Autobacs Seven Company Ltd.

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Autobacs Seven Company Ltd.

5-6-52 Toyosu, Koto-ku
Tokyo
Japan
Telephone: + 81 03 6219 8700
Fax: + 81 3 6219 8701
Web site: http://www.autobacs.co.jp

Public Company
Incorporated: 1947
Employees: 4,009
Sales: ¥227.07 billion (2.12 billion) (2004)
Stock Exchanges: Osaka Tokyo London
Ticker Symbol: 9832
NAIC: 441310 Automotive Parts and Accessories Stores; 336399 All Other Motor Vehicle Parts Manufacturing; 423120 Motor Vehicle Supplies and New Parts Merchant Wholesalers; 423130 Tire and Tube Merchant Wholesalers

Autobacs Seven Company Ltd., Japan's leading retailer of aftermarket auto parts, has begun exporting its successful retail formula into the international market. Unlike many of its foreign counterparts, Autobacs targets the market for automobile customization and upgrades, rather than simply providing replacement parts. In Japan, Autobacs operates more than 530 stores, including nearly 350 franchised stores. Autobacs stores operate under two major formats. The original Autobacs store features one-stop shopping for a full range of auto parts, as well as repair, installation, and maintenance facilities, service stations, and automotive sales. Autobacs remains the largest part of the group's network. Since the 2000s, however, Autobacs has been expanding its second format, the Super Autobacs. These large-scale facilities, which reach up to 50,000 square feet and more, feature an extended range of products, as well as a variety of amenities—including three full-sized, 100-seat movie theaters showing first-run movies—in order to attract and retain customers in the stores. The Super Autobacs stores extend the aftermarket concept to include books, DVDs, music, apparel, gifts, and other items related to automobiles and automotive culture. The Super Autobacs format features prominently in the company's plans for international expansion; the company opened its first Super Autobacs in the United States in California in 2003. The company operates six stores in Taiwan, two in France, in partnership with Renault, and one each in Singapore, Thailand, and, since 2004, mainland China. Autobacs also has begun to roll out a third retail format in Japan, Autobacs Hashiriya Tengoku, which specializes in sales of secondhand auto parts and equipment culled from the company's primary retail network. Listed on the Osaka, Tokyo, and London Stock Exchanges, Autobacs remains controlled by the founding Sumino family and Chairman Koichi Sumino. In 2004, the company posted sales of ¥227.07 billion (2.12 billion).

Auto Parts Wholesaler in the 1940s

The automotive market in Japan took off especially following World War II. The country's fast-rising economy and its commitment to establishing its own full-fledged—and internationally competitive—automotive industry introduced a variety of new business opportunities, such as the need to develop national networks for the wholesale distribution of automotive parts. Among the entrants into this sector was Toshio Sumino, who founded his company, called Suchiro Syokai, in Fukyushima-ku, in Osaka, in 1947. Less than a year later, Sumino reincorporated his company as a limited liability company, called Fuji-Syokai Ltd.

Fuji-Syokai quickly added a retail component as well, and by the 1950s the group's retail sales formed a major part of its business. The growth of this activity was fueled by the rise of a culture of automobile customization (called "tuning") among a segment of the consumer market. Unlike typical automobile owners, content with merely replacing parts on their cars as necessary, tuning enthusiasts sought to upgrade and modify their automobiles, and were prepared to pay for high-end components, customized paint jobs, and the like.

Sumino's company began to cater more and more to the growing tuning market. By 1958, the company restructured, spinning off its wholesale operations into a separate company, Daiho-Sangyo Co. Ltd. In that year, the company also created its Drive Shop division. Over the next decade, Fuji-Syokai continued to expand its range of operations, adding automobile sales, and its own chain of service stations.

In the early 1970s, Sumino recognized a new opportunity in the Japanese auto parts aftermarket. Until then, the market remained highly segmented, meaning that customers were required to shop at one store for their tires, at another for other parts, and continue on to yet another for repairs and installation services. Sumino saw an opening for a new type of auto parts retail store in Japan, one that would offer a one-stop shopping concept to the automotive aftermarket. In 1974, the company opened its first one-stop retail store in Osaka.

The new store was called AUTOBACS, which stood for "Appeal, Unique, Tires, Oil, Batteries, Accessories, Car audio and Services." Opened in Higashi, Osaka, the first Autobacs paved the way for the company's growth into Japan's leading aftermarket specialist. The company quickly began developing its plans to extend its reach nationwide, adding franchise operations in addition to stores under its own direct management. The first Autobacs franchise store opened in Hakodate, Nakamichi in 1975.

The success of the Autobacs concept and the rapid development of the retail network soon encouraged the company to adopt its retail brand as its own, and in 1978, the company became known as Autobacs Seven Company Ltd. The following year, the company merged with its Daiho-Sangyo and Autobacs Higashi subsidiaries into a single corporation, which also became known as Autobacs Seven Co. in 1980.

International Expansion in the 2000s

Autobacs continued its rapid expansion through the 1980s. The company marked its entrance into the eastern Japanese market in 1981, with the opening of a store in Koshigaya. By the mid-1980s, the company boasted nearly 300 stores in its total network, franchisees included. These were organized along regional lines, with offices in Tokyo, Sapporo, Sendai, Nagaoya, Takamatsu, and Fukuoka. Although the group provided direction from its headquarters (moved to a nine-story purpose-built building in Osaka in 1986), the company's regional offices were encouraged to operate more or less autonomously. By then, Autobacs had claimed the leadership in the Japanese automotive aftermarket.

Autobacs's growth suffered a setback in the mid-1980s, when a group of franchise owners decided to break away from the company and establish their own business. The defection eliminated more than 50 stores from the Autobacs network. Nonetheless, the company remained focused on expansion, with plans to expand its total network to more than 500 stores by the early 1990s. In preparation for this growth, the company turned to the stock market, listing its shares on the Osaka Stock Exchange in 1989. Four years later, the group added its listing to the Tokyo Stock Exchange as well. In 1995, in preparation for the future launch of international operations, the company opened its capital to foreign investors, adding a listing on the London Stock Exchange.

By the mid-1990s, competition in the Japanese automotive aftermarket had grown increasingly intense. To distinguish itself from its fast-growing rivals, Autobacs began emphasizing a new range of customer services. The loosening of Japanese restrictions governing the country's automobile repair sector allowed the company to begin marketing an extended range of repair services, in addition to its existing installation services.

The company also began preparing a new retail format, introducing something of an automotive aftermarket retail revolution in Japan and establishing the direction of the group's future international expansion. In 1997, the company unveiled the first of the new stores in Chiba. Called Super Autobacs, the new format featured more than 50,000 square feet of selling and repair space, set over two floors. The Super Autobacs featured more than mere auto parts. Indeed, in addition to an expanded selection of goods, including books, DVDs, music, and apparel, the large-scale stores also offered three in-house, 100-seat movie theaters showing first-run films to customers.

Autobacs began rolling out the Super Autobacs format across Japan, meeting with strong success. The format also became the company's flagship for its international expansion. The group's first target was Taiwan, where the company quickly followed the success of the first Super Autobacs with the opening of five more stores by the mid-2000s. Autobacs also entered Thailand, forming a franchising joint venture with that country's auto parts retailer Champion in 1997 to open a string of smaller format Autobacs in Thailand. The company opened its first Super Autobacs in Thailand at the end of the 1990s. In the meantime, the company expanded in Japan, acquiring a stake in the rival Auto Helloes Co. Ltd. The company acquired full control of Auto Helloes in 2002.

In 1999, Autobacs turned to Europe, reaching an agreement with French automaker Renault to form a new retail joint venture. That company, owned at 51 percent by Autobacs, opened two large-format stores in France and planned to expand the format throughout Europe through the 2000s.

Company Perspectives:

Mission: Our dream is to create a paradise for car enthusiasts. Our common purpose in each country is to create a place where car-lovers can come and enjoy the one thing that brings them together, enthusiasm for cars in any form. An Autobacs store is a place where you can explore the joy of car ownership, the pleasure of customizing your vehicle, improving its appearance, or performance. Autobacs' mission is to promote the idea that the car is more than just a means of transport, and the means of expressing this in every aspect of our customers' car lifestyle. We believe that this enthusiasm is something that goes beyond borders; that exists in a similar form in all countries, and is shared by people from various cultures and languages.

Autobacs moved its headquarters to Tokyo in 2001. In that year, as well, the company launched an e-commerce-enabled web site, extending its retail reach to Japan's highly active Internet market. Also in 2001, the company announced its plans to develop its own sports car, called the Garaiya.

Into the mid-2000s, Autobacs focused on two new, and potentially vast, markets. The first was the United States, where the company opened a Super Autobacs in 2003. Located outside of Los Angeles, the new store, at 50,000 square feet, easily tripled the size of its nearest competitors' stores. The Super Autobacs proved an immediate success as well, posting sales of more than $9 million after its first year. The company began plans to introduce its franchise into the United States, and a future expansion of its network to as many as 200 stores.

Next, the company turned to a far different market. In 2004, the company opened its first auto parts store in China, in Shanghai, forming a joint venture, called Shanghai Autobacs Paian Auto Service Co., held at 65 percent by Autobacs. After opening a second store in China in 2005, the company announced plans to boost its Chinese franchise network to as many as 100 stores before the end of the decade. After conquering Japan's automotive aftermarket, Autobacs hoped to repeat its success on an international scale.

Principal Subsidiaries

Autobacs Seven Europe S.A.S.; Auto Helloes Co. Ltd.

Principal Competitors

Sears, Roebuck and Co.; SAM'S Club; Rite Aid Corporation; AutoZone Inc.; Advance Auto Parts Inc.; Jardine Cycle and Carriage Ltd.; Castorama France S.A.; Kohnan Shoji Company Ltd.; Pep Boys-Manny, Moe and Jack; CSK Auto Corporation; Yellow Hat Ltd.; Autoseven Company Inc.

Key Dates:

1947:: Toshio Sumino launches an auto parts wholesaling business in Osaka and then enters retailing in the 1950s.
1974:: The first Autobacs auto parts store is launched in Higashi, Osaka, creating the first one-stop shopping auto parts and service store in Japan.
1980:: The company formally adopts the name Autobacs.
1989:: A public offering is made on the Osaka Stock Exchange.
1993:: A listing is added to the Tokyo Stock Exchange.
1995:: The company places shares on the London Stock Exchange ahead of the international rollout of the Autobacs retail concept.
1997:: The first Super Autobacs store is launched in Chiba, Japan; the company enters Thailand.
1999:: The company establishes its first European operations through a joint venture with Renault.
2003:: The company enters the U.S. market with the opening of the first Super Autobacs in California.
2004:: The company enters mainland China with the opening of its first store in Shanhai.
2005:: The company announces plans to develop a network of up to 100 stores in China and 200 stores in the United States.