What started as a liquor store in a small town has grown into a company with annual sales of more than 100 billion yen by overcoming a business crisis. For this installment of Leaders, a column featuring corporate management and senior executives, The Yomiuri Shimbun asked Kakuyasu President and CEO Junichi Sato for the secret of how he accomplished such an impressive business success.
The year 2000 was the watershed moment. I realized that I could not survive a price war that we had been involved in. I decided to stop promoting excessive bargain sales and find a way out by putting emphasis on our strength -- home delivery. I made up my mind that it was the only option available for the company's survival.
[The scale of the domestic liquor market, including that for beer, began shrinking in the mid-1990s. Soon afterward, measures to deregulate the sale of liquor were adopted. It was expected that competition with supermarkets and convenience stores would intensify.]
How could we compete with major distributors? I took a hard look at our business operations to make sure that we were not missing any business opportunities because of things within our control.
We found a clue eventually. At that time, there was no such service as same-day delivery for orders. The delivery area was also limited to the store's neighborhood, and we did not accept orders if the volume was not large enough. But maybe we could lower the minimum amount for orders? "This is it," I thought.
Our new business strategy -- that we would deliver even a single bottle of beer to anywhere within Tokyo's 23 wards in two hours or less, free of charge -- was born.
How should we put the idea into concrete shape? We set a delivery zone within a 1.2 kilometer-radius of each store. A bit more than 130 stores spread across the 23 wards were needed to realize the plan. Having already opened almost 30 stores by then, I had an instinct that we could make it.
We were blessed with some luck. First, the radius set at "1.2 kilometers" turned out to be a "magic number," corresponding to the most efficient delivery zoning. If it were 1.5 kilometers, the delivery distance would be too long, so the transport efficiency would be lost. If it were set at 1 kilometer, on the other hand, we would have to operate about 180 stores. Expanding our business to that extent was not feasible.
Why 1.2 kilometers? There is no secret. When I put the point of a compass on our key store, then located in Kita Ward, Tokyo, and drew a 1-kilometer-radius circle around it, the circle covered only two-thirds of a nearby apartment complex. With 1.2 kilometers, the circle covered the entire building. I wanted to put the full complex in the delivery zone as it represented a big market.
Second, a young employee made a suggestion that opened my eyes. "Let's expand and promote our services to izakaya bars and restaurants in residential areas in addition to households," the staff member said.
I was probably not flexible enough. I had my own preset thoughts on delivery routes: Liquor in kegs for wholesale customers should be sent from a delivery center, while products for home use were to be delivered from regular stores. With that fixed thought, I was not able to come up with the idea of delivering wholesale liquor to residential neighborhoods.
The staff member plainly said, "We can simply deliver wholesale liquor from regular stores, that's all." We immediately acted on the proposal and sales soared. Apparently, restaurants jumped on the new service because they did not need to keep [as much] liquor in stock.
[Sales reached more than 60 billion yen in fiscal 2006, triple the level of just over 20 billion yen in fiscal 2000.]
I had sleepless nights when the company had an annual loss of about 800 million yen at its worst time. I was so glad when we finally made a profit in 2006.
At the beginning, many people must have thought our home delivery service was reckless. We put considerable effort [into the new service to succeed], and we have also been fortunate.
Consumers carefully choose products and stores by finding subtle differences in the space of "100 versus 99." There is no such competition as "100 versus 0." That is why we rack our brains over how to create that difference of "1." For that purpose, we have always discussed [what to do] within the company. Our employees deliver products as salespeople to promote our business. They are antennae to catch the trends in the public.
3 hours sleep a night for 4 yrs
When I was a university student, I worked part-time for my family business. But the working environment was not attractive enough and the business looked unprofitable. I had no intention of taking over the family business. Although my father often told me to follow him into the family business from the time I was a junior high school student, I did not like that either.
Because I wanted to stay away from my parents, I decided to go to Tsukuba [in Ibaraki Prefecture, to attend university] like a fugitive. I was young and self-centered. As I experienced living by myself apart from my parents, however, I realized for the first time how much I owed them.
After graduation, I joined the family business. I worked really hard. I went to the office at 5 a.m. to check order forms sent overnight and write slips. Time flew by. Employees came into the office at 9 a.m. and we would start loading goods onto trucks and deliver them until evening. I collected money from restaurants at night. I was not always able to meet managers. Even if they were available, they could not deal with me when their business was busy. I could not return home until after midnight. I averaged just three hours of sleep a night for about four years.
Why did I work that hard? No one liked such heavy labor and troublesome tasks at all. The general atmosphere at the office was: "Let the newcomer, the [president's] son deal with all the trouble."
Thanks to that, I could fully understand how much the employees struggled at their workplaces. I discovered some hints about how to motivate them and felt more closely attached to the company.
About 10 years after I joined the company, the economic bubble burst and our business experienced a rapid economic slump. Our business clients went out of business one after another, and we had bad loans piling up like a mountain. It made my blood run cold. I believe that the tough experience I went through after joining the company helped me somehow endure the predicament.
'Lazy Susan' philosophy
Our sales stand around 110 billion yen [for fiscal 2017]. The liquor market in Tokyo's 23 wards is believed to be 600 billion yen or 700 billion yen. Our business opportunities are not fully cultivated there. I envisage increasing the sales to 150 billion yen with a 25 percent share of the market. As times have changed, I have thought about the next move to take.
[Although expansion of the market is unlikely due to population decline and there being fewer habitual drinkers in the younger generation, demand for home delivery is expected to grow because of the trends of an aging society and the increase in dual-income households.]
With regard to delivering alcoholic beverages, there is a stark contrast between when business is busy and slow. During the day, the busy hours are from 10 a.m. to noon as well as those stretching from early evening to 8 p.m. The early afternoon is slow. In terms of the week, weekends are busy and the three days from Tuesday to Thursday are slow. When it comes to a month, the end of the month is busy but the mid-month period is slow.
To utilize our delivery system [during slow business hours], I have examined the possibility of delivering various kinds of non-alcohol items including wholesale food.
When asked my motto or credo, I invoke the image of the "lazy Susan" rotating tray found on tables at Chinese restaurants. When enjoying Chinese food together, people who scramble to take big servings are often deemed greedy or pushy. In contrast, other people -- who say, "After you; I'll wait for all of your turns" -- will be thanked and could sometimes encounter unexpectedly large amounts of food left on the tray. I cannot explain it well in words. However, in my view, the essence of management can be interpreted as such.
In business, the customer's convenience always comes first, and our own is secondary in importance. People who always first think and act in accordance with others' convenience will end up with positive consequences. Because I cannot come up with specific words to phrase the idea, I have compared it to the lazy Susan.
We have attached the words "liquor store that will do everything" to the company name. It shows my commitment to satisfy any request from our customers.
-- Kakuyasu Co., Ltd.
Founded in 1921 as Kakuyasu liquor store. Kakuyasu is an expression combining the word kakumasu -- a box-shaped traditional wooden vessel for drinking sake -- and the name of the founder and first president, Yasuzo Sato. Prior to rapidly expanding its business activities since around 2000 by improving delivery networks in Tokyo's 23 wards, its main business operation was in liquor distribution for wholesale and discount sales. The company's annual sales are approximately 110 billion yen and it has about 1,460 employees. It operates 172 stores in Tokyo and Kanagawa, Saitama and Osaka prefectures, and elsewhere.
-- Junichi Sato / President and CEO of Kakuyasu Co., Ltd.
Born in Tokyo in 1959. Sato graduated from the University of Tsukuba in 1981 before joining the company to eventually inherit the family business. He became the third president in 1993. When he joined the company, its annual sales were 700 million yen and the number of employees was about 15. As Sato has developed creative services and a store deployment strategy based on a delivery-centered business model, the company's annual sales have increased to more than 100 billion yen.
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