AOYAMA TRADING Co. Ltd. - Company History

Four people started Aoyama Trading in May 1964 in Fuchu, a town of 47,000 in inland Hiroshima: Aoyama Goro, an accountant at the state tobacco monopoly, his brother, and his wife’s two brothers. The shop occupied the ground floor of Aoyama’s house and sold menswear, womenswear, kimono and local foodstuffs alike; first-year sales were ¥23 million. On the founding night Aoyama made his brothers three promises meant to keep the firm from thinking like its competitors — no business associations, no golf, no private car — and in October 1967 he cut everything except men’s suits.

That subtraction is what made a format possible. Selling only suits, the company could answer in one voice how large a store should be, how goods should be bought and how much to spend on advertising. A 1972 tour of American retailing showed him shopping centres standing in open country an hour from San Francisco, drawing customers who arrived by car; a survey of 2,000 of his own customers showed that 62% wanted either wide selection or convenient parking, and wide selection needed 150 tsubo — space no city centre could supply. In April 1974 the first roadside Yofuku no Aoyama opened in a rice field in eastern Hiroshima. It was the first suburban store of its kind in Japanese retailing; car dealers followed in 1975, restaurant chains in 1977, general merchandisers in 1978, and the suit trade itself only around 1983.

The second heresy was in buying. The trade worked on consignment, returning what did not sell; Aoyama bought outright and carried the risk itself. Manufacturers, freed of the financing cost of returns, cut their prices, and Aoyama held gross margins near 50% against an industry average of 36% — for twenty-three years. Thick margins funded advertising at 17% of sales, advertising filled the stores, volume cut costs again. Each roadside unit was designed to a template: 150 tsubo, forty parking spaces, a catchment of 500,000 people, ¥500 million of sales. By the year to March 1984 the chain had 39 stores, ¥12.9 billion of sales and ¥730 million of ordinary profit, run off point-of-sale data wired to a mainframe from 1983.

Aoyama listed in November 1987 on the Osaka and Hiroshima exchanges with 118 stores and the leading share of Japan’s heavy-clothing market. Listing changed the geometry of expansion. With roadside suit stores nationwide approaching 900, the old thirty-minute, 500,000-person catchment was leaking customers, so Aoyama shrank the unit — roughly 100 tsubo, a fifteen-minute drive, 200,000 people — and covered the map densely rather than pinning down regions. Advertising fell from 20% of sales to 12%, part-timers went from under thirty to 319, and ordinary profit rose from ¥1.6 billion to ¥4.6 billion in a single year. The head office moved to Fukuyama in 1990 and the shares to the Tokyo exchange that December, reaching the first sections of Tokyo and Osaka in September 1992.

The cheapness came from going upstream. Ordering a minimum of 10,000 garments at a time, Aoyama had about thirty apparel makers produce 1.18 million suits a year, and from 1986 negotiated directly with the woollen mills at the stage where its suppliers bought cloth; some production moved to China, which reached 10% of the total. Suppliers earned 12–15% gross on Aoyama’s orders against 30–40% on department-store work. By the end of 1992 the chain had 417 directly operated stores in every prefecture and 11% of the men’s suit market. Falling rents let it take Ginza in October 1992 at a quarter of bubble-era rates, where the store sold ¥300 million in its first month. Friction rose with the volume: Onward Kashiyama cut Aoyama off in 1993, and when the Fair Trade Commission ordered four suit chains to stop misleading dual pricing that November, Aoyama alone contested it, accepting only in March 1994.

The growth machine ran on new stores paying for the next ones — an opening weekend of ¥60–70 million, over ¥400 million a year per store, two-thirds of the ¥150 million build cost earned back by the store itself, 212 openings in three years. From autumn 1994 opening weekends fell to ¥20 million and annual sales to ¥300 million; the cost of expansion landed back on head office and the chain reaction stopped. Quality and organization had been stretched too — complaints of cheap goods, suppliers asking for ¥2,000 more per suit to build them properly, 1,200 new graduates hired into falling sales. The year to March 1995 brought the first decline since listing, with same-store sales down 14% and central Tokyo stores down 44%.

In June 1997 Aoyama Goro moved up to chairman and his wife’s brother Miyamae Shozo took the presidency, ending thirty-three years in which the founder directed the stores himself. The cash the price war had generated was being run elsewhere: through special-purpose companies in tax havens, the firm held dollar bonds of high-risk sovereigns including Russia, disclosed in the accounts only as fund names, so nobody outside could see what was in them. On 16 September 1998 a rumour of ¥20 billion of Russian losses took the shares limit-down; Aoyama itself published the holdings two days later — ¥42.7 billion of book value against ¥22.7 billion of market value — and booked a ¥7.4 billion extraordinary loss at the September 1999 interim, which left interim net profit at ¥56 million.

The store business needed a second answer as well. Suburban stores had been weak for three or four years, discounting had pulled the average selling price down to about ¥25,000 against a ¥35,000 list, expenses ran at 42.6% of sales, and stock turned barely twice a year. In November 2000 Aoyama opened The Suit Company in Nihonbashi: two prices only, $176 (¥19,000) and $260 (¥28,000), no sales, no salesmen approaching customers, cloth bought direct from Italian mills without a trading house, sewing concentrated on two Chinese partners with Aoyama’s own engineers embedded, and a target of ten stock turns a year in a city location. The idea was not original — Only of Kyoto had opened the first two-price store in 1999 — and Aoyama had itself tried the same thing under its old banner and failed; what made it work the second time was rebuilding it from zero rather than adapting the existing format.

Aoyama Osamu, the founder’s eldest son, became the third president in June 2005, adding the imported-cloth Universal Language line and, later, franchised ventures well outside tailoring — American Eagle Outfitters stores from 2010, a yakiniku restaurant franchise from 2011. The founder died in January 2008 at 77. The context for all of it was contraction: the men’s suit market had roughly halved from 1997 to about ¥270 billion in 2007, and consolidated sales slipped from ¥202.7 billion in the year to March 2006 to ¥193.2 billion in the year to March 2011.

Household spending on suits had fallen from ¥19,000 a year in 1991 to ¥5,217 by 2017 — a quarter of the peak — under an ageing workforce, the Cool Biz dress-code campaign from 2005, the retirement of the baby-boom generation and new competition from Uniqlo and cheap online made-to-measure. The fiftieth-anniversary plan of 2014 named acquisitions as the way out, and in December 2015 Aoyama bought Minit Asia Pacific, the Mister Minit shoe-repair and key-cutting chain, with roughly 300 stores in Japan and 250 in Australia and New Zealand. Consolidated sales reached a record ¥254.8 billion in the year to March 2018 with ¥20.6 billion of operating profit, and the company returned 130% of earnings to shareholders over three years.

The core did not hold. By the year to March 2020 sales were ¥217.7 billion, operating profit ¥800 million, and a ¥5.4 billion goodwill write-down helped produce a ¥16.9 billion net loss; the medium-term plan was withdrawn. Then remote work removed the occasion for a suit altogether: the year to March 2021 brought ¥161.4 billion of sales, a ¥14.4 billion operating loss and a ¥38.9 billion net loss. Aoyama consolidated 159 stores, exited its Levi’s business after eleven years, and ran the first voluntary redundancy programme in its history — 400 places offered, 609 people applied, more than a tenth of the parent company’s permanent staff.

The Aoyama Reborn plan did what it was designed to do. Net profit returned in the year to March 2022, sales recovered to ¥194.8 billion and operating profit to ¥12.6 billion by March 2025, on a headcount cut from 8,101 to 6,561. Sales, however, remain far below the ¥254.8 billion of 2018, and the goal of earning 40% of revenue outside suits by fiscal 2027 is not met. In January 2025 the company named Endo Taizo — a 1990 entrant who had run a suburban store, then personnel and administration — as its first president from outside the founding family, with Aoyama Osamu moving to chairman.