Yaohan
Corporate History & Strategy

In Japan's retail market of the mid-1950s, memories of wartime shortages still lingered, and prices were generally determined through negotiation. The prices of food and daily necessities varied from store to store, and consumers were in a position of making purchases without a clear grasp of the prevailing rates. Particularly in provincial cities, the opacity of pricing had accumulated as a source of everyday frustration.

At the time, retail commerce was premised on face-to-face sales practices, and pricing was left to the discretion of shop owners. Discounting and credit sales were commonplace, and in many situations cash settlement was secondary to credit transactions. While this structure offered some convenience to consumers, it also made it difficult to judge total expenditures and the reasonableness of prices.

As postwar recovery progressed and the supply of daily necessities stabilized, consumer interest shifted from 'whether one can buy' to 'at what price one can buy.' However, retail-floor practices did not necessarily adapt to this change, and how to ensure price transparency and reliability was gradually becoming recognized as a challenge.

Under these conditions, Yaohan decided in 1956 to introduce cash-and-carry fixed-price selling. This marked a shift to a sales method in which all products bore a clearly displayed price, no bargaining was conducted, and cash settlement was the rule. This was an extraordinary undertaking by the standards of prevailing retail practices.

The shift to cash-and-carry fixed-price selling also represented a major change for the seller. Abolishing credit sales and enforcing cash collection meant that the turnover of procurement funds had to be accelerated. Additionally, lowering prices required a review of purchasing terms and inventory management, demanding operations more efficient than before.

Even so, the rationale behind adopting this method was the aim of earning consumer trust through price transparency. By displaying fixed prices to everyone and maintaining low prices consistently, the intent was to establish the store's position as one that could be patronized on a daily basis. The 1956 decision was a shift toward a sales method that prioritized long-term relationship building with customers over short-term sales.

Kazuo Wada, then president, perceived that from the late 1960s to the early 1970s, the competitive environment in Japan's retail market was undergoing significant change. The proliferation of supermarkets had intensified price-and-assortment-based competition in every region, and competition within the same trade area was clearly increasing. The era when growth could be achieved simply by opening more stores was drawing to a close, and the domestic market was gradually taking on the character of a war of attrition.

Meanwhile, for Japanese companies at the time, overseas expansion was primarily the domain of manufacturers, and cases of retail businesses opening stores abroad were almost nonexistent. The South American market in particular, geographically and culturally distant, was a region that Japanese companies rarely considered as an option. Wada believed that continuing to confine growth opportunities to the domestic market could itself become a factor narrowing management decisions.

Under this conviction, Kazuo Wada decided to open a store in Brazil in September 1971. At the time, it was extremely unusual for a Japanese retail company to open a store in South America, and virtually no successful precedents existed. Even so, Wada judged that it was necessary to gain experience that could not be obtained as an extension of domestic competition.

Brazil was selected as the destination because of the presence of the Japanese-Brazilian community, as well as the country's population scale and its perceived potential as a future consumer market. Wada did not assume that the cash-and-carry fixed-price selling method established in Japan could be applied directly, and he oriented toward management adapted to local needs, setting the goal of becoming 'the Sony of the distribution industry.'

From the late 1980s to the early 1990s, China was in the process of fundamentally reshaping its economic structure through the advancement of its reform and opening-up policy. Coastal regions were attracting increasing amounts of foreign capital, and Hong Kong was growing in prominence as a financial and logistics hub linking China to international markets. Meanwhile, in the retail and distribution sector, many areas remained underdeveloped, and modern distribution systems had not yet sufficiently penetrated.

Kazuo Wada envisioned that the trajectory Japan experienced during its high-growth era—'rising incomes → expanding consumption → distribution revolution'—would occur in China with a time lag. He believed that China's economy, which had developed under manufacturing-led growth, would eventually transition to a stage centered on domestic demand and consumption, at which point the role of the distribution industry would grow significantly.

At the time, most Japanese companies entering China were manufacturers, and few retailers were seriously considering the Chinese market. Wada viewed this very vacuum as an opportunity and was considering establishing a base in China as a strategic move anticipating the future consumer market.

Under this conviction, Kazuo Wada decided in 1990 to establish the Yaohan Group's base in Hong Kong. The intent was to position Hong Kong as a forward base for China operations, consolidating information, talent, and capital to build a structure anticipating full-scale expansion into the Chinese market. This decision was a pioneering move among Japanese distribution companies.

Wada recognized that substantial capital was essential for a phased entry into China. Accordingly, from the early 1990s, the company issued bonds totaling approximately 60 billion yen to fund growth investments. This amount far exceeded the company's annual ordinary income at the time, representing aggressive capital procurement premised on future growth.

The Hong Kong headquarters and the large-scale capital procurement were part of the concept Wada had articulated as 'becoming the Sony of the distribution industry.' Just as manufacturers had gone global through technology, the vision was that distribution companies could also cross borders through systems and operational capabilities, and this thinking underpinned the decision to open stores in China.