Becoming a manufacturer-retailer: owning production abroad (1994)

A strength honed by a strong yen — and its weak-yen underside

The heart of this decision was that a retailer took even the work of “making” into its own hands. Owning a furniture factory at sales of $69.2M (¥10bn) to $138.3M (¥20bn) was, by the conventional wisdom of the day, an oversized investment, and Nitori paid tuition for it in Indonesia — absenteeism and strikes. It did not retreat: it switched to direct control through wholly owned subsidiaries, consolidated in Vietnam, and drew manufacturing, logistics and retail into a single stream. A structure that could source finished goods without trading houses or wholesalers produced the pricing power to keep cutting prices and still hold a profit.

And yet this strength stood back-to-back with the currency weather of a strong yen. In a model that makes abroad and sells in yen, a strong yen lowers procurement costs and becomes the source of competitiveness; a weak yen runs the same channel in reverse, and rising procurement costs press straight on profit. When the weak yen of the 2020s pulled the ground from under the company’s plan, the low-cost structure of SPA turned backward, and thirty-six straight years of rising sales and profit came to an end. The strength a strong yen honed carries within it, at the same time, the task of how much of a currency tailwind can be turned into a strength of one’s own.