Ito-Yokado: The Challenge of Apparel

Summary• 1945 – Masatoshi Ito joined his mother and older in brother in

running the small clothing business established in 1920

• 1958 – Ito stepped towards mass merchandising and established Yokado, Ltd.

• 1965 – Ito was operating 8 superstores under the new name, Ito-Yokado (IY)

• 1974 – Seven-Eleven Japan franchise store opened in Japan

• 1978 – Toshifumi Suzuki became CEO of SEJ

• 1992 – Toshifumi Suzuki became CEO of IY

• 2005 – IY was a leading Japanese Superstore retailer of food, apparel, household products and various customer services

The Problem: Sales in apparel continued to slide down

IY Financial

-

500,000.00

1,000,000.00

1,500,000.00

2,000,000.00Revenues

Apparel

Household Goods

Food

Others

Reforms at IY

• 1982 – implemented Suzuki’s Tanpin Kanri, a process of managing store inventory item-by-item in order for employees to develop hypotheses on the future demand of each item, order accordingly and review the results to confirm or modify the hypotheses– Supply side reforms - IY specified to wholesalers’

which modes of transport to use in delivering goods and implemented strict policy on on-time delivery

– Demand side reforms – introduction of management information system (MIS) for employees to assess their stock needs at any given point in time.

Apparel Reforms

• Risk Merchandising (RM) – Outright payment for apparel bought from wholesaler

• Team Merchandising (TM) – to place IY buyers at the center of the production cycle

RESULT: IY had some success with TM but it continued to lose apparel sales overall

More Apparel Reforms

• European fashion offices – IY opened an office in Milan to keep IY apparel close to fashion-forward European apparel trends

• IY Design Studio – a group of 5-6 designers who would assist TM buyers in producing fashion-forward products that would appeal to typical customer sensibilities

• Made in Japan - most successful TM venture which is a series of TM projects featuring apparel and household products for customers who sought quality Japanese merchandise

RESULT: Made in Japan was a major achievement in IY’s effort to develop its TM capabilities but apparel sales continued to go down

Retail Customer Behavior

• Insistence on luxury and quality

• Brand affinity

• More spending on gadgets and phones

• Trends are hot and fast

• Population is shrinking and aging

A question of Entrenched Habit – Suzuki suspected that the solution to the apparel division’s struggle to regain sales was less a matter of instituting the right new initiative, and more an issue of freeing buyers from some of their entrenched buying habits.

Conclusion

• The reason why the apparel sales continued to go down remains unknown.

• This could be the topic of our discussion considering other factors like population, competition, gross national income per capita, % change in the compensation per employee, etc.

• What will be your recommendation/s?