The Seiyu, Ltd.

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The Seiyu, Ltd.

3-1-1 Higashi Ikebukuro
Toshima-ku
Tokyo 170
Japan
(03) 989-5111
Fax: (03) 982-3221

Public Company
Incorporated: 1956 as Seibu Stores
Employees: 11,349
Sales: ¥1.05 trillion (US$8.41 billion)
Stock Exchanges: Tokyo Paris Frankfurt Düsseldorf

The Seiyu, Ltd. (Seiyu) leads the Seiyu Group, a subgroup of the Saison Group retail conglomerate. Saison Group is one of Japan’s largest retail concerns with annual sales of more than ¥4 trillion, of which Seiyu accounts for almost 30%. The Seiyu Group consists of 22 companies, within which the Seiyu, Ltd. represents the group’s main business of superstore retailing and operates 264 stores throughout Japan. In 1991 the Daiei, Inc., was the only other Japanese retailer to have such truly national coverage. Seiyu maintains a wide range of store formats, including large general merchandise stores, which are centrally operated and predominantly self-service department stores; supermarkets; and specialty stores. The stores offer their customers a complete range of services, usually provided by group member companies, covering everything from credit to real estate. Seiyu was originally founded in 1956 to become the supermarket arm of the privately owned Seibu Distribution Companies—now the Saison Group. At the time, the company took the name of its parent, Seibu Stores, and is the oldest of Japan’s major superstore chains by one year, although its competitor Ito-Yokado Co. Ltd. had been operating in another form since the early 20th century.

The key personality in the history of Seiyu is Seiji Tsutsumi. Until 1991 Tsutsumi was the head of the then Seibu Saison Group before stepping down to become chairman of the Saison Corporation within the same group. He has been the driving force behind Seibu’s successful retailing operations for the past 40 years. His half-brother, Yoshiaki Tsutsumi, is head of the independent Seibu Railways Group. Competition between the brothers contributed to the respective buildup of their companies after the original Seibu companies were split between the two brothers by their father. The early years were difficult for the company. Seiyu was established as a three-store chain with supermarkets in Odawara, Taira, and Shizuoka; however, all three original stores soon failed. The first successful store opened in Tsuchiura in 1958. Others followed but the pace of store openings remained slow, and by 1962 there were only five stores with less than 5,000 square meters in sales space. The main reason for the slow opening of new stores was Seiyu’s dependence on its parent company Seibu Distribution. At the time, Seibu was conducting an ill-fated and costly experiment with a department store in Los Angeles. With Tsutsumi’s tight overall control of the group’s operations and a lack of funds due to losses from department stores, growth was restricted. In many respects, Seibu stores operated as small department stores. Each store sourced and sold goods independently, and did not practice self-service selling.

In November 1962 Tsutsumi decided that it was time to extend the supermarket side of the business. This was a period when Tokyo was growing rapidly, and large housing developments were springing up around the city. Following Tsutsumi’s directive, the company began to search for new store sites close to this new housing. These estates represented a totally new market for Japanese retailers, with younger families from all over Japan beginning to move to the capital.

In addition, the company made a positive move toward becoming a chain store business and developed the retail strategy of self-service discount department stores whereby the company would open self-service outlets similar to department stores offering household and food items at a discount. This was the first step in the development of Seiyu’s modern superstores.

Five months later, in April 1963, the company changed its name to Seiyu Stores Ltd., a move that emphasized the distinction between Seiyu and Seibu, and indicated a move to greater independence from the Seibu Group. The decision was not entirely voluntary. Complaints from small businesses led the Ministry of International Trade and Industry (MITI) to instruct the company not to operate under the same name as its sister department stores.

Following this change Seiyu rapidly expanded its chain of stores. To achieve this it took advantage of its connection with the Seibu Railway Company, locating stores along major rail arteries to the west of Tokyo. This land was not only cheap, but the sites had several other advantages. Stores at railway terminals provide a guaranteed flow of customers by catching commuters as well as local residents. In urban Japan, unlike most Western nations, shopping by car is seriously restricted because of road congestion and even in the early 1990s railway terminals are employed as prime retail sales.

Throughout the 1960s, Seiyu expanded first along the two main Seibu railway lines, and after 1965 stores were opened along lines operated by Japan National Railways and Keio Railways to the west of Tokyo, and along Sobu railway lines to the north. Store sizes ranged between 900 and 3,000 square meters depending on the site. On the whole, medium-sized stores of slightly more than 1,000 square meters of sales space were employed, with the emphasis on food and household products. The larger superstore outlets also carried a few clothing lines.

In 1969 Seiyu opened its first major distribution depot at Fuchu. In the same year production capacity for private brands was expanded with the founding of the Seiyu Stockbreeding Company and the Seiyu Meat Company. Seiyu Shoes Ltd. and Seiyu Marine Products Ltd. were established in 1970.

By this time the Seiyu chain had grown to more than 80 stores, all within Tokyo and neighboring regions. The early 1970s saw further expansion and diversification. Through the takeover of Koma Stores Ltd., a Kyoto chain of 12 outlets, Seiyu Stores Kansai Ltd. was founded. At the center of the Kansai region is Osaka, Japan’s second-largest city and the country’s second-largest market. It is also the home base for the major superstore chains of Daiei Inc., Nichii, and Izumiya. Seiyu’s entry in 1970 was part of a strategy to open stores throughout the country. The Kansai company acted as a gateway to Nagoya and the southern island of Kyushu, leaving the Tokyo headquarters responsible for the north of Japan.

In 1971, Seiyu acquired a majority shareholding in the regional Uoriki chain in the Central Japan Alps. Unlike the takeover of Koma in Kyoto, this was not simply a market entry strategy. Although Uoriki was a small local chain, it dominated food retailing in the area, and Seiyu has maintained this strong position, becoming highly successful in the region. The company was renamed Seiyu Stores Nagano Ltd. in 1971.

In 1972 the Seibu Group established links with Sears, Roebuck & Co., giving Seibu access to the Sears catalog. Catalog corners were set up in some large Seiyu stores as well as in department stores, and Seiyu gained access to Sears retail experience. Sears maintains a 2.24% stake in Seiyu and was the company’s ninth-largest shareholder in 1991.

In the same year, experiments were set up in small store retailing. This was the beginning of the highly successful Family Mart convenience store chain. Seiyu opened a small number of experimental stores during the mid-1970s, eventually establishing Family Mart Company as a viable chain in 1978. Family Mart is the third-largest convenience store chain in Japan and became independent from Seiyu Group in 1981. The Family Mart Group now forms a separate, autonomous part of the Saison Group.

Throughout the mid-1970s Seiyu continued a strategy of store expansion and business diversification and in 1974 expanded production of its own name brands to more than 500 items. These early brands were designed chiefly as discount goods to attract price-conscious consumers.

Ties with Sears, Roebuck were strengthened when the companies exchanged research teams between 1974 and 1978. Sears’s chief objective was to gather information on the Japanese market, while Seiyu was interested in learning more about the Sears system of retailing. In 1978 Seiyu established an office in Chicago for the purpose of gathering information and sourcing new products suitable for its business in Japan. Further offices were established in Peking in 1979 and in Paris in 1982.

Although the implementation of a new Large Store Law in 1974, restricting the opening of large stores, did not hinder the opening of stores of less than 1,500 square meters, problems with small local retailers made new large store developments increasingly difficult toward the end of the 1970s. In 1979 MITI tightened the law further, making all new stores of more than 500 square meters subject to official approval. The consequence of this new legislation was that large companies such as Seiyu found it no easier to open medium-sized stores than to open large ones. A new strategy of opening large stores, usually more than 5,000 square meters, emerged and many stores exceeded 10,000 square meters in sales space. This trend continued in the early 1990s, with small and medium supermarkets being opened only in rare cases.

In 1979, Seiyu moved its headquarters to Tokyo’s tallest building, the Sunshine 60 in Ikebukuro. The building was constructed to let, and the Saison Group is the main tenant. The building’s spectacular size is similar to that of Sears, Roebuck headquarters in Chicago. The complex includes a Seiyu superstore, one of the few in central Tokyo.

By the beginning of the 1980s Seiyu was operating retail outlets that ranged from small convenience stores and medium-sized supermarkets to large-scale department stores. The company was also involved in producing a wide range of own-name brands, notably fresh and processed food products and household goods. The type of low-price, low-quality own-name brands previously available were no longer acceptable to Japanese consumers, and Seiyu responded to this problem in two ways, improving the quality of its supermarket brands and introducing the Shoku no Sachi own-name foodstuffs brand in 1984. In 1980 Seiyu had introduced the famous Mujirushi Ryohin brand. Mujirushi Ryohin means “good unbranded products”; these high-quality basic goods soon became very popular and Mujirushi Ryohin is now a famous brand. Sold initially in special areas of Seiyu stores, against a background of plain stone floors and unpolished wooden shelving, goods are packaged in plain wrappers and sold without the elaborate designs found on much Japanese packing. In doing this, Seiyu created a unique brand image. Large sales within larger Seiyu stores and Seibu department stores led to the opening of independently-sited specialty stores under the Mujirushi Ryohin name, including in 1983 the opening of a store in the highly fashionable Aoyama district of Tokyo. Eventually Daiei Inc., Jusco Ltd., and Uny Ltd. all created their own versions of Mujirushi Ryohin. In 1991 there were 217 Mujirushi Ryohin specialty stores in Japan, stocking a range of over 1,800 items. In 1991 Seiyu opened a Mujirushi Ryohin store in London.

By 1983 the Seiyu name was widely known in all parts of Japan and the group responded by changing the name of its main subsidiaries. Seiyu Stores Ltd. became the Seiyu, Ltd., and the main regional companies also simplified their names to Kansai Seiyu Ltd. and Nagano Seiyu Ltd. Kansai Seiyu was merged with the head company in 1988.

Building on the success of the Mujirushi Ryohin specialty stores, Seiyu continued to expand beyond its traditional core of food retailing. In 1983 links were formalized with Time Ltd. in the United States, and Seibu Time Ltd. was established. Seibu Time Ltd. produces a number of magazines including Money Japan, launched in 1985; Lettuce Club, launched in 1987; and any, launched in 1989.

In the areas of information and culture marketing, further developments included the production and distribution of films. The group’s chairman and founder, Seiji Tsutsumi, has always encouraged all forms of art, and his retail stores are the venue for art exhibitions and performances. Cine Saison Ltd. was established in 1984 within the main Seiyu Group structure, and has been responsible for the production of a Japanese movie each year since 1985. Twelve Seiyu stores and shopping centers operate cinemas, and eight more have facilities to run regular drive-in movies.

Since 1987, Seiyu has also operated the 774-seat Ginza Saison Theater in central Tokyo and has been responsible for organizing a large number of cultural events throughout the latter half of the 1980s. In 1988 the Soviet Ballet Institute School was opened in Tokyo, and in the same year a cultural exchange agreement was established with Robert Redford’s Sundance Institute, a film school in the United States.

To strengthen the company’s image at the upper end of the retail market, Seiyu began to remodel its larger stores as department stores in the 1980s, increasing the ratio of nonfood products and introducing more concessions within stores. The company also began to use the Seibu name on these larger stores to emphasize the department store image. Kasugai Seibu, Koriyama Seibu, and Maebashi Seibu are all examples of department stores run by Seiyu, with sales that are among the highest for individual outlets in Japan.

Seiyu also operates two large shopping complexes. The Hikari-ga-Oka complex in northwest Tokyo was completed in 1987. Part of a major housing development, it includes a Seiyu-operated Seibu department store, a separate supermarket, many specialty stores, restaurants, and a cinema. Seiyu aims to operate the complex as a community center, providing evening classes and various family events on weekends. The Hikari-ga-Oka complex is one of Seiyu’s most successful projects of the late 1980s.

In 1988, Seiyu opened the Rakuichi complex at Nagahama in Shiga prefecture, its second and more ambitious shopping center development. Rakuichi is a shopping center and entertainment complex that includes a superstore, specialty stores, a conference center, and an amusement park. It is designed to cater to a wide geographical area. This kind of development has been emulated by other Japanese retailers and represents the desire to offer complete one-stop shopping and entertainment. Rakuichi is located far from any large urban area, however, and as of the early 1990s had shown only limited success.

Towards the end of the 1980s Seiyu consolidated various arms of its business. Seiyu Finance Ltd., originally established in 1982, was merged with Tokyo City Finance in 1989. The new company offers a wide range of financial services to Seiyu customers, including consumer credit, mortgages, life and other insurance, securities, and some business finance services. These services are offered both independently and at special counters within major stores.

Seiyu expanded its international operations during the latter half of the 1980s, establishing links with companies in South Korea, Indonesia, Thailand, and Hong Kong. These links were formed to promote development imports—whereby Japanese companies contract production in the poorer Southeast Asian countries—of cheap consumer goods. In addition, food products are imported from the western United States. Seiyu now has five buying and representative offices in South-east Asia, and three more in the United States.

In 1990 Seiyu was Japan’s third largest retailer, behind Daiei and Ito-Yokado Co.; the three were the only retailers to have sales in excess of ¥1 trillion per annum. The group appears solid, with a wide range of business activities and a national network of stores, yet in 1991 it was experiencing problems. The Saison Group is known for showing only small net profits even by the standards of Japanese retailing as a whole, owing to overinvestment in areas which currently are not not performing well, such as hotels. Seiyu’s annual sales growth was falling well behind that of other leading companies in the late 1980s and early 1990s. This will continue to be a problem for the group, but the strategy of diversification into a wide range of retail formats is an important and progressive one, and should support the company in the long term. The company’s activities in the fields of culture and entertainment and the emphasis on community services make Seiyu stores popular with consumers. As the government moves progressively to allow greater domestic competition in large store retailing, Seiyu’s strategy of department store development and its popularity should keep the firm on solid ground throughout the 1990s.

Principal Subsidiaries

Nagano Seiyu; Seiyu Foods (77.4%); Seibu Time; Super Maruzen (79.8%); Seibu Sekiyu Shoji (80%); Nikoh (26.6%); Kureru; Seiyu Photo Service; Asahi Mediko (80%); Chepo (85.7%); Roily Doll (69.3%); Tokyo City Finance (50.5%); Seiyu Toshi Komon (65%); S. S. Communications (54.1%); Cine Saison; SMIS (80%); Ryohin Keikaku.