Letting go of resale-price maintenance (1997)

The courage to let go of 70 years of price control, and the void it left

The heart of this decision lies less in complying with a regulation than in the fact that, with the option of fighting the Fair Trade Commission open to him, President Fukuhara chose not to fight — deciding instead to turn the strength he would have spent on defence toward reform. Like the 1987 sweep that recalled the sales companies’ stranded inventory and severed the high-growth model of volume expansion, it was a decision to face the reality of distribution head-on rather than defer the pain. By letting go of seventy years of price control, Shiseido at last stood on the ground of open-market competition.

Yet the very length of the years spent protected by the system rebounded as a poverty of adaptability to competition. An organization with no experience of moving prices fell behind the normalization of discounting and the rise of low-price brands, and was struck through the void of a price band it had left thin. The competition the abolition made possible also summoned the next problems — a proliferation of brands and a worsening of profit efficiency — and led straight into the brand consolidation and chain-store revival of the 2000s. The courage to choose reform over a fight was right, but the substance of the reform would need more time yet to catch up with the competition.