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introduction:why did ito-yokado, which has created many legends in japan, fail in china?

jin mei | author: lishi business review | produced by

as one of pang donglai’s early learning objects, ito yokado’s retail management methods still influence pang donglai today.

from "free tea", "three-meter rule", "five-meter rule" and "jogging", to scene-based displays, japanese retail, represented by ito-yokado's "let customers feel touched when they come to the store every day", is likecarrefour、walmartlike european and american retail represented by china, it has had a profound impact on china's retail industry.

from a small street shop to a retail giant, masatoshi ito, the founder of ito-yokado, known as the "king of japan's distribution industry", has led the innovation and transformation of japan's retail industry. as a good friend of drucker, ito masatoshi predicted japan's long-term decline as early as the 1970s and 1980s.

however, this giant, once a powerful retailer in japan, has been struggling in the chinese market. after a store opening boom, it has been rapidly closing stores since 2014, and now only huatang in the asian games village is left in beijing.

how did ito shunya create the textbook success of ito yokado? why did ito yokado fail in china?

1

the first circulation revolution

in 1920, after experiencing world war i, japan went from wartime abnormal prosperity to economic crisis, with a large number of factories closing down and workers losing their jobs. with the increase of cultural exchanges and the intensification of urbanization, the ito masatoshi family, who was later known as the "king of japan's distribution industry", opened a street grocery store called "yokado western products store" in taito district, tokyo.

four years later, ito masatoshi (hereinafter referred to as ito) was born. until 1952, "yanghuatang western products store" was still a small shop with only two people.

in 1953, with the rapid development of the economy and the continuous improvement of consumption levels, japan introduced the first self-service comprehensive supermarket from the united states - kikonoya, which was born and became a representative of high-end shopping in japan.

in 1955, the mass production of manufacturing enterprises gave rise to the prosperity of supermarket business, and the initiative of the market shifted from sellers to buyers. in 1957, daiei supermarket was launched. with its low prices and convenient shopping, it surpassed the old mitsukoshi company in just over a decade and became the overlord of japan's retail industry.

in 1958, after ito's half-brother passed away, he took over the small shop and was ambitious to make a big move in line with the trend of the times.

in 1960, after more than 30 years of exposure to western goods, ito finally set foot on american soil and felt an unprecedented shock. "everyone (in the united states) seemed rich," he said. "i especially noticed the huge scale of american consumer society and the distribution technology that made it possible. i think as japanese society develops, the japanese distribution system will become more like the united states."

after returning to china, ito began to gradually transform grocery stores into one-stop chain stores, and pioneered the japanese gms model of "supermarket + department store". he also regularly went to the united states to "learn from masters".

ito knew that america's advanced and successful experience alone was not enough.

he also embarked on a journey of exploration in japan. he opened refrigerators in ordinary households and examined every item in the cupboard. he even searched through the surrounding trash cans to gain insight into consumers' daily needs, find consumer preferences, and their true feelings about products. these valuable first-hand data allowed ito to accurately grasp the pulse of the market and also gave him a profound understanding of the essence of retail.

during the post-war recovery period and the "shinmu boom" era of rapid economic growth, there was almost no reason why ito would not explode when he met him rummaging through garbage cans.

as soon as ito-yokado's (hereinafter referred to as kado) products were put on the shelves, they were snapped up by enthusiastic consumers. kado's sales volume increased by 30%-50% every year. in the 1970s, kado had become one of japan's top retailers and went public in 1972. the company's development was booming.

on the surface, kado’s success was just the prosperity of one-stop supermarket shopping, but it gave birth to the vigorous "japan's first distribution revolution."from the 1950s to the 1970s, the use of computers reduced operating costs. after the low-temperature distribution system was completed, the revolution in the distribution of fresh food began, and japan's distribution methods quietly changed.

but ito said that he was still full of a sense of crisis "because of his cowardly and anxious nature."

he said, "customers will not come to us on their own initiative, suppliers will not sell to us on their own initiative, and banks will not lend to us on their own initiative." if an enterprise wants to develop in the long run, it must take the initiative and cannot wait for customers to come to it.striving to build a "trustful" relationship with all parties and maintaining reputation at all costs has become ito's business creed.

in 1973, toshifumi suzuki, a senior executive of kado, discovered a 7-11 convenience store during a visit to the united states.southern companythe signing of the regional cooperation agreement gave birth to the 7-11, which has since become famous in asia. this cooperation also made huatang the largest shareholder of 7-11 when the southern company of the united states collapsed nearly 30 years later.

2

the second circulation revolution

in the mid-1970s, the first oil crisis triggered the most serious economic problems since world war ii, and japan's industrial production fell by more than 20%. severe inflation and intensified business competition in various regions made it increasingly difficult to add outlets or expand the size of stores. in the early 1980s, huatang's sales were 623.9 billion yen, and growth became increasingly difficult.

in the cold winter, the burden of development fell on ito's shoulders.

ito once again led the team to start a detailed "exploration" on shelves, warehouses, logistics vehicles, and trash cans...

the transformation from high-speed development to high-quality development is ito's answer to the times.he decided to increase profits by reducing costs. he reduced the purchase volume, stopped purchasing slow-selling goods, reduced the purchase process, and saved time, which greatly reduced the company's operating costs.

with more than 600,000 items purchased each year, how can we effectively manage the massive inventory and identify slow-moving items?

in 1982, huatang established a business improvement committee. through business reform committee meetings, store manager meetings, general management meetings, group policy briefing meetings, etc., it formed a complete and effective organizational management system and information sharing mechanism, improved inventory management capabilities, and eliminated unsaleable goods.

but how do you determine whether a product is unsalable?

after discussions at store managers' meetings, huatang set unified slow-moving standards for each product, so that the inventory could be accurately determined for each product, and the inventory levels of different products could be accurately identified based on sales differences. from march 1982 to the fall of 1984, in two and a half years, huatang's stores had no slow-moving products!

the reason why the results were so rapid was closely related to huatang's inventory management performance mechanism. in the spring of 1982, huatang found that only 40% of suppliers could deliver goods according to their requirements (according to the specified date, goods, and quantity), so the company began to establish a purchase management system and pay a fine if there was a delay.

after solving the supplier problem, huatang found that the problems in the distribution stage were still obvious. in 1984, in order to solve this problem, huatang began to explore the possibility of joint distribution. they began to try out the future that huatang was proud of at the funabashi store in chiba prefecture and the furukawa store in ibaraki prefecture.the "window wholesale system" means that suppliers deliver goods to wholesalers designated by the company, who then distribute them to huatang.

unexpectedly, this great idea ended in complete failure. this was because the suppliers believed that the benefits would be taken by huatang, and it was not mutually beneficial. after summarizing the lessons of failure, in december 1985, huatang implemented the "window wholesale system" in the field of processed food in 39 stores. they reached a consensus with the suppliers in advance this time, so the progress was smooth. after that, the distribution of clothing and daily necessities also naturally began to adopt the "window wholesale system".

faced with massive delivery tasks, how can we ensure that every item is delivered to the store on time and accurately?

faced with mountains of goods, huatangthe "principle of minimum logistics fluctuations" has constructed a new distribution strategy - "blue distribution" and "red distribution".

processed foods, suits, women's clothing, underwear and daily groceries have similar storage requirements and customer purchase times. they are delivered together, called "blue delivery", to ensure freshness and quality. clothing, children's clothing, decorative materials, daily necessities, home appliances and stationery have diverse customer needs, so they are combined into "red delivery" to flexibly adjust to changes.

the two types of delivery are arranged in the morning and the afternoon, and this rule must be followed by both the company's own logistics center and the joint delivery to ensure that the stores handle the same type of goods at the same time. with the development of modern technology, huatang also uses modern information tools such as pos systems and computer systems to grasp sales trends in a timely manner and implement single product management. at the same time, by sharing information with suppliers, communication costs are also reduced.

the addition of computer systems allows replenishment to be done in order by shelf, with an operating system error of only 1/50000. in addition, the expiration date and permitted sales period of goods are also checked by the system, and the entry and exit of goods are all completed by the system, which not only saves manpower, but also makes it more accurate and efficient.

after the collective distribution and precise management, the management cost is greatly reduced and the freshness of the goods is significantly improved. with the development of technology, huatang has also realized information sharing between customers and suppliers, and can respond to market changes more actively.huatang's logistics management gradually began to change towards supply chain management.

eliminating inventory can introduce new products, speed up product turnover, and increase the company's working capital. as the economy gradually recovers, huatang has begun to work hard to improve user experience and consumption.

consumers buy hammers to drive nails better.superficial retailers only consider how to get consumers to buy hammers as quickly and as often as possible, while smart retailers consider how to get consumers to hammer nails. following this line of thought, huatang began to change its display and sales methods. they began to explore display methods that accurately convey value information. they even adjusted the display of products according to different time periods and weather changes on the same day.

by helping customers nail nails,"let customers feel touched when they come to the store every day" has become huatang's trump card, and they use it to occupy the "ultimate value of retail."

from the moment a customer enters the store, goes to the parking lot, finds a shopping cart, and is guided through the process of finding the items on his or her shopping list, including queuing up to check out, going to the service desk, and finally going to the parking lot, huatang strives to find any opportunity to embed "touching emotion" in the details.

in order to make customers feel at home, huatang has introduced the "three-meter rule" (greet customers loudly within three meters), the "five-meter rule" (pay attention to customers within five meters and be ready to serve them at any time), the "jogging exercise" (you must jog when customers call you) and the "cashier guidance" (be patient and appease customers when there are more than three people checking out) to improve customer satisfaction.

huatang treats a small problem in the bathroom or a customer falling down as a business issue. as the number of repeat customers increases, the layout will be adjusted to increase the user's sense of freshness.

the forced "slowdown" during the cold winter helped huatang gradually develop a refined management style and core competitiveness. in the process of fighting the depression, huatang led the japanese sales industry, completed the "second circulation revolution", achieved the destruction of price factors, and laid a good foundation for the economic crisis that followed.

in the early 1990s, huatang's revenue reached 183.04 trillion yen, making it a leading company in the sales field, and the company's "intrinsic competitiveness" was unprecedentedly improved.

japan then entered a dark moment in its history.

3

japan's growth stagnation

in 1997, yamaichi securities, one of the four largest securities companies in japan, went bankrupt. the president cried and begged other companies to hire the 7,500 unemployed employees. his tearful photo was published in the washington post, which said that "those tears heralded the end of an era in japan." japan began its lost 30 years, with gdp once experiencing negative growth and the retail industry almost stagnating.

ito had predicted this situation long ago.

in 1991, after the japanese real estate bubble burst, he predicted that "japan will experience an unprecedented recession." but what is shocking is that under ito's management, kado was almost "unscathed" in the face of the national crisis.

first, the business transformation that lasted until the 1990s allowed huatang to start fine-tuning its management early on, and to use computer technology to transform every aspect of its business, from purchasing, supplier management to store display.improving the efficiency per square meter and the efficiency per person also enhances the company's price competitiveness.

huatang's reform is a classic case of harvard business school. professor salmon of harvard business school praised it: this is a reform that allows every store and every product to gain customer support; this is a work reform involving all employees, including hourly workers; this is a reform of the entire process of food from the field (sea) to the table; this is a reform that uses computers to improve the accuracy of marketing.

secondly,the key to dealing with the economic crisis lies in the hands of users.relying on the purpose of building "trust" with users, free mother-and-child rooms, strollers, umbrella rental services, scheduled shopping shuttles, etc., huatang has been ahead of the times and gained the trust of users.

the most commendable thing about huatang is its high "purity" situational display mode (especially the parent-child area), which determines the display of products completely from the user's perspective. the services of pangdonglai, which are called amazing by users, also contain the inspiration of huatang. it will make adjustments according to customer needs, even down to the time period. because data shows that consumers who come to shop at different times of the day are not completely of the same type, so customers have different preferences and needs.

the high degree of industrialization, standardization and catering of fresh food is almost the most prominent national retail advantage of japan, and there is no other.

transferring surplus capital to china, where domestic demand is strong and the retail industry is gradually opening up, has become the choice of most japanese retail tycoons to survive the crisis.aeon, carrefour, wal-mart, metro, and ito-yokado are no exception. in 1996, after obtaining government approval, he chose beijing as the location for his first store. however, the "enthusiastic invitation from the chengdu municipal government" caused his china director, tomihiro saegusa, to temporarily change his direction.

but unfortunately, huatang, which seemed to be growing rapidly, did not continue its glory in china.

while tomio saegusa made bold statements that in order to win the support of local people and take root, one must "live in the local area for 20 or even 30 years", he also copied japan's experience and employed a large number of japanese executives in china.

"chengdu people mainly eat river fish. fresh, high-quality, and high-nutrition marine fish cannot be sold at all, and a lot of them are thrown away every day." they opened refrigerators and cabinets in citizens' homes, searched through trash cans, and visited local teahouses, just to understand what locals like to eat and wear. hard work pays off. in chengdu, which is dominated by state-owned department stores, huatang's japanese-style service finally set off a wave.

bowing to customers, free mother-and-child rooms, water dispensers, self-service take-out bags, fresh ice, dressing tables, hair dryers, and free rental umbrellas make shopping in huatang a very "western" thing for chengdu people.

japan's successful experience was verified, and huatang began to use the same experience to expand its territory in beijing.

in 1998, ito-yokado ranked 33rd among the world's top 500 companies. it opened its first store in shilipu, beijing. riding on the growth trend of china's retail industry, ito-yokado opened stores from beijing asian games village to wukesong and tongzhou beiyuan at the rate of almost one store per year.

but compared with the hot opening of stores, the figures behind it are not optimistic. in 2012, the sales of huatang's five stores in chengdu reached 5 billion yuan, while the sales of the eight stores under huatang commercial in beijing were only about 2.5 billion yuan. they transferred the manager from chengdu to beijing, but failed to reverse the decline.

fundamentally, the times in china have changed, and beijing is the first stop for the change.

in 2012, online shopping had already become a normal practice in beijing. huatang, which stuck to the gms model, did not realize that beijing's commercial center at that time had turned into a lifestyle center that integrates leisure, cultural and artistic experience, providing satisfaction that e-commerce could not replace. huatang did not seize the digital trend, and digital service supporting facilities such as digital parking tickets were delayed in opening, and e-commerce channels also started slowly. by the time they reacted and added catering, children's business formats, and rest areas, the situation was already over.

since 2014, beijing huatang has started a wave of store closures, including the wukesong store, wangjing store, beiyuan store... until the closure of the fengtai north road store in 2017, huatang only had the asian games village store left in beijing.

why didn’t huatang continue japan’s prosperity in beijing?

after china fully opened up to the outside world in 2004, aeon supermarket, also from japan, established a distribution system in china. however, huatang, which was a joint distribution in japan, did not establish its own logistics center in china. the outsourcing of logistics meant that huatang’s business in china did not have the premise of joint distribution, so 80% of its business was consignment sales, and only 20% were its own products, which was exactly the opposite of the situation in japan.

china's highly integrated and rich channel supply means that in the competition of e-commerce and cross-border shopping, huatang, which has no core weapon, is like a building without a foundation. the strong wind of the times will naturally fade away with the waves. fortunately, 7-11's convenience store business still maintains strong competitiveness.

from japan's glorious rise to china's difficult exploration, the two-sided story of ito-yokado tells us that no matter how successful a company is in its own market, it needs to put aside its past achievements when entering a new market, and re-examine and reposition itself with a humble learning attitude. in different eras, influenced by factors such as technology, city size, and economic development stage, people will choose different places to shop, so "success is not the end, but a new starting point", especially in the retail industry.