Yamada Denki Co., Ltd.

views updated

Yamada Denki Co., Ltd.


4-40-11 Hiyoshi-cho
Maebashi, Gunma 371-0017
Japan
Telephone: (+81-27) 233-5522
Fax: (+81 027) 233 3568
Web site: http://www.yamada-denki.jp

Public Company
Incorporated: 1973
Employees: 6,447
Sales: ¥1.28 trillion ($10.25 billion) (2006)
Stock Exchanges: Tokyo
Ticker Symbol: 9831
NAIC: 443112 Radio, Television, and Other Electronics Stores; 443120 Computer and Software Stores

Yamada Denki Co., Ltd., is Japan's leading electronics specialty retailer (Denki is the Japanese term for electronics). Based in Maebashi, in the Gunma prefecture of the northern Kanto region, Yamada operates nearly 300 stores in all of Japan's 47 prefectures. The company's aggressive expansion drive in the early 2000s enabled it to become the first of the country's specialty electronics retailers to top the ¥1 trillion mark by 2005. In 2006, sales rose to ¥1.28 trillion ($10.25 billion). In the process, the group has risen from number three in the market to number one, outpacing perennial rivals Kojima, Gigas K's Denki, and Best Denki. A hallmark of Yamada's growth has been its early decision to implement a centralized distribution model. This in turn has provided support for the group's developing large-scale store format, with an average floor space of 1,000 square meters. Yamada has traditionally chosen suburban locations for its stores, tapping a market largely ignored by its competitors. At the midpoint of the first decade of the 2000s, however, the company has launched a drive to enter the urban market. For this, the company has developed a new superstore format, opening its first 20,000-square-meter store in Osaka, near the Namba train station. The new store boasts a product assortment of some 800,000 items, including a growing number of products such as personal computers and LCD televisions, under Yamada's own "Frontier" brand. While the new format operates under the Labi 1 Namba signage, the majority of the group's stores operate under the Tecc Land name. Yamada also operates a smaller discount store format, Daikuma, with 26 largely franchised stores. Yamada is listed on the Tokyo Stock Exchange. Founder Noboru Yamada remains company president.

SETTING UP AN ELECTRONICS CHAIN IN 1973

Among Japan's top electronics specialty retailers, Yamada Denki was a relative latecomer; nearly all of its major rivals were in operation by the mid-1960s. Yamada's own start came only in the early 1970s, when Matsushita Electric Industries decided to enter the retail market in order to directly sell its own electronics and home appliance products. Matsushita turned to Noboru Yamada, who had worked for Victor Company of Japan since the early 1960s, to found the retail operation. The new company opened for business with a single store in Maebashi, the capital city of the Gunma prefecture in the northern Kanto region in 1973. Over the next decade, Yamada expanded the Matsushita store network, adding a number of new locations in the region.

The rising power of the Japanese economy, and the country's rapid embrace of electronics technologies, encouraged the growth of the retail electronics market into the early 1980s. By then, Noboru Yamada had begun to recognize the need to expand beyond the products of a single manufacturer, particularly amid the competition coming from the fast-growing electronics specialists, such as Kojima, Best Denki, and others. In 1983, therefore, Yamada incorporated a new company, Yamada Denki, in order to relaunch the retail network as an independent operation.

Yamada Denki remained limited to a regional operation through the 1980s, and for the most part countered its larger competitors' pricing advantage with a commitment to high service levels. Nonetheless, Noboru Yamada recognized that a low-pricing strategy was necessary if he hoped to establish the company among the sector's leaders. From the start, therefore, Yamada began to implement certain features of its business model that were to enable the company not only to survive the Japanese economic collapse in the 1990s, but also develop into one of the market's strongest competitors.

As part of that process, the company opened a distribution center in Maebashi in 1984, a precursor to the centralized distribution model the company adopted in the mid-1990s. In 1986, the company implemented its own point-of-sale (POS) system, linking all of its stores. In this way, Yamada Denki was able to increase the efficiency of its own operations, allowing the company to put into place its own low-price strategy. However, Yamada continued to differentiate itself from its competitors, emphasizing its service commitment. While its rivals largely chose to boost employee productivity, Yamada adopted a strategy of focusing on its sales-per-square meter. As part of that effort, the company actually hired additional sales staff. Employees were also given a company manual, enabling the company to increase the professionalism of its staff.

Yamada Denki began developing its own large-scale store format into the second half of the 1980s. By 1987 the company had opened the doors to the first of these stores, called Tecc Land, in the first floor of the company's new headquarters building. While the company maintained most of its smaller stores, most of which featured less than 500 square meters of sales space, the large-scale format, of more than 1,000 square meters, quickly became a company priority. This was especially true at the start of the 1990s, when Yamada Denki became one of the first in the industry to feature a dedicated sales space for personal computers.

As backing for its expansion, Yamada went public in 1989, listing its stock on the Tokyo Stock Exchange's OTC market. By then, Yamada Denki's revenues had topped ¥25 billion per year, and the company had cracked the country's top ten electronics retailers. The company further boosted its market position with a decision to pursue the corporate computing market.

REORGANIZING FOR GROWTH

The booming Japanese economy of the 1980s had allowed Yamada to grow in a relatively mild competitive environment. Indeed, Yamada and its competitors had even formed an organization, the Nippon Electric Big-Stores Association (NEBA), through which they agreed to respect each others' territories. The collapse of the country's economy in the early 1990s, however, quickly caught up to Yamada, and by 1994, the company had posted its first losses. As a result, Yamada was forced to review and restructure its operations. Along the way, the company also dropped its membership in the NEBA. This led the company to expand beyond the northern Kanto region for the first time, opening its first store in Miyazaki, in Kyushu, in 1992.

COMPANY PERSPECTIVES


With its ever-expanding lineup of products, Yamada Denki will answer to the most demanding customer needs.

One of Yamada Denki's core management policies is "enhancement of product selection." We believe that we can enrich the customers' lifestyle by providing an environment where customers can enjoy the process of shopping. It is our mission to provide our customers a vast selection of products to choose from and give our assistance in finding an ideal lifestyle for each and every customer.

Yamada shifted its market strategy to a low-price model, introducing guaranteed lowest pricing, while also promising free repair services. The company next focused on revitalizing its store format, carrying out an extensive refurbishing of its network, including the closure of a number of smaller stores, in favor of a new and larger format. By the mid-1990s, the company had succeeded in raising its store sizes into the 1,000- to 1,500-square-meter range, outpacing the industry average of just 900 square meters. The larger store format also allowed the company to put into place another element of its restructuring strategy, that of increasing its product range, with a special emphasis on the personal computing market, in order to appeal to the entire family.

At the same, the company recognized the need to expand its POS system into a fully integrated operating system. In 1995, the company revamped its network infrastructure, building a full-scale POS-system connecting the company's headquarters, its store network, as well as its distribution operations, and, importantly, its supplier network. Modeled after the POS-systems put into place by the country's convenience store sector, the new network also featured something of a revolution in the Japanese retail electronics sector, that of a centralized distribution network. In order to implement this part of its restructuring, Yamada turned to partner Daiichi Kamotsu, which took over the company's distribution operations. Over the next several years, Yamada continued to refine its centralized distribution model, including adding new distribution centers, also operated by Daiichi Kamotsu, to support its national expansion. The increased efficiency of its operations enabled the company to pursue its low-pricing strategy, and into the late 1990s Yamada's pricing was as much as 11 percent lower than the national average.

Throughout its restructuring, Yamada had limited its new store openings. By 1997, however, the revitalized company was able to turn its attention toward its next objective, that of becoming a truly national retail electronics player. The company returned to the expansion of its retail network that year. By 1998, the company had stepped up the pace of its new store openings, unveiling more than 20 stores in that year alone. At the same time the company had refined its target markets, avoiding the urban centers to instead focus on the relatively undeveloped midsized suburban markets. As part of this program, the company moved toward still larger store formats, including closing many of its smaller stores in favor of the opening of far larger stores in new, high-traffic locations. By the early 2000s, the company had succeeded in boosting its average store size to 3,300 square meters, with per-store sales topping ¥4.3 billion per year. With 120 stores and sales topping ¥750 billion by 2000, Yamada had become the country's third largest specialty electronics retailer, trailing only Kojima and Best Denki.

TAKING THE LEAD FOR THE NEW CENTURY

Yamada Denki marked its emergence into the retail big leagues with a shift of its stock to the Tokyo exchange's First Section. The company continued to pursue its expansion, and by 2002, the company's network covered 36 of Japan's 47 prefectures.

Amid the bruising competition that marked the Japanese retail electronics sector at the beginning of the 2000s, Yamada continued to build its market share. Part of the group's growth came through a series of acquisitions and joint ventures, as the sector's weaker players began to falter. In 2001, for example, the company formed a joint venture with rival Wako Denki, which principally operated in the Kansai region of Osaka, to take over that company's 20 larger-sized stores. The following year, Yamada acquired the 20-store Daikuma discount store network from Ito Yokado, giving the company a second retail format. By the end of that year, Yamada had also reached an agreement to take over the operation of the electronic appliance departments of a number of supermarkets owned by the Daiei retail group. After launching a test in four stores, however, the companies canceled the agreement.

KEY DATES


1973:
Noboru Yamada opens first store in Maebashi as part of Matsushita Electric Industries' launch into direct retail sales of its electronic appliances.
1983:
Yamada founds a new company, Yamada Denki, in order to expand beyond a single manufacturer's products.
1992:
Yamada launches expansion beyond northern Kanto region.
1995:
Company restructures operations and adopts new expansion strategy based on larger store formats and lower pricing.
2005:
Yamada becomes leading specialty electronics retailer in Japan and first in the sector to post revenues of more than ¥1 trillion.

By then, Yamada had raised the level of competition a notch, following its introduction of a new retail format, Digital 21. The new format was developed as a test market for the launch of a new points system, by which customers received points redeemable for discounts of as much as 15 percent. Although the company later faced criticism from the Japanese trade authority, the success of the program led to its general rollout by the middle of the decade.

Yamada remained an ambitious and aggressive competitor. Intent on building its market share, the company decided to invade its competitors' stronghold, that of the city center, and opened its first urban store in Hiroshima in 2004. This store became something of a testing grounds for the company's next and most ambitious effort: the creation of a 20,000-square-meter superstore, called Labi 1 Namba, near the Namba train station in Osaka, which opened in 2006.

By then, Yamada had taken the clear lead in the sector, becoming the first specialty electronics retailer to post revenues of more than ¥1 trillion in 2005. Having achieved this milestone, Yamada set its sights still highercalling for its revenues to double, and its market share to climb to 20 percent before the end of the decade. As part of this effort, the company launched a new program designed to boost its store network to more than 500, in part through developing a smaller franchised store format for smaller rural markets. The company also continued to look for new partnerships, acquiring a stake in Shopland PC owner Kouzuro Co. in 2004, then reaching a joint venture agreement with Shoichi Denki, based in Kyushu, in 2006. The move helped Yamada complete its national expansion, and by mid-decade the company operated stores in all of the country's prefectures. In the meantime, the company readied its entry into the Tokyo market, constructing a 5,000-square-meter store in the Shibuya districtJapan's retail electronics capitalto be opened in 2007. The new store clearly signaled Yamada Denki's intention to remain the Japanese specialty electronics retail leader in the new century.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Chushikoku Tecc Land Co., Ltd.; CIC Co., Ltd.; Climb Entertainment Co., Ltd.; Climb Music Entertainment Co., Ltd.; Cosmos Berry's Co., Ltd.; Daikuma Co., Ltd.; Inversenet Co., Ltd.; Kansai Yamada Denki Co., Ltd.; KOUZIRO Co., Ltd.; Minami-Kyushu Yamada Denki Co., Ltd.; Okinawa Yamada Denki Co., Ltd.; Reagal United Trusties Co., Ltd.; Yamada Broadband Co., Ltd.; Yamada Housing Co., Ltd.

PRINCIPAL COMPETITORS

Kojima Corp.; Gigas K's Denki Corp.; Best Denki Company Ltd.; Joshin Denki Company Ltd.; Okuwa Company Ltd.; GEO Corp.; Denkodo Company Ltd.

FURTHER READING

Hug, Dale, "Yamada-Denki to Release High-End PC for Online Game Players," Japan Corporate News Network, November 29, 2004.

"Japan's Yamada Denki to Assist Wako Denki's Rebuilding," AsiaPulse News, October 31, 2002.

"Japan's Yamada Denki to Double Stores to More Than 500," AsiaPulse News, February 14, 2005.

"Japan's Yamada Denki to Launch House-Brand Digital Electronics," AsiaPulse News, December 4, 2006.

"Japan's Yamada Denki to Sell Electronics in Daiei Outlets," AsiaPulse News, October 31, 2002.

Rahman, Bayan, "Daiei, Yamada Denki Link Up," Financial Times, October 31, 2002.

"Yamada Denki Becomes 1st Specialty Retailer with ¥1 Trillion Sales," Kyodo News International, February 26, 2005.

"Yamada Denki to Storm Rivals' Stronghold," Kyodo News International, December 29, 2005.