AEON Co., Ltd. - Benefiting from Deregulation in the 1990s

Benefiting from Deregulation in the 1990s


In the early 1990s, the Japanese retail sector was being deregulated, partly in response to U.S. pressure to lower the barriers to entry that faced would-be overseas entrants. Legislation such as the Large Scale Retail Law was beginning to be relaxed under the Structural Impediments Initiative. As a consequence of the liberalization, the AEON group was likely to have a freer rein in opening new large outlets, as well as in expanding its discount-store activities.

Superstores, however, were becoming less central to the group's plans, since its research found, according to a 1991 company report, that "Japanese consumers, with more time and money than ever to spend on shopping, are starting to view the generalized superstore as inadequate." In response, AEON established what it calls "new retail formats with specific consumer targets and product categories," such as its FORUS fashion centers aimed at the youth market.

AEON also expects that it will increasingly become a developer of shopping centers containing a variety of specialized retail outlets under a single roof. AEON's NOA shopping center was one of the earliest centers of this kind. In 1991, its main development arm, AEON Kosan Co., Ltd., was engaged in the construction of another center. Another development company, Diamond City Co., Ltd., had been started as a joint venture with Mitsubishi Corporation in the year of JUSCO's founding; it, too, was expected to receive a new lease of life after the deregulation. As a retailer, AEON was retooling its specialty chains and restaurants with an eye toward their inclusion in the envisaged large-scale shopping complexes.

Other candidates for inclusion in the complexes include AEON's remarkably wide range of service companies. Nihon Credit Service Co., Ltd. was set up in 1981 to issue credit cards and provide other financial services, including automated teller machines, and insurance. In 1990, it began to operate in Hong Kong as well as Japan. AEON also has a marriage bureau, a travel agency, a tailoring service, and a series of sports and leisure centers.

Interviewed by the Financial Times in October 1991, chairman Takuya Okada said, "Now Japanese retailing companies have the opportunity to grow very significantly because the government's policies have shifted from encouraging manufacturing to encouraging consumer activities. I believe that the changes in retailing in the next 20 to 30 years will be far greater than those in the past 20 to 30 years."