New models emerge in Japan

04 April 2012

TOKYO: Companies such as Rakuten, Gree and Fast Retailing are attempting to shake up business models and strategies in Japan, reflecting a pressing need to reinvent old ways of working.

Start Today, the owner of fashion ecommerce site Zozotown – boasting 1.9m active members as of February 2011 – has enjoyed annual sales growth topping 40% since 2004, and expects profits to rise by 46% to ¥8.6bn during its latest financial year.

"I want to create new value by doing something people haven't done before," Yusaku Maezawa, the site's founder, told Reuters. "If competition heats up in terms of price and labor conditions ... I would let the imitators do it and develop a new innovation."

The impetus behind this logic is demonstrated by the fact that the average price on the Nikkei stock market has contracted by 74% from the peak of 1989, as big Japanese corporations struggle.

"Many people just rely on their past success, but things are moving and changing so fast, you need to self-innovate," said Hiroshi Mikitani, CEO of Rakuten, the ecommerce site. "Even Rakuten, if we stop, I think we are going to decline very rapidly. That's the new rule of the game."

Rakuten was established in 1997, and now employs more than 7,000 staff. Profit levels reached ¥71.4bn last year, and the organisation has branched out into areas such as e-readers and foreign acquisitions.

Gree, a mobile social gaming platform, is hoping to see a five-fold increase in global user numbers to 1bn players in the next five years, a scale of ambition Yoshikazu Tanaka, its CEO, says is not always observable in Japan.

"There are huge numbers of people working at companies who have never seen their firm grow in the years since they got their jobs," he said. "So even if you tell them that growth and success are interesting or fantastic ... it doesn't seem real."

Fast Retailing, the parent of apparel chain Uniqlo, has also been heralded as one of corporate Japan's major recent success stories, having helped define the fast fashion segment at home and abroad.

"Japan is seeking something like stability. Stability is fine, but if you try to be stable without a desire to grow, there is no stability," Tadashi Yanai, CEO of Fast Retailing, said. "I think the biggest problem is that that awareness has faded."

Elsewhere, Lawson hopes to have 10,000 convenience stores in China by 2020, up from 355 today, and will adapt them to suit local tastes.

"Japanese that go overseas and do things the Japanese way are limited in what they can accomplish," Takeshi Niinami, its CEO, said.

Data sourced from Reuters; additional content by Warc staff