This is an executive interview conducted by Mio Shimamura, CEO of Premium Japan, featuring executives from companies with unique brand stories. Through the products and services they create, as well as their corporate philosophy, we will unravel the essence of the ``Japanese sensibilities'' and ``Japanese aesthetic sense'' that their brands express. This time, we will introduce J.D., a company with roots in the long-established department stores Daimaru and Matsuzakaya, as well as the fashion building PARCO and luxury mall GINZA SIX. We spoke to Ryoichi Yamamoto, chairman of the board of directors of Front Retailing Co., Ltd.

The first management reform that marked the beginning of a reformed life

J. was established in 1717 by the merger of the long-established department stores Daimaru, founded in 1611, and Matsuzakaya, founded in 2007. This is Front Retailing. The management integration of large department stores attracted attention from both the industry and the public, and Mr. Yamamoto was in charge as the first president of Daimaru Matsuzakaya Department Store, which was created as the core operating company for the integration. Since then, the company has undergone a series of reforms, including making Parco a subsidiary, opening the luxury mall GINZA SIX on the site of the former Matsuzakaya Ginza store, and even rebuilding the Daimaru Shinsaibashi store.

``I've been an office worker for about 50 years, and I think half of that time was devoted to reform,'' he says. ``Because of my involvement in these reforms, I am who I am today, and J.Front Retailing is here.'' This is the management reform carried out under then president Tsutomu Okuda during his time at Daimaru.

``At that time, we focused on stand-alone accounting, and poorly performing subsidiaries were hidden from the public, but when consolidated accounting was introduced a few years later, Daimaru was in a difficult situation, falling into the red.President Okuda I decided that if we didn't make some serious management reforms, we wouldn't be able to sustain the company in the future."

The two missions I was given when I first became the sales reform promotion manager were to ``achieve maximum customer satisfaction at the lowest cost'' and ``review and streamline all operations from purchasing to sales.'' They were then asked to present the master plan at a store manager meeting three months later.

"We sat in a conference room from morning until night and first analyzed the current state of the company.In fact, at the time, Daimaru's stores were very unique, and even though they were the same company, each store had different forms of invoices and different work methods. First, in order to reduce unnecessary work and costs and concentrate management resources on operations that generate profits, there was an urgent need to redesign, standardize, and streamline operations. The approximately 150 departments in department stores are classified into 18 patterns based on differences in the responsibility and authority for product assortment, such as whether the store is primarily responsible for product selection, and differences in customer service characteristics, such as whether it is self-service or consulting. We defined the number of people with what skills and created job descriptions.We transformed the department store management, which had relied on experience and intuition, into a more rational and efficient one.

Actions based on beliefs move people and produce great results.

Although under the president's banner, even if a mere general manager explains a reform plan to a seasoned store manager, it is difficult to gain immediate understanding. Many store managers reportedly decided to wait and see. That's why we created a model department.

``We created a model sales floor in accordance with our reform plan, and were able to achieve small but concrete results.We left the cash register and other simple tasks to part-time workers, and we had a deep pool of human resources so that employees could focus on the most important customer service. We were able to operate a model sales floor with a thorough review of operational waste at 1/3 of the cost."

Rather than imposing theoretical theories on the field, the field gradually began to move by producing results. Furthermore, we conducted training for all managers and staff at the site, and spoke directly to them. During the day, he promotes reform work at the head office, and at night he explains the company's reforms to employees who have gathered from all over the country for training. He continued to convey the company's thoughts without taking a break.

"It's difficult to say whether everyone can empathize from the beginning. However, once the number of empathizers reaches about 2%, it becomes clear that ``Yamamoto is serious about what he's doing,'' and things start to pick up speed. I always say, ``The first millimeter is important.'' However, thanks to all the effort we put into getting it up and running, everyone started moving like a rock rolling."

At the beginning of the reform, sales did not increase much, but as the cost structure changed, profits increased significantly and bonuses were now payable. Employee motivation increased, and sales gradually increased. As a result, Daimaru continued to increase profits for nine consecutive years.

Because it is Ginza, it is a “department store”. and To GINZA SIX

After that, we introduced a new business model to the new Sapporo store that opened in 2003, and the store turned profitable in just 10 months after opening, which normally takes several years, and it took only 3 years to eliminate the accumulated losses that would normally take XNUMX years. It was wiped out.

One of Mr. Yamamoto's reforms that is still fresh in our minds is the redevelopment of the Matsuzakaya Ginza store, declaring that ``we will not open a department store in Ginza,'' and opening it as the luxury mall GINZA SIX.

``I visited Ginza many times and asked myself, ``Are we going to open a department store here?'' Department stores have first-class brands and long-established stores in one building, and they have everything, but each one is compact. The entire city is lined with brands and long-established stores that are world-class.What can we do to add new charm to Ginza?It's a place with flagship stores of luxury brands instead of a mediocre selection of products. That's what became GINZA SIX."

Mr. Yamamoto says that this idea also has meaning because it is located in Ginza. ``Ginza is a special place in Japan, a city that has always given birth to new culture.90 years ago, for the first time in Japan, you could enter the store wearing geta shoes, and the Western style of displaying products in showcases. A department store was born, and that was Matsuzakaya in Ginza.We thought it would be appropriate to create the first luxury mall in Japan because Ginza has always been a stage for new challenges.”

Along with the city. Amplify the appeal of the area with stores as the core

As the word suggests, we believe that it is important to contribute to the development of a town where department stores and commercial facilities exist, and we are implementing an "urban dominant strategy."

``The ``urban dominant strategy'' is to maximize the appeal of an area with stores at its core and grow together with the region.For example, many of the stores surrounding the Daimaru Shinsaibashi store are actually leased by our company. If we leave closed stores as they are, the scenery and atmosphere of a shopping district will be destroyed, so we are renting them out and attracting brands and restaurants to the area, which was originally a place where people would live. What was once a lonely business district has attracted brands to old buildings in former settlements, increasing the ability to attract customers to the area as a whole.It is extremely important to make the area more attractive than just a department store. That's the point."

Top management's own transformation is the key to changing the company.

The final reform during his time as president was governance reform.

“When the Governance Code was enacted in 2015, I thought, ``This is it.'' I really felt that this is how companies should be. I felt like I had been hit hard on the head by not being able to do so.The management reform, the Sapporo model, and the GINZA_SIX model were all made possible by the hard work of our employees, who were in charge of reform. I realized that nothing really had changed."

The first step was to reform the board of directors. "The board of directors has clearly positioned itself as the role of creating a vision for the company from a bird's-eye view, and thoroughly discussing strategies to achieve that vision."

Next, we will also refine the president's succession plan. ``In the end, a company depends on its president. The future of the company will be determined by who is chosen as president.'' Reforms have been made so that employees can be fired.

Mr. Yamamoto asserts, ``Personnel matters are not the exclusive domain of the president.'' I remain unwavering in my belief that this company can be changed if top management themselves transform themselves.

Because of his current position as chairman of the board of directors, he is unable to actually execute the project himself, but he says that he is still constantly coming up with ideas.

``If you have a high awareness of problems, you will see them one after the other.As you work to solve those problems, new ones will appear in front of you.Reforms do not end with one thing; they are continuous. I like the phrase ``unfinished completion,'' but even if you realize that it will never be completed, you will never stop asking questions. I always approach problems with the mindset that they must be tackled.”

The essence lies in simple words. Japanese aesthetic sense is based on the spirit of Zen

Mr. Yamamoto has lived a life of turbulent reform, but the first product he handled after joining Daimaru was ceramics. Including that experience, what do you feel about Japan's aesthetic sense?

``I feel that the spirit of Zen, which expresses extremely important and essential things in simple words, represents the beauty of Japan.For example, there is the word ``saitaku doki,'' This means that when the egg hatches, the timing of the chick trying to break out of the shell from the inside and the parent bird trying to break the shell from the outside coincides, so the chick can safely escape to the outside world. It's important to read the timing and know the timing.When I previously owned 65% of the shares in subsidiary PARCO, I thought that in terms of economic principles, I could strongly request PARCO to do what I wanted because it was the parent company, but that wasn't true. They don't live in that sense, and sometimes even die. Rather, it's when they become a member of J-Front and want to expand their activities that they form a bond in the truest sense. ``Don't rush and wait for the right time.'' Eight years later, PARCO has become a wholly owned subsidiary and is now the key to new growth, and I believe that was exactly what I said.''

In his calm words, Mr. Yamamoto gives the impression that the reform is far from over. J. I'm sure it will be taken over by Front Retailing.

Ryoichi Yamamoto

Born in Kanagawa Prefecture in 1951. After graduating from Meiji University's Faculty of Commerce in 1973, he joined Daimaru. In 2003, he was promoted to president in an unusual selection by then president Tsutomu Okuda, despite having no experience as a director. In 2007 he worked on the integration of Daimaru and Matsuzakaya Holdings, and in the same year J. Became director of Front Retailing. In 2013 he became the representative director and president. Current position since 2020.

Mio Shimamura