Mitsukoshi - Company History

The founding of Echigoya, and the fixed-price cash trade that made it the largest store in Edo

Mitsukoshi traces its origin to Echigoya, the drapery that Mitsui Takatoshi (三井高利) opened in Edo in 1673[1]. The site he chose, Honcho 1-chome, was the foremost shopping street in Edo, where many drapers stood side by side[2]. What Takatoshi rented was a small house with a frontage of one and a half ken[3]. The shop name Echigoya came from the fact that the ancestors of the Mitsui family had been samurai in the service of the Rokkaku Sasaki house, the senior line of the Omi Genji[4]. When Oda Nobunaga destroyed the Rokkaku Sasaki, Mitsui Echigo-no-kami Takayasu (三井越後守高安) withdrew to Ise, and his son Takatoshi (高俊) laid down the sword and became a townsman[5]. Echigoya was run under the management of the Mitsui family[6], and the drapery trade continued on the same ground throughout the Edo period[7]. Every company that would later become a department store had an Edo-period draper as its predecessor: Ito Gofukuten dates from 1611, Daimaru from 1717 and Takashimaya from 1831[8].

After the shop suffered a fire, Echigoya moved in 1683 to Surugacho, one block to the south[9]. Takatoshi used the move to mount a large advertising campaign and set out a new way of trading he called 現銀掛値なし — cash on the counter and no marking up[10]. Kakene nashi meant selling at a set price rather than raising or lowering it according to the customer[11]. Gengin meant abandoning the credit trade then customary, settled twice a year at Bon and the year end, and taking cash across the counter instead[12]. Together the two brought in passing trade and paid the shop in cash at the same time[13]. Takatoshi went on producing one new device after another, reading the mood of the Edo public[14], and the business flourished. Echigoya became the leading store in Edo, taking as much as 1,000 ryo on a busy day[15]. Edo of the period ranked it accordingly: a thousand ryo for the theatres, a thousand for the fish market, a thousand for Echigoya[16].

After the move to Surugacho, Echigoya took up money-changing[17]. Mitsukoshi and the bank are both called the origin of Mitsui because Takatoshi combined the two on the same ground[18]. Through the second half of the Edo period Mitsui grew into the largest enterprise of its day on those two wheels, the Echigoya drapery and the money-changing and exchange business[19]. Mitsui Takatoshi went up to Edo at 52, and in the twenty years until his death at 72 he left an estate of 72,000 ryo — some ¥19bn to ¥20bn at present-day values[20]. The family assets were managed and invested as a single whole by the 大元方 Omotokata[21], whose authority reached to setting the trading rules, auditing the accounts, directing management and deciding senior appointments[22]. Property, which made up nearly half the family assets, was handled by the 家方 Iekata[23], responsible for leasing land, choosing tenants and collecting ground rents and shop rents[24]. The second head of the house, Mitsui Takahira (三井高平), left the family code known as the Sochiku Yuisho (宗竺遺書), which taught that those with merit should be properly raised up and advanced[25].

Minomura Rizaemon’s decision, and the beginning of the name Mitsukoshi

In the closing years of the Edo period, Mitsui’s finances were in crisis behind an outward show of prosperity[26]. Bad assets had grown, lending such as the forced levies to the shogunate and the daimyo had frozen, and liquid funds were extremely depleted[27]. The man who rescued the house from that crisis was its chief clerk, Minomura Rizaemon (三野村利左衛門)[28]. Minomura had been nothing more than a money-changer working as a hired hand for the Oguri hatamoto family at Surugadai[29], but he earned merit in the effort to have the shogunate’s levies reduced, an effort centred on Oguri Kozukenosuke[30], and was brought in as chief clerk of Mitsui. After his appointment he kept up his contact with the shogunate and widened Mitsui’s field of business by drawing in government funds[31]. In the revolutionary years at the end of the shogunate the great merchant houses fell one after another; among them the Konoike and Mitsui survived[32].

The Mitsui Omotokata in Kyoto deepened its ties with the imperial faction around the head of the house, watching events unfold in concert east and west[33]. In 1868 Mitsui made its colours plain in support of the imperial side[34]. Together with the Ono-gumi and the Shimada-gumi it answered the levy of 3.2 million ryo of foundation funds that the new Meiji government required, and came to carry the finances of that government[35]. It also took on a part in sorting out a monetary system in complete disorder and in establishing a banking system, and it was Minomura who drove these forward[36]. In June 1871 the Kawaseza Mitsui-gumi received the sole appointment to handle the convertibility business of the new currency[37]. In that same year of 1871 Mitsui built the Mitsui-gumi House at Kaiunbashi[38]. It was the tallest structure in Japan at the time, and the building of the Kawase Bank Mitsui-gumi at Surugacho followed it[39].

The sole appointment carried a hard condition with it[40]: abolish the drapery business and devote yourself to banking[41]. The drapery had been the core trade since the founding and could not simply be cut away; opinion inside Mitsui divided, but Minomura made the decision and accepted the condition[42]. The desperate expedient he prepared was to have three of the Mitsui houses change their surname to Mitsukoshi and to move the drapery into their management[43]. This is the beginning of today’s Mitsukoshi[44], and the name that draws on both Mitsui and Echigoya was born here[45]. The three renamed houses took on the drapery, and the main body of the Mitsui family devoted itself to banking[46]. The drapery was separated from the Mitsui family in March 1872[47].

Reorganisation as a partnership, and Japan’s first display selling of kimono cloth

The drapery that left the Mitsui family in 1872 had no settled place thereafter, and in 1893, in step with the coming into force of the Commercial Code, Mitsui reorganised its bank, its trading and mining businesses and Mitsui Gofukuten into unlimited partnerships[48][49]. In October of the same year the Mitsui Family Council and the Mitsui Motokata were established[50]. Then in August 1895 the drapery returned to the Mitsui main house in its earlier form[51]. In not quite thirty years the shape of the organisation changed three times — separated, reorganised, returned[52]. During the partnership years Mitsukoshi took in Western modern trading practice, and as its first such attempt engaged women as shop assistants[53]. Mitsui Gofukuten was also an early example in Japan of adopting motor lorries for the carriage of goods[54].

The remaking of the way it sold began in November 1895, when the upper floor of the main store was converted into a display hall and Japan’s first display selling of kimono cloth was introduced[55]. In September of the following year, 1896, the firm renamed itself Mitsukoshi Gofukuten[56]. In June 1899 it raised life-size posters at Shimbashi Station, pioneering street advertising[57]. Then in October 1900 every floor of the main store became display space and the old seated selling, zauri, was abolished altogether[58]. Under zauri an assistant brought bolts of cloth out in front of a single seated customer; under display selling the customer walks the floor and chooses the goods for themselves[59]. Five years passed between the adoption of display selling and the complete abolition of zauri[60]. In the ten years after the change of name, reform ran through every part of the business[61].

The incorporation of Mitsukoshi Gofukuten and the Department Store Declaration

On 10 December 1904, Mitsukoshi Gofukuten Ltd was incorporated with capital of ¥500,000[62]. It took over the whole of the business descending from Echigoya, together with the main store in Nihonbashi, Tokyo and the buying houses at Kyoto and Kiryu[63]. In the same month as the incorporation, Mitsukoshi issued its Department Store Declaration[64]. It was, however, an incorporation that kept the word gofukuten — drapery — in the name, and the word did not leave the trade name until June 1928[65]. At the time of the declaration the goods handled were still chiefly kimono cloth, and floors for foodstuffs and horticulture entered only with the completion of the new building in September 1914[66]. The founding capital of ¥500,000 was built up to ¥2m over the following six years[67].

As a joint-stock company Mitsukoshi adopted, under its new organisation, a policy of keeping step with the economic advance that followed the Russo-Japanese War and with the increasingly vigorous Westernisation of daily life and manners[68]. It widened the goods it sold beyond kimono cloth, and from about 1907 sold shoes, bags, footwear, umbrellas and combs, and opened a restaurant and a photography department as well[69]. In May of that same year, 1907, it opened the Osaka store[70]. The following year, 1908, a new three-storey Western building was completed and the form of a department store took shape[71]. In June of that year capital was raised to ¥1m and offices were opened at Keijo and Dalian, which later became branches[72]. In March 1910 capital rose to ¥2m, and in July 1911 work began on a five-storey building of 4,000 tsubo total floor area[73]. In September 1914 the Renaissance-style five-storey new wing of the main store was completed[74]. The newspapers of the day wrote it up as the greatest building east of the Suez Canal[75]. With its completion, floors for foodstuffs and horticulture were newly opened, and the departments of a department store were complete[76].

The Mitsukoshi Market, and the main store burnt out in the Great Kanto Earthquake

Reflecting the boom that followed the end of the European war, Mitsukoshi’s results advanced markedly[77]. The scale of the business widened year by year, and by January 1920 capital stood at ¥12m[78]. In the same period it opened the 三越マーケット, a permanent floor of everyday goods, seeking a bond with the general public[79]. The catchphrase the Imperial Theatre today, Mitsukoshi tomorrow passed into common speech at about this time[80]. With lifts and its heating and ventilation plant, with Japan’s first escalator running through it and sprinklers set into the ceilings throughout the building, the main store was at once called a new sight of Japan[81]. By making permanent a floor that ran from kimono cloth to everyday necessities, Mitsukoshi widened its custom beyond its established patrons[82].

In the Great Kanto Earthquake of September 1923, Mitsukoshi lost the main store and the Marunouchi annex to fire[83]. The loss from the disaster came to ¥7,375,000, and capital had to be reduced to ¥7m[84]. As an emergency measure it opened barrack-built markets on land adjoining the main store and at other sites[85], answering the needs of citizens beset by shortages and by the difficulty of getting about[86]. These markets became the occasion for the later opening of the Shinjuku and Ginza stores[87]. The earthquake brought a second change: by abolishing the practice of leaving footwear at the door, Mitsukoshi opened its floors a further degree to the general public[88]. Alongside the post-earthquake city planning, transport to the nearer suburbs developed, and an opportunity opened to Mitsukoshi for growth beyond mere recovery[89].

The change of trade name, and six branches in six years

In October 1924, the year after the earthquake, Mitsukoshi raised its capital to ¥15m[90]. Capital had been cut to ¥7m immediately after the earthquake[91], so the increase was to more than twice that level. At the same time the markets around Tokyo were made branch shops, which led on to the opening of the Shinjuku and Ginza stores[92]. The temporary floors opened in the course of recovery turned, as they stood, into permanent branch shops[93]. In April 1927 the rebuilding of the whole main store was completed and the Mitsukoshi Hall opened[94]. In July of the same year the firm established Niko Shokai (二幸商会), which handled the manufacture and wholesaling of foodstuffs[95]. Three years and seven months passed between the loss of the main store in September 1923 and the completion of the rebuilding[96].

In June 1928 Mitsukoshi changed its trade name to Mitsukoshi Ltd, and in the same month opened the Kobe store[97]. Dropping the word gofukuten came twenty-four years after the Department Store Declaration[98]. The Ginza store opened in April 1930 and the Shinjuku store in October of that year, followed by Takamatsu in March 1931, Sapporo in May 1932 and Sendai in April 1933[99]. In the six years from 1928 to 1933 Mitsukoshi placed six branches and carried its standing across the country[100]. For Ginza and Shinjuku, the emergency markets raised after the earthquake had been the occasion for opening[101]. In April 1931 capital was raised to ¥30m and the shares were listed on the long-term settlement market of the Tokyo Stock Exchange[102]. In 1932 the Mitsukoshimae subway station opened and connected directly with the basement sales floor[103], and in October 1935 the great extension and refurbishment of the main store was completed[104].

The Department Store Law, wartime control, and eight-tenths of the floor surrendered

The Department Store Law came into force in 1937, the China Incident broke out, and the shift into the Pacific War followed; Mitsukoshi met tightening control and the requisitioning of its sales floor[105]. What was surrendered came to eight-tenths of the floor area[106]. The Department Store Law also placed limits on extending or opening stores[107], and Mitsukoshi’s method of growing by adding stores stopped there. From about 1938 the control of goods made selling difficult; power restrictions halted the escalators, and the steel requisition order took them away altogether[108]. The trade turned to meeting the demands of the times — developing and spreading substitute goods, opening floors for comfort parcels and air-defence supplies[109]. Here Mitsukoshi met the worst period since its founding[110].

The Ginza, Takamatsu and Sendai branches were burnt out in air raids[111]. With the end of the war the Osaka and Sapporo branches were requisitioned, and the overseas branches at Keijo and Dalian were lost[112]. The branch network laid down before the war became, just as it stood, the object of war damage and requisition[113]. In October 1945 Mitsukoshi hurried the restoration of the Nihonbashi main store, which had escaped the raids[114]. In October 1946 it opened the Matsuyama store, and in January 1948 it established the Mitsukoshi sewing works[115]. In October of that same year, 1948, it raised capital to ¥90m[116]. While cooperating in the distribution of daily necessities and the stabilisation of prices, it staged events at the Mitsukoshi Theatre and its exhibition halls, and set up the Mitsukoshi Clinic as a foundation[117].

In May 1949 Mitsukoshi listed its shares at the same moment that the Tokyo Stock Exchange opened[118]. By 1951 the whole of the main store could be used again, and the store facilities had returned to a level above pre-war[119]. The Korean War set the consumer economy recovering, and Mitsukoshi continued to expand and renew its store facilities while working to modernise its organisation[120]. In 1951 capital stood at $4.2M (¥2bn), annual sales at a little over $46.9M (¥17bn) and profit at $811,111 (¥292m)[121]. In October 1951 part of the revaluation reserve was incorporated to bring capital to ¥1.5bn, and in December 1954 capitalisation raised it to ¥1.86bn[122]. The post-war increases of capital were in every case made by incorporating revaluation reserves[123].

The largest in the East, and first place handed to Daiei

Mitsukoshi’s total annual sales in 1954 were $68.9M (¥25bn), a little over 13 per cent of all department stores in Japan[124]. Sales of gift certificates reached $2.6M (¥930m), which was a little over 29 per cent of the national total[125]. The floor area of the main store and the branches came to 42,800 tsubo in all, a little over 11 per cent of the national department-store total[126]. Its share of sales stood two points above its share of floor space, and in gift certificates it took close to three-tenths[127]. In December of that year it began an extension of 4,600 tsubo on 467 tsubo of land adjoining the main store[128]. On completion the store would exceed 20,000 tsubo, which by the reckoning of the day would make it the largest department store in the East[129]. The president at the time was Iwase Eiichiro (岩瀬英一郎)[130]; Mitsukoshi took in men from Mitsui Bank at each turning point.

Sales in the year to 1961 were $152.2M (¥55bn) and profit $3.9M (¥1bn): over three times the sales and five times the profit of ten years before[131]. By the year to 1966 profit had reached $7.8M (¥3bn) and sales $259.7M (¥94bn), ten times the profit and 5.5 times the sales of 1951[132]. Capital increases numbered five from December 1954 onward, and with the half-paid issue subscribed in July 1967 capital passed ¥10bn[133]. In 1968 there were 10,500 employees and 170,000 square metres of selling floor in all[134]. This was the period in which Matsuda Isaburo (松田伊三雄) as president put aggressive management to the fore[135]. In the half-year to February 1968, catching the great year-end consumption boom, half-year sales passed $138.9M (¥50bn) and a net profit of $4.7M (¥2bn) was recorded[136].

The post-war store network widened further: the Ikebukuro store opened in October 1957, Hirakata in July 1968, and in June 1971 Paris Mitsukoshi as the first store overseas[137]. Meanwhile the trade was hard pressed by the advance of superstores and chain stores, and Mitsukoshi took the course of setting up satellite stores in the city suburbs through affiliated companies[138]. Even so, in 1972 Daiei passed ¥300bn with sales of $990.9M (¥305bn) and overtook Mitsukoshi, which stopped at $949.4M (¥292bn), to stand at the head of Japanese retailing[139]. The changeover came fifteen years after Daiei was founded[140]. This was the year in which Mitsukoshi gave up first place in retail sales[141].

Okada Shigeru’s ten years, and the sudden dismissal of 1982

In 1973 Mitsukoshi opened the Hiroshima store in April and the Yokohama store in November[142]. In January of the same year it formally joined the Futsuka-kai, the presidents’ council of the Mitsui group[143]. Companies that had had deep ties with Mitsui Gomei before the war but had grown somewhat distant after it were, at this point, restored to their old place[144]. Mitsukoshi came in from associate membership alongside Toshiba and Oji Paper[145]. Okada Shigeru (岡田茂) served as president from 1972 to 1982. He came from the advertising side of the business, and was a manager who brought Mitsukoshi rapid growth through events that played well in the press. In the fifty years after the war the presidency changed hands only five times, and the history of Mitsukoshi overlaps with long tenures.

Alongside that rapid growth, Okada was extremely timid about investment in the stores themselves, refurbishment included. He rode on the national store network already built, and left merchandising policy untouched as well. In 1979 the Fair Trade Commission issued an exclusion order against the company for forcing sales on its suppliers[146]. The practice of making suppliers buy goods was judged to fall foul of the Antimonopoly Act[147]. In the accounts for the year to February 1983 a deficit of $20.5M (¥5bn) was recorded on the disposal of bad stock[148]. The share of retail sales held by department stores fell from 11.0 per cent in 1974 to 7.6 per cent in 1985[149]. In that same year Daimaru too fell into a sharp decline in profit under the opening costs of its Umeda store[150].

In 1982 Okada was dismissed and arrested over disorderly accounting and a scandal concerning the supply of goods. His single remark on being told of his dismissal — Why? — is widely known. Criticism was strong of a culture that had left the private appropriation of the company unchecked, and Mitsukoshi ought thereafter to have worked at modernising its management. Behind the emergence of such long tenures lay a structure in which the terms of directors were not clearly fixed and there was no retirement age. In a company where ringi proposals are built up from below, the senior man’s approval comes last; at Mitsukoshi, request forms circulated already carrying the seals of the chairman and the president. The same structure was again at issue over the special loss fifteen years later. When that loss came in 1997 the labour union demanded that a vision for renewing the management be drawn up by January 1998, but the Management Reform Promotion Committee the management side set up was composed of directors.

The expanded department store, and a ¥44.6bn special loss

The man who had fallen out with Okada and been driven from Mitsukoshi, and who returned by way of the presidency of Seibu Department Stores, was Sakakura Yoshiaki (坂倉芳明). He was president from 1986 to 1995 and chairman until 1997. The line he set out was a diversification he called 拡・百貨店, the expanded department store: it reached into hotels, sports and imported-car sales, and went on into stores abroad and golf-course development. In the bubble years of the late 1980s the drive to become a comprehensive living-services industry was in fashion, and department stores extending around their core trade was common to the whole business. Mitsukoshi’s earnings leaned on the Nihonbashi main store in Tokyo, a single store that took more than 40 per cent of company sales and about 75 per cent of profit. Its strengths — corporate outside sales backed by the Mitsui group, and the numerous 御帳場 ochoba preferred customers permitted to buy on account — began to thin in this period.

Golf-course development began in 1988, during Sakakura’s presidency, with $452.7M (¥58bn) put into land acquisition alone. Citing obstacles to the purchase of land, Mitsukoshi made the loans for the development through a subsidiary. What was kept hidden was not confined to those outside the company: the labour union was told of the special loss only at the end of September 1997. Ichihara Akira (市原晃), Sakakura’s predecessor as president and chairman of the board when the development began, said that he too had not known about the development until this special-loss announcement. Mitsukoshi did not disclose the development properties or the developer even after announcing the special loss. The investment ran for ten years, hidden from those outside the company and those inside it alike.

On 3 October 1997 Mitsukoshi booked a special loss of $368.5M (¥45bn) arising from the golf-course development and announced that it would fall to a net loss of $264.4M (¥32bn) in the year to February 1998. Facing demands that responsibility be taken, Sakakura Yoshiaki resigned from the board. Mitsukoshi had run seven consecutive years of consolidated losses through the previous term and carried accumulated losses of $29.7M (¥4bn), and the special loss was expected to push the consolidated equity ratio into single figures. Of the 64 consolidated and equity-method companies, 24 were in the red at the ordinary level, and many carried accumulated losses. Fukuoka Mitsukoshi, opened in the same period, carried a total investment of $495.8M (¥60bn), a first-year sales target of $338.8M (¥41bn) and a calculation that it would break into single-year profit only seven years out. In November of the previous year Mitsukoshi had failed in the tender for the former National Railways site in front of Osaka station, its bid lower not only than Yodobashi Camera’s but than the second-placed Parco’s. Without a base in the Kansai, it had put ¥60bn into Kyushu. With Takashimaya’s entry into Shinjuku, the Shinjuku district’s share of sales rose 2.6 per cent on the year while the Nihonbashi district fell 1.4 per cent, the sharpest effect anywhere in the Tokyo area.

The blank decade, and a merger to preserve the name

In the year to February 1999 Mitsukoshi booked a special loss of $278.1M (¥36bn), chiefly provisions against the accumulated losses of subsidiaries, and a net loss of $198.6M (¥26bn). On a parent-only basis the two years to February 1998 and February 1999 produced losses totalling $453.1M (¥59bn), and the company passed its dividend for the first time since listing. On a consolidated basis it was the eighth consecutive year of net loss, and the consolidated equity ratio fell below 3 per cent. Inoue Kazuo (井上和雄), the president who announced in February that year a restructuring that included 600 job cuts, said that the damage this time is greater than that of the Mitsukoshi affair of 1982. Corporate outside sales, once a strength, fell away sharply with the structural decline in corporate demand, and the individual outside sales carried by the ochoba system headed for decline as the customers aged. The proportion of part-time staff stood at about 15 per cent at Mitsukoshi against more than 40 per cent at Isetan and Takashimaya. Executive vice-president Nakamura Tsuneo (中村胤夫) said that corporate demand is unlikely to grow from here on. The preceding year to February 1998 had also brought a net loss of $285.1M (¥35bn), and in 1999 some 1,150 people left through voluntary redundancy.

On 1 September 2003 the Mitsukoshi parent merged with four companies — Nagoya Mitsukoshi, Chiba Mitsukoshi, Fukuoka Mitsukoshi and Kagoshima Mitsukoshi — and a new company carrying on the trade name was launched[151]. The form adopted was a consolidation-type merger, in which the five existing companies dissolved and a new company merged with each of them. Under a consolidation-type merger the parent’s unrealised gains could be revalued at market, and the revaluation gain both wiped out $114.7M (¥13bn) of consolidated loss carry-forwards and cancelled the negative legacies of the subsidiaries. It was from this point too that the securities code moved out of the 8000s of the retail sector into the 2000s. There was dissent inside the company at settling the past with unrealised assets; a Mitsukoshi alumnus said, These are unrealised gains our seniors built up little by little. Is it right to use them so cheaply? On 5 May 2005 four stores — Yokohama, Osaka, Hirakata and Kurashiki — were closed on the same day, and in the early-retirement offer that February 1,000 people applied within half a month for 800 places. Ishizuka Kunio (石塚邦雄), who became president that same year, stopped the sales in order to raise the gross margin, and worked at strengthening self-edited selling floors.

The result came out the other way round: the sales lost with the discounting could not be made up, and regular customers drifted away. In the first quarter of 2007 profit fell 60 per cent on the year, and operating profit dropped to less than half that of Isetan or Daimaru. At a press conference on 23 August that year Ishizuka said, The reforms we have carried out over the past two years have not led to results for the company as a whole. Nor can the speed be given a passing mark. The merger with Isetan that surfaced in August that year would create the largest department-store group in Japan, with sales above $12.7B (¥1.5tn). Japanese department stores take 80 per cent of their goods on consignment and the individual store carries great weight, so the gains from scale are limited. Against the $1.5B (¥180bn) of investment called for by a six-year plan that included the Umeda store in Osaka, only some $849.1M (¥100bn) could be secured. Oku Masayuki (奧正之), president of Sumitomo Mitsui Banking Corporation, said that in a harsh environment, if it is what a company needs to survive, a merger cannot be avoided. The plan was approved at an extraordinary general meeting in November, and Isetan Mitsukoshi Holdings was established on 1 April 2008. Mitsukoshi ended more than 58 years as a listed company, and merged with Isetan in April 2011[152].