Nitori Holdings - Company History
- Founding
- In December 1967 Nitori Akio opened the Nitori Furniture Shop in Sapporo, with a selling floor of 30 tsubo — about 99 square metres. He had chosen the trade by elimination, because there were few competitors around the site he had in mind; his bank credit was cut off almost as soon as he opened, and in the days spent clearing unsold stock cheaply he learned in his body that low prices bring customers in. In March 1972 he incorporated the business as Nitori Kagu Oroshi Center, and a study trip to the United States that same year set the American chain store up as his model. Seeing American furniture on sale at a third of Japanese prices became the starting point of every judgement he made afterwards.
- The Decision
- To sell cheaply, he kept deciding to move down towards the making of the goods. In 1978 he began opening stores at high density within Sapporo, putting a distribution centre in place first to raise delivery efficiency. In 1987 he took the step of importing furniture components from South-East Asia. Then in 1994 he built the company's own factory in Indonesia and took hold of finished-goods production itself, which gave him a structure in which a stronger yen lowered his yen-denominated costs. Under the financial crisis of 2008 he turned that low cost base into price cuts, and drew in more customers during the downturn than before it. Costing that fixes the selling price first and works the process backwards from it is what made it possible to cut prices in a recession.
- Today
- The cost structure built on the assumption of a strong yen is now running the other way. The design of manufacturing at the company's own overseas plants and selling in yen produced a gross margin of 57.4 per cent in the year to February 2021, but as the yen weakened that fell to 50.4 per cent in the year to March 2023, and the run of 36 consecutive years of rising sales and profit ended in the year to March 2024. For the year to March 2026 revenue was $5.8B (¥912bn) and operating profit $793.5M (¥126bn), made up of $5.1B (¥804bn) from the Nitori business and $687.3M (¥109bn) from the Shimachu business, brought into the group in 2021. Forward exchange cover extends only to the current year, at ¥147.65 to the dollar, and the company is trying to win back gross margin with new products costed on the assumption of ¥155.
- Competition
- In furniture and interiors in Japan there are few rivals able to compete head-on on price. Pricing at half the department stores' level and 30 to 50 per cent below the specialist chains, Nitori grew to first place in Hokkaido by sales and eighth nationally by the early 1990s, and became a national chain after crossing to Honshu in 1993. In household goods, however, Muji had already come down into mid-sized shops in residential catchments, and in home centres DCM had already gathered regional banners under one roof. Nitori outbid that same DCM for Shimachu with a counter-offer of $50 (¥5,500) a share, but refitting the stores and putting own-brand goods into them did not bring in customers, and outside furniture its advantage on price has not carried across.
Timeline
1967–1993Founding the Nitori furniture shop, and dominance across Hokkaido
- 1967Nitori Akio opens the Nitori Furniture Shop in Sapporo
- 1971A large second store opens
- 1972Incorporated as Nitori Kagu Oroshi Center in March
- 1972Study trip to the United States to observe furniture distribution
- 1978Chain-store plan announced; dominance strategy begins in January
- 1980Distribution centre with an automated high-bay warehouse opens
- 1982Hakodate store opens
- 1986Company renamed Nitori
- 1987Business tie-up with Marumitsu Mokko; inspection base opened in Singapore
- 1989Listed on the Sapporo Securities Exchange in September
- 1993First shops opened on Honshu, in eastern Japan
1994–2009Overseas factories, and the making of an SPA supply chain
- 1994Manufacturing subsidiary established in Indonesia in October
- 2000Kanto Distribution Centre built at Shiraoka, Saitama
- 2000Marumitsu becomes a wholly owned subsidiary in August
- 2002Listed on the First Section of the Tokyo Stock Exchange in October
- 2003MARUMITSU-VIETNAM EPE established in October
- 2004Nitori (China) Purchasing Co. established; Pinghu distribution centre opens
- 2004Finished-goods production begins in Vietnam in September
- 2006Akabane store opens in Tokyo with the head office attached
- 2007Distribution base opened at Huizhou, China
- 2007First overseas store opens in May
- 2008The price-cut declaration launched in December
- 2009Twenty-two consecutive years of rising sales and profit
2010–2020A holding company, and thirty-six consecutive record years
- 2010Move to a holding-company structure in August; renamed Nitori Holdings
- 2010Meiou Trading (Shanghai) established in May
- 2011Marumitsu renamed Nitori Furniture; the Vietnam plant renamed NITORI FURNITURE VIETNAM
- 2012NITORI USA established in May; Sapporo head office relocated in October
- 2013First US store opens under the Aki-Home brand in October
- 2014First store in mainland China opens in October
- 2016Shirai Toshiyuki becomes president in February
- 2017Kachitas becomes an equity-method affiliate in May
- 2018Taicang distribution centre opens; entry into apparel in December
- 2020NITORI RETAIL (MALAYSIA) established in March
- 2020Market capitalisation passes two trillion yen
- 2020Tender offer for Shimachu announced at ¥5,500 a share in November
Founding Story
1967–1993Founding the Nitori furniture shop, and dominance across Hokkaido
A single shop of about 99 square metres in Sapporo, opened in December 1967 by a founder who had picked furniture largely because nobody else nearby was selling it, grew into a chain that covered Hokkaido and then crossed to the main island. Sales rose from $55,556 (¥20m) in the year to February 1969 to $159.2M (¥18bn) by 1993 — and the idea that would carry the company far beyond that, a chain of shops selling at American prices, was already fixed in the founder's mind from a trip abroad in 1972.
The shock of American furniture at a third of Japanese prices
In December 1967 Nitori Akio (似鳥昭雄)[1] opened the Nitori Furniture Shop (似鳥家具店) in Sapporo. He had arrived at the furniture trade by elimination — there were few competitors around the site he had in mind — and he set up a shop of roughly 99 square metres (30 tsubo) over the scepticism of others in the trade[2]. Almost immediately after opening he was hit by a freeze on his bank credit, and spent the founding years struggling for cash. Clearing unsold stock through markdowns taught him, in his body rather than his head, the commercial principle that low prices bring customers through the door. In March 1972 he incorporated the business as Nitori Kagu Oroshi Center Co., Ltd.[3], and a study trip to the United States that same year became the turning point. Seeing goods on American shop floors priced at a third of Japanese levels, Nitori returned home and set as the company's guiding purpose the making of Japanese daily life as rich as America's.
Reaching American price levels, he concluded, would require holding the whole chain from manufacturing to retail in-house — and that conclusion was the starting point of what later became the SPA (speciality-store retailer of private-label apparel) model, the 製造小売業 or manufacturing-retail business. As president, Nitori made strict personnel discipline and the early promotion of young staff the axis of how he ran the organisation, building the structure that would carry the expansion years well before it was needed. In January 1978 he announced a plan to turn the business into a chain and began a dominance strategy within Sapporo: concentrating shops in a defined area to raise distribution efficiency, and pairing that with a new distribution centre to build out a delivery network across Hokkaido. He demanded that manufacturers work to his own product specifications, and by gaining bargaining power over small makers he took hold of both price and quality in his buying. The trade magazine Kindai Chusho Kigyo (近代中小企業) noted in its November 1977 issue that the secret of the company's success lay in a buying method no one else used and in thoroughgoing rationalisation[4].
The Hakodate store's twelve-hundred-million-yen miscalculation
The move into Hakodate in 1982 brought friction with incumbent traders — the local business journal Hakodate Zaikai (はこだて財界) reported the view that the floor area Nitori was being allowed was simply too large[5] — but the company pushed its network across the whole of Hokkaido on the strength of the distribution efficiency and price competitiveness its dominance strategy produced. At a time when $2M (¥500m) a year was the standard take for a single furniture store, the Hakodate shop was targeted at $2.4M (¥600m) and recorded $4.8M (¥1bn); the cash squeeze that had dogged the company for want of collateral turned around on that success. Opening at high density within a defined area cut delivery costs and raised local recognition at the same time, and although Nitori was a late entrant it built a real presence in the Hokkaido furniture market. With its Hokkaido base secure, the company listed on the Sapporo Securities Exchange in September 1989[6] and gained access to capital. Using the standing that listing conferred, it laid the groundwork for national expansion and in 1993 began opening shops on Honshu, in eastern Japan. The low-price, high-volume model built in Hokkaido was now to be rolled out nationwide.
To compete as a national chain, domestic manufacturing costs alone were not enough. Building a production system that used low overseas labour costs and the advantage of a strong yen became the next task, and Nitori began looking to South-East Asia for both sourcing and manufacturing. The yen's appreciation after the 1985 Plaza Accord[7] made overseas component sourcing and finished-goods imports favourable on price, and pushed the company outward. In 1987 it began importing furniture components through a business tie-up with Marumitsu Mokko[8], and set up an inspection base in Singapore to put quality control in place. The local press recorded that the company was opening a Singapore office because the weight of its overseas business was shifting gradually from nearby markets such as South Korea and Taiwan towards South-East Asian countries including Malaysia, Thailand and Indonesia[9] — a forward-looking move that already took account of where Asian wage levels were heading.
Notes
- ニトリ 有価証券報告書【役員の状況】 (Nitori Holdings, annual securities report — Directors and Officers)↩
- リクルートブック 大学編 1981年版（東日本版） (Recruit Book, University Edition, 1981, Eastern Japan)↩
- ニトリ 有価証券報告書【沿革】 (Nitori Holdings, annual securities report — Corporate History)↩
- 近代中小企業 (Kindai Chusho Kigyo, November 1977)↩
- はこだて財界 1982年5月号 (Hakodate Zaikai, May 1982, Hakodate Zaikai Mondai Kenkyujo)↩
- ニトリ 有価証券報告書【沿革】 (Nitori Holdings, annual securities report — Corporate History)↩
- ニトリ 有価証券報告書【沿革】 (Nitori Holdings, annual securities report — Corporate History)↩
- ニトリ 有価証券報告書【沿革】 (Nitori Holdings, annual securities report — Corporate History)↩
- 日本経済新聞 北海道版（1989年1月11日） (Nikkei, Hokkaido edition, 11 January 1989)↩
References & sources
- Kindai Chusho Kigyo, November 1977, on Nitori Akio and the multi-store strategy of a locally rooted retailer.
- Hakodate Zaikai, May 1982, on the confirmed Hakodate opening. NDL Digital Collections.
- Nikkei Inc. (Hokkaido edition, 11 January 1989, on the Singapore information base; Saitama edition, 6 October 1998);, 14 June 1994, interview with president Nitori Akio;, 13 February 2005 on Nitori as a manufacturer and 23 February 2009 on backward-reasoning management against the downturn; and Nitori Akio's My Personal History, from 22 April 2015.
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