From chasing scale to defending gross margin — Oe’s 2020 rebuild (2020)

Choosing not to chase scale

The core of this decision was not a response to financial distress but the abandonment of an attachment to revenue scale. Even after Burberry left, Sanyo Shokai built its sales plans against the benchmark of the old ¥140bn, weaving in wishful thinking and stretch targets. Oe treated that as the thing to correct, and put gross margin — profit per garment — at the centre of management in place of size. A company that could not let go of the memory of volume stopped measuring volume: that is the turning point of this rebuild.

How long an equilibrium found by shrinking can hold is, however, still open. A high-margin business at around ¥60bn broke the chain of losses, but without a growth story in the upper-middle market it risks thinning out at that reduced size. Securing profit without pursuing sales is, put the other way, a choice that narrows one’s own room to grow. Scale or profitability as the primary axis — the answer given by an apparel company that lost an enormous borrowed asset puts a quiet question to an industry that has long measured success by size.