Implementing Drastic Management Reforms
to Develop a New Department StoreBusiness Model.
Now department stores are at a historic turning point.
The current department store slump is fundamentally
attributable to their own structural issues such as the weak
response capabilities to the market and the high-cost andlow-proﬁt structure

rather than the impact of rapidly

deteriorating macroeconomic environment. It seems to be
diﬃcult for department stores even to survive, let alone grow in
the future, as long as they continue to rely on the existing
department store business model.
In this context, J. Front Retailing (JFR) seriously addresses
the development of a new department store business modelwith a focus on the improvement of marketing capabilities andthe innovation in business operation structure to revitalize thecore department store business of the Group.
We aim to create an urban lifestyle store with a new operation
model based on popular appeal and lifestyle suggestions as
the fundamentals of department stores. To this end, we shift ouroperational focus from the past merchandising-driven retailer
type ideas to the creation of the appeal of stores as commercial
facilities centered on marketing and tackle the following threeimportant tasks.
The ﬁrst task is to improve marketing capabilities and establish
store strategies.
In the second half of ﬁscal 2008, JFR expanded its Marketing
Planning Promotion Division to strengthen the function ofplanning basic measures to respond to market and customer
changes mainly in department store business.
Particularly, in order to enhance store competitiveness ineach area, which is our greatest challenge, we speed up joint
eﬀorts with our department stores to develop store strategies
based on a detailed area marketing analysis. Beginning with
Daimaru Kobe and Shinsaibashi stores and Matsuzakaya Nagoya
and Ueno stores, we are developing store strategies based onmarket strategies and competition strategies through an area
marketing analysis and will expand into other stores.
With the diversiﬁcation of customers purchasing channel
choices, we will strengthen click-and-mortar business that aims
to create a synergy eﬀect between Internet sales and store sales
to attract customers who do not shop in our physical stores andboost sales of the products that are not oﬀered in our physicalstores.
In the meantime, amid increasingly ﬁerce competition, it isvery important in terms of marketing strategy to expand the04

ba s e o f t h e id e n t i ﬁ a bl e c u s t o m e r s w h o h o ld o u r o w ncompany-wide business operations, organizations and personnelcompany-branded cards and build eﬀective CRM. Mainly in ourplanning including administrative support such as out-of-store

stores, we will increase customers holding our cards throughsales, general aﬀairs, human aﬀairs and accounting incompany-wide campaigns and other measures to make our storesconjunction with the above-mentioned overhaul of sales ﬂoor

more attractive and consequently expand our customer base.

operations through the building of a new department store
model. Aiming to achieve the highly productive department

The second task is to establish a store operation structure that

store operation by a few select people, which involves changes inenables both the development of stronger market response

our way of thinking and working, we will pursue further

capabilities and low-cost management.

low-cost operation.

Daimaru is leading JFR s eﬀort to establish a new business
operation structure

mainly for stores. Under this newIn addition to these three business challenges, the integration ofstructure, sales ﬂoor operation is divided into two types

Daimaru and Matsuzakaya into one company will constitute one

including shop operation and independent operation to beof the main pillars of our business structure reforms.

based on their respective diﬀerent features.

In March 2010, our department store businesses will beUtilizing the strengths of each type and based on the ﬂoor

integrated into one company a year ahead of the originalclassiﬁcation meeting new customer needs, mainly in shop

schedule. This will unify the management implementation

operation type sections, we will accelerate the renewal andstructure and speed up decision-making, as well as signiﬁcantly

replacement of brands and shops through the introduction of the

reducing duplication of organizational functions, with the aim ofbest ones that will attract attention and popularity fromachieving high-eﬃciency and low-cost management.

customers, mix and scrapping and building. Thus we will

We are also in the process of integrating the merchandise

improve the response to new market to maintain and enhance

departments of the two companies headquarters. In March

our appeal as commercial facilities.

2009, women s accessories and children s wear departments

As part of our speciﬁc eﬀorts, we already began to introduce

were integrated, while women s wear departments, men s wear

new shops to shop operation type sections without being

and accessories departments and foodstuﬀ departments will beconstrained by the existing suppliers and will expand such shops

integrated in September 2009 and the integration of theinto all our department stores based on store strategies toremaining home furnishings departments and art work, kimono

bolster low- to mid-priced oﬀerings, which are in particularly

and jewelry departments will be completed in March 2010.

strong demand from customers.
At the same time, in order to help implement these measures,

In ﬁscal 2009, we will manage our company based on thewe will develop highly skilled professionals, compile operating

assumption that we will be placed under an extremely severe

procedures in a manual for eﬃcient operation, and improvebusiness environment that we have never experienced before.

information systems to support the streamlining of operations.

We will devote all our energies to building a new department

The third task is to promote low-cost and high-eﬃciency

and focus on minimizing sales shrinkage and dramaticallymanagement to increase human productivity.

reducing costs, which is our greatest challenge for the year.

store business model toward corporate survival and recovery

The shift to a new department store model will signiﬁcantly
change our sales ﬂoor operation management.
First, we will shift our focus from sales to proﬁt. It wasreasonable to aim to maximize sales during the days when sales

And it is in these hard times that we aim to provide high quality
management that can meet the expectations of all our
stakeholders including customers and shareholders and fulﬁll ourcorporate social responsibility.

were steadily increasing. However, in the present day whensales are shrinking, the shift from sales orientation to proﬁtorientation is needed to improve the motivation of our sales staﬀ.
Second, operations organization and personnel structure willbe radically overhauled to seek an increase of humanpr od uct iv it y . We a r e pla n ni ng a d r a st ic o ver ha ul o fJune 2009

Tsutomu Okuda

President and CEO05