Company history

A home centre is a shop sized to a catchment of a few tens of thousands of people, and density in one region costs less in freight and advertising than a thin national spread. That arithmetic explains why the three chains that became DCM grew up separately, in Hokkaido, in Chubu and on the Inland Sea, and never once competed. The oldest of them opened in 1919, when a hardware wholesaler and retailer, Ishiguro Shoten, began trading in Kushiro on Japan's northern island; it took corporate form in December 1951. It bought ironmongery from wholesalers, passed it to local shops and contractors, sold across the counter as well, and handled a good deal of merchandise that had to be fitted. At the time nothing in Japan gathered the goods of a household under one roof: furniture came from furniture shops and department stores, appliances from appliance shops, building materials from builders' merchants, tools from ironmongers, paint from paint shops.

The second root was a pharmacy. Kagami opened a chemist's shop in Nagoya in October 1947, incorporated it through the 1960s, and in 1970 set up the company that would be renamed Kahma in 1971; in June 1972 it merged with three other firms, taking its name from the initials of the three proprietors' surnames, with the aim of building a chain of 176 drugstores across Aichi. The third began with tiles: a dealer in tiles and sanitary ware opened in Matsuyama in April 1958, incorporated as Daiki, and built a business selling and installing building materials and housing equipment — it employed more tile-setters than any other single company in Japan and ran its own vocational school for them.

All three turned to home centres in the 1970s, each for its own reason. The drugstore plan stalled inside a year: regulation allowed roughly one opening a year, so Kagami, who had gone to the United States to study distribution and come back convinced by what American home centres were doing, kept the merged company and swapped the merchandise instead, opening Kahma's first home centre in Nagoya in October 1973 — weeks before the oil shock. In Kushiro the same shock pushed a wholesaler downstream: reading the end of high growth, Ishiguro Shoten spent two years experimenting and opened its first store in April 1976, finding that its habit of selling goods that needed fitting made it good at teaching customers to do it themselves, at a better gross margin than wholesaling. Daiki came last, in 1978, wanting a third business alongside its manufacturing and wholesale arms; its founder, struck by a one-tsubo display outside the Sony Building in Ginza that marked the seasons with flowers, insisted his rural stores keep plants at the door, and opened the first home centre in Japan built around a garden-and-pet nursery.

In Hokkaido the constraint was the sea. In 1983, the year it reached ten stores and ¥10bn of sales, Ishiguro Shoten reported higher revenue and lower profit — not through anything it had done, but because goods from the main island crossed water. Wholesalers would ship only by the container and added the freight; as far north as Aomori they would replenish a shop piece by piece, and beyond the strait they would not. No amount of extra sales removed the gap, and buying the same goods from the same wholesalers meant never matching a mainland rival's cost. So the company changed what it could control. It installed an IBM System/38 and built a distribution centre at the same time, pooling every store's orders into one just-in-time flow and taking goods-in inspection, price-marking and delivery — the work a mainland wholesaler would have done — into its own hands. It took more than two years to master; after that, shrinkage fell, dead stock disappeared and stock turned twice as fast. Renamed Ishiguro Homa in 1987, it was seventh in the trade by the year to February 1989 and went public over the counter that October.

In Chubu the constraint was cost, and Kahma attacked it by concentration. It computerised ordering in 1980, ahead of the trade, opened a distribution centre in 1981, and built stores averaging about 600 tsubo — larger than rivals' — all within one region, so that logistics and administration stayed cheap. It declined to buy point-of-sale systems, assembling something that did the same work for a tenth of the cost, and by 1993 part-timers were about 60% of the workforce and given real responsibility. From the late 1980s it regrouped its 40,000 lines not by how they were administered but by how customers used them, proposing a module of goods for each of the 52 weeks and shifting the calendar region by region. A capital tie-up with Oscar in 1983, absorbed outright in 1990, carried it into Toyama, Ishikawa and Fukui. Listing on the Nagoya exchange in August 1993 raised $95.1M (¥11bn) and lifted equity to 57.6% of the balance sheet; by the year to March 1995 Kahma was second in the trade with ¥112bn of sales — and Aichi alone was 53.4% of them.

On the Inland Sea the constraint was a bridge. Daiki set out its Setouchi dominant-area plan in 1983, the year construction began on the Seto Ohashi; its founder took his executives to a hilltop in Okayama to argue out what a Shikoku company should do once the bridge opened, and what a mainland rival would do looking the other way. The answer was to cross first, into Hiroshima and Okayama, aiming at 68 stores across four prefectures, with formats cut to the catchment — 400, 700 or 1,000 tsubo for populations of 30,000 to 70,000. Daiki also kept making and installing things, from household septic tanks to treatment plants, and its unusually high 26.7% gross margin in 1992 came from buying its own building materials at wholesale through its own wholesale division. Ishiguro Homa, renamed Homac in 1995, meanwhile began co-developing an own-brand, Price First, with Jusco and Keiyo — a loose collaboration whose sales passed ¥5bn by 1998, and whose partner would matter again twenty years later. In 2000 Homac's president told an interviewer that home centres, too, had entered the age of mergers and acquisitions.