Merging Daimaru and Matsuzakaya into a holding company (2007)

The weight of choosing scale

The heart of this decision is that, facing a market that had shrunk for nine consecutive years, the company put securing scale ahead of surviving alone. Okuda said Daimaru could reach ¥1 trillion on its own — and joined with Matsuzakaya anyway. If the market keeps contracting, going it alone eventually stops working: that reading, overlaid on his pride at having finished a reform of quality, is what appears to have pushed the merger through. With takeover pressure becoming real, scale was at once a weapon and a shield. And in the form two old houses took — keeping their store names while entering a single holding company — one can detect the calculation of the side initiating consolidation: the appearance of equals, with control conceded to no one.

Scale did not, however, convert straight into strength. The three years granted to Matsuzakaya were blocked by the Lehman shock and a shrinking market, and the subsidence of the department-store format itself continued. J. Front would in time leave the pursuit of department-store scale and shift its centre of gravity to a real-estate model. The 2007 decision to put scale first looks less like an answer that saved the department store than a foothold for the change of format that followed. How the choice to secure volume first in a shrinking market paid off in the later rearrangement of quality — J. Front’s subsequent history is a continuing answer to that question.