AEON Co., Ltd. - Origins

Origins


The first self-service stores in Japan opened in the 1950s, and the sector grew rapidly despite the hostility of small shopkeepers. Early supermarkets operated on a local rather than a national scale, however, and were ill-equipped to withstand recessions. Many went out of business during the recession of 1964–65, and consequently the late 1960s was a period of consolidation among the survivors, many of which decided to form alliances or merge. It was against this background that JUSCO was formed in 1969 through the business tie-up of three companies—Okadaya, Futagi, and Shiro—in the Chubu and Kansai areas.

Okadaya Co., Ltd. had the longest pedigree of the three, having been founded in 1758. Until World War II, it was a store trading in clothing, including kimonos. After the war, it was restarted by Takuya Okada in a single building built on a devastated site and staffed by five employees. It grew into a chain of 14 department stores in the Mie prefecture but was still very much a regional enterprise in the late 1960s, when Okada, in the light of his observations in both Japan and the United States, decided that, for chain stores, size was becoming a critical issue. Larger chains, he realized, could achieve vital economies of scale in both buying and selling, as well as greater administrative efficiency.

Takuya Okada first broached the subject of a merger to Kazuichi Futagi, the president of Futagi Co., Ltd. This company had been established in 1937 as a clothing store. After the store was destroyed in the war, its proprietor reopened for business in 1945 with a stock of second-hand clothes. So successful was Futagi in rebuilding his business that by 1968, when the foundation of JUSCO was conceived, he had a chain of 26 stores in the Hyogo prefecture.

Shiro Co., Ltd, was a relative newcomer, a chain of 15 stores in the Osaka prefecture dating back to 1955. Its head, Jiro Inoue, learned of the proposed merger between Okadaya and Futagi and let it be known that he, too, would like to participate.

Headquarters for the new company was set up in February 1969, with capital of ¥150 million provided by the three participants in three equal parts. The actual merger was to follow slightly later, in 1970. The infant company was given the name Japan United Stores Company—soon abbreviated to JUSCO, which became the official name. Futagi was to be chairman and Okada president.

Shortly after the establishment of JUSCO, the vice-president designate, Inoue, died at the age of 41. Inoue's firm of Shiro was heavily indebted, so in the first instance only Okadaya and Futagi merged, keeping Shiro as a separate company called Keihan JUSCO. Okada used Okadaya's profits to help put Keihan JUSCO back on its feet, and it became part of JUSCO proper a few years later.

The foundation of JUSCO coincided with a retail boom, but that did not mean the climate was entirely hospitable to the new enterprise. Along with the economic effects of the oil crises of the 1970s, the company had to contend with stringent building restrictions. In 1973, the persistent lobbying of smaller retailers culminated in the enactment of the Large-Scale Retail Law by the Japanese National Assembly. As a result of the law, further strengthened in the late 1970s, the development of new supermarkets, especially those with floor areas of more than 500 square meters, was made subject to a lengthy planning application process that some said amounted to a veto by the smaller retailers. This legislation naturally put a damper on the internal growth of a company like JUSCO, which nonetheless continued to construct new stores and saw expansion by acquisition the natural course to take.

Throughout the 1970s, more and more local chains came under the JUSCO umbrella. The company acquired a reputation for harmonious cooperation with local businesses and communities, as Takuya Odaka illustrates in his memoirs with the story of the Ezuriko PAL Shopping Center. The citizens of Ezuriko, he recounts, actually sent a deputation to JUSCO's head office to ask for help in constructing a new shopping center.

The internationalization of JUSCO began during the 1970s, particularly with respect to the development of overseas buying operations. In 1973, JUSCO established the Miwon Fishery Co., Ltd., in South Korea, jointly with the local Miwon Co., Ltd. The following year saw the opening of agricultural ventures in Australia and Brazil.

There was a general trend during the 1970s for Japanese retailers to import. To gain leverage, JUSCO's largest competitor, Daiei, formed a buying group with 150 other companies for collective purchasing of overseas merchandise. In 1979, JUSCO, together with other leading retailers, formed a similar retail consortium, the Allied Import Company (AIC). In 1981, AIC would gain exclusive distribution rights in Japan over the products of the world's largest supermarket chain, Safeway of the United States.

In 1980, JUSCO's own-label products, known as White Brand, were launched. White Brand denoted a basic but high-quality product sold in plain packaging at the lowest possible price.