AEON Co., Ltd. - Expansion and Diversification in the 1980s
Expansion and Diversification in the 1980s
The 1980s were a period of rapid growth for chain stores. JUSCO was in the forefront of this movement and was usually ranked fourth among the supermarket chains in terms of turnover and second in profitability. Many of JUSCO's acquisitions were allowed to retain their identity as regional chains rather than being absorbed by the parent company. This afforded JUSCO a number of advantages, including cheaper advertising in local media and better levels of cooperation with suppliers.
Increasingly during the 1980s, JUSCO's strategy extended beyond the pursuit of market share in the supermarket sector. The company sought to compensate for government restrictions on the opening of new supermarkets and to cater to an ever more sophisticated Japanese consumer via diversification. It spawned an imaginative range of retail outlets, such as Nihon Direct, a mail-order business; discount store Big Barn; Blue Grass shops for teenagers; and Nishiki, a kimono store. There were also Autorama Life, a car sales company started in 1982, and JUSCO Car Life, which opened five years later to provide automobile maintenance services.
Another JUSCO venture, Mini Stop, was a chain of convenience stores providing not only 24-hour neighborhood shopping facilities but also fast food and some financial services for public utility charges. Appealing particularly to Japan's growing body of working women, Mini Stop, founded in 1980, had 340 stores by 1990.
JUSCO was also beginning to develop a variety of restaurant and fast-food operations to enable it to profit from the growing popularity of eating out in Japan. The first of the Gourmet D'Or Co., Ltd. restaurants, which were to form the company's most important chain, began appearing in 1979 and were originally known as Coq D'Or JUSCO Co., Ltd. These were Japanese-style family restaurants that catered to travelers and shoppers alike.
The 1980s also saw the continued expansion of JUSCO's overseas business. In 1988, the Financial Times called it "one of Japan's most internationally-minded retailers." It opened outlets in various parts of Southeast Asia, formed joint ventures with overseas companies to trade both in Japan and elsewhere, and systematically developed foreign lines of supply. It also raised capital abroad, issuing its first Eurobonds in 1976.
JUSCO had opened its first overseas store in Malaysia in 1985. This was operated by Jaya JUSCO Stores SDN. BHD., a company originally jointly owned with Cold Storage (Malaysia) and three other local companies. It was the first time that a Japanese company had entered into a significant joint venture in the Malaysian retail industry. JUSCO assumed operational control of Jaya JUSCO in 1988.
Since the latter part of the 1980s, JUSCO's retail operations in Asia have grown to include another Malaysian superstore, four in Hong Kong—including Hong Kong's biggest store, opened in the Kornhill Complex in 1987—and five in Thailand. In 1990, a chain of Mini Stop convenience stores was launched in South Korea under an agreement with the Korean Miwon Group.
One of JUSCO's best-known European joint ventures formed during the 1980s was its partnership with British fashion manufacturer and retailer Laura Ashley. Laura Ashley was Japan's first store opened in Tokyo's Ginza district in 1986. The appeal of the brand's "traditionally English" style to Japanese consumers was so strong that by the end of 1990 there were 36 shops, two-thirds of them existing within department stores such as Mitsukoshi, and there were plans to open a further 11 stores in 1991. During 1990, JUSCO increased its share in Laura Ashley Japan from 50 percent to 60 percent, giving it overall control, and also announced the purchase of a 15 percent stake in Laura Ashley UK for £29.9 million, a deal that rescued the British company from a heavily indebted state.
In the United States, JUSCO had made an important acquisition in 1988. The Talbots Inc. was a chain of fashion stores belonging to General Mills Inc., a Minneapolis-based corporation that had decided to focus on its core business in the food industry. JUSCO's purchase of The Talbots for $325 million was the first noteworthy foray by any Japanese firm into the U.S. retail business. JUSCO made a point of leaving the existing management in place and said that it hoped to apply the retailing expertise of its new subsidiary to its domestic operations. The chain grew rapidly in the United States after the takeover. The Talbots stores were also introduced in Japan: the first six establishments opened in 1990, against a five-year plan to open 50. JUSCO and General Mills's relationship predated the Talbot deal. Since 1982, they had been running a joint venture in Japan that proved to be one of JUSCO's most popular catering operations.
In 1990, a wholly owned JUSCO subsidiary, the AEON Forest Co. Ltd., was created to become head franchisee within Japan of The Body Shop. This U.K. company specializing in "environmentally friendly" toiletries was an ideal partner for JUSCO, which was increasingly seeking to be seen as a "green" enterprise. Japanese consumers had been becoming increasingly environmentally aware during the late 1980s, and the popularity of the first Body Shop in Tokyo solidified JUSCO's plan to open 50 stores in five years.
JUSCO was not just jumping on a "green" bandwagon. Cofounder Takuya Okada had always been interested in conservation and had encouraged a range of conservation projects such as tree-planting. The "JUSCO: in tune with the Earth" conservation project was launched shortly after the Body Shop tie-up, and JUSCO would soon begin experimenting with recycling of packaging in its own stores.
Throughout the 1980s, JUSCO was expanding its buying activities in the so-called Newly Industrializing Economies (NIEs), following a "develop and import" strategy whereby JUSCO would establish links with NIE companies—for example, City Knitting, a knitwear manufacturer in India, in 1988—with the aim of developing products suitable for the quality-sensitive Japanese consumer.
In 1987, The Economist noted that although 15 years earlier the top Japanese retailers had been department stores, the five biggest were now supermarket chains, with JUSCO in fourth place. The writer attributed the supermarkets' success in large part to their rapid adoption of information technology. For JUSCO, the second half of the 1980s in particular saw a sustained drive to harness the power of information technology to all aspects of the business. TOMM (Total On-Line Merchandising and Management) was an in-store system implemented in 1986 as part of a corporate information system due to be completed in 1989.
Jusco made great progress in the area of Point of Sale (POS) systems. POS systems automate the management of inventory, making it possible to fine-tune the reordering process and minimize the amount of money tied up in stock. POS also allows detailed analysis of turnover at each outlet, so that stocking policy can be attuned to local tastes. JUSCO had Fashion POS installed at all its outlets by 1990 and showed a marked improvement in turnover rates and profitability as a result. It was rapidly extending POS coverage to non-fashion lines.
On its 20th birthday in 1989, the JUSCO group adopted a new corporate identity. The parent company is still called JUSCO, and the directly owned superstores continue to bear that name; the group is collectively known as the AEON Group.
In the late 1980s, the group was becoming increasingly eager to propagate its image of a socially responsible "corporate citizen" on a global level. The AEON Group 1% Club was one manifestation of this concern. Formed in 1989, the Club collected 1 percent of the pretax profits of 31 member companies and used these funds to promote cultural activities and exchanges. In 1990, the club funded an expedition to Japan for a group of "young ambassadors" from Malaysia. In 1991, Takuya Okada—who was chairman and chief executive officer, having been succeeded by Hidenori Futagi as president in 1984—visited London at the time of the Japan Festival to promote a similar scheme for 30 U.K. high-school students.
In 1991, the group created its Environmental Foundation to sponsor academic research on conservation issues as well as such practical work as reforestation in Thailand. Group employees were also being encouraged to undertake environmental work in their local communities through a "Clean and Green" campaign.
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