock Co., Ltd.; Restaurant Peacock Co., Ltd.; Daimaru Mariepaul Co., Ltd.; Daimaru Kogyo Co., Ltd.; Daimaru Sports Co., Ltd.; Daimaru Creation Co., Ltd.; Daimaru Mode Atelier Co., Ltd.; Alembic Co., Ltd.; Mich International Co., Ltd.; Daimaru Mokko Co., Ltd.; Consumer Product End-Use Research Institute Co., Ltd.; Daimaru Transportation Co., Ltd.; Rakuto Transportation Co., Ltd.; Chuo Kogyo Co., Ltd.; Daimaru Plan & Development Co., Ltd.; Daimaru Realty Co., Ltd.; Daito Realty Co., Ltd.; Roots Japan Inc.

Principal Competitors: Mycal Corporation; The Seiyu, LTD.; Takashimaya Company, Limited.


Additional Details

Further Reference

Daimaru Now: 1989, Osaka: The Daimaru, Inc., 1989.

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