Posts Tagged ‘Mizuno Seiichi’

Interview with Seiichi Mizuno

Friday, February 13th, 2009

This article originally appeared on MEKAS.

Seiichi Mizuno served as President of Seibu Department Stores in the early 1990s. As one of the core members of Seibu’s Shibuya branch from 1970 onwards, Mizuno directly oversaw and personally contributed to the rise of Japan’s world-class consumer marketplace. After stepping down from Seibu, Mizuno worked extensively with Netscape, while also serving in the House of Councilors as a member of the breakaway centrist and pro-environment New Party Sakigake. Now head of his own company Institute of Marketing Architecture Co., Ltd, Mizuno is a celebrated author, serves as a Director for some of Japan’s top companies, and campaigns for the protection of the natural environment.

We sat down with Mr. Mizuno in his Daikanyama office.

Tell us about your background before joining Seibu.

I grew up in Tokyo, and I did my undergraduate degree at Keio University’s Department of Economics.

Did you become interested in department stores while a college student at Keio?

I didn’t have any particular interest in department stores per se, but I was very interested in what Seibu was doing as a business. I did not want to work for “a department store” as much as I wanted to work for Seibu. I wasn’t interested in the prestigious department stores like Isetan, Mitsukoshi, and Takashimaya. I had the impression that Seibu was up to a lot of interesting things.

What was the image of Seibu in the late 1960s and early 1970s?

At the time, youth had grown bored with department stores. Seibu was the only department store trying to attract young people by offering the latest fashion.

More specifically, in 1968, Seibu’s Shibuya branch opened a shop called Capsule, which offered cutting-edge fashion. There was no other department store that was opening boutiques of that nature. Seibu sold culture for people obsessed with culture, which let the company express a completely new vision for the department store.

Was Seibu the first to target the youth market?

When I was younger, I believed that youth would take the leadership position in Japanese consumer culture and change Japanese fashion. During my student days, the Japanese brand VAN was at its peak, but the “Ivy Look” was still relatively niche in the total market. Seibu, however, thought VAN was interesting, so when VAN first moved out of Osaka for Tokyo, Seibu was the first department store to sell the brand, other than Hankyu. But since Hankyu did not have a big department store in Tokyo, Seibu was the only place you could really get it.

Isetan and Mitsukoshi didn’t sell VAN. So when I was in school, I was really influenced by the Ivy look and thought it was cool that Seibu sold it. I thought it was really interesting that Seibu tried to capture the feelings of youth. From that time on, youth had the strongest reaction towards new trends. It’s still true today. Youth are better than adults at picking up changes in trends. Compared to the U.S., the spending power of youth, even in that era, was much higher.

That was because the dankai baby boomer generation was enormous, and they became the leaders of consumer society in the post-war recovery. My baby boom generation was born in the post-war, and when they hit 17 or 18, Japan’s economic strength really kicked in and their parents suddenly had a lot of consumer power. When they started to want to live more luxuriously, they took an interest in trendy goods — especially things from overseas.

What’s different about Japan and overseas is the speed at which young people lead the market. In Europe, it’s totally unthought of that young people would spend lots of money on clothing and other goods. For the Japanese, the idea of “trends” is young people spending a lot of money on luxurious things. That started back in the ’70s.

Was Seibu also the only department store to pick up European fashion?

This was the era when Japanese designers started to go abroad, like when Kansai Yamamoto did his sensational show in London, or when Kenzo Takada opened his first boutique in Paris, or when Issey Miyake started to get accolades in Paris.

Even before that time, Seibu had tight relations with many foreign brands. Seibu brought Hermès to Japan and started to sell Yves Saint Laurent haute couture. Seibu is the Japanese company with the longest relationship with the Paris collections. That was one of the company’s strengths, but more than that, when Takada and Miyake came back to Japan after getting famous overseas, they made their triumphant return collection shows at Seibu.

I expected Seibu to become an innovative company in the realm of “information business.” The philosophy of Seibu owner Seiji Tsutsumi resonated with me.

Was Tsutsumi already famous when you were applying to work at Seibu?

He was well-known in the industry, of course, and he had started to attract a lot of attention. But those in old financial and political circles still saw Seibu as a second-rate department store. They only thought it was an upstart.

When I was about to graduate from university, I told my advising professor that I wanted to work at Seibu. He said, “Don’t do it. If you are going to work at a department store, go for Isetan or Mitsukoshi. I will write you a recommendation letter. Don’t go to Seibu. It’s a second class operation.” I told him, “I am not interested in department stores. Seibu is challenging the entire idea of department stores. I think they’re interesting.” We got into a big fight.

So, fashion people and youth all respected Tsutsumi, but the general thought was that Seibu was a second class department store.

What was the basic image of a department store in the 1960s?

Generally speaking, the department store was not for daily use but for “sunny day goods” — in other words, formal goods and non-daily goods. There was a lot of value in the wrapping paper of the department store. The paper showed that the product was bought at a department store, so it was a guarantee that it matched the store’s selection policy. When you sent presents to other people, just the act of buying the gift at a department store would make it very formal. The stores had that kind of high reputation.

Normally, people would not even buy specialty goods at department stores, since it was cheaper to buy them at local shops or big grocery stores. When I started working at Seibu, department stores were mainly patronized by older, conservative customers. Members of the upper classes were quite numerous, especially when it came to fashion. Young trendy people had already started moving away from department stores.

I have often read that department stores had a monopoly on introducing foreign culture to the Japanese public. For example, a lot of the big famous art exhibitions of the ’70s and ’80s were held at department stores, not museums.

Back in that era, there were not a lot of spaces for art exhibitions, so I think department stores were able to have a slight monopoly. And on that score, Seibu was one step ahead of the pack. The other department stores held exhibitions and brought art in from overseas, but the exhibitions were always for very established artists. For example, they would do an exhibition of impressionist art, while Seibu would show contemporary modern artists. Other department stores would do Renoir, and we would do Picasso. So we were able to make a distinction by trying to capture the feeling of the time and offer totally new culture.

And also, Seibu already had all the major foreign brands when the other department stores finally decided to bring them in. For a long time, the other department stores basically had no interest in foreign brands. They wouldn’t deal with them, and they weren’t dealt with. Seibu, on the other hand, was already was importing Yves Saint Laurent and Hermès.

Once I joined the company, we tried to introduce the trendiest stuff from around the world. Once French haute couture and pret-a-porter became too obvious, we went to Italy and found new brands like Armani, Versace, and Missoni. Seibu was the first to introduce them to Japan. Seibu was the first to offer the idea of moving the center of fashion from Paris to Milan. We always had access to the latest information from Europe.

Did Seibu help move the center of Japanese admiration away from America and towards Europe?

After the war, Japan drew almost all of its fashion influence from the United States. So for basic fashion, American style was very strong. Fashion is originally from Europe, however, and in the Meiji Era, Japan took most of its influence from Europe. I think that Seibu helmed the movement to bring the Japanese fashion eye back to Europe. We created an opportunity for that.

Once you joined Seibu, what was the nature of your work?

I joined in 1970, and I was sent to work in the womenswear department of Seibu’s Shibuya branch. I found this interesting for what it was. A year later, I moved to sales planning. I was given a lot of positions to pitch new plans. In 1984 I was made head of the Shibuya branch, and at that time, we opened Seed and Loft. Seed was one of the first high-end select shops. After that, we did the crafts-store Loft, and I acted as the Shibuya branch head for two-to-three years. In 1986, I joined the board of the Shibuya branch, and in 1988, I became a regular Director and moved back to the merchandise department. In 1990, I became the CEO of Seibu Department Stores.

I was a big fan of Seibu Shibuya back when it opened, so my connection to that particular store was very deep.

Was Shibuya always one of the core places for youth culture? 

Yes. And beyond youth culture, Shibuya was the spot for “culture” ― fashion and art. Ginza was for a rich, conservative crowd, but Shibuya was for more aggressive culture people. So, whatever Seibu did, the reaction would be a lot faster in Shibuya. Shibuya had a lot of value for Seibu. A lot of creators and artists lived there, so it was a really interesting market.

How did department stores develop while you were at Seibu?

Things changed. Department stores started to take on the image of “We have everything!” — from food to high-end jewelry to brand goods, but all of these were half-baked. Consumers matured and became unsatisfied with what the department stores offered.

One example: the brand boutiques inside of department stores. The floor-space of these boutiques is limited, so you have to limit the product line. When you do that, consumers will just go to the brands’ flagship stores that have the full product line and much larger selling space. This erases the entire charm of the department store brand boutique.

Also, customers started getting much older, so young people got fed up with the department store selection and started going to specialty shops. I believe these factors have changed the role of department stores. In the past, there was a time when the most cutting-edge customers would come to department stores, but those people have gone away little by little and now it’s only older conservative customers. That’s the biggest problem for department stores right now.

There was a time — about ten years ago — when department stores attracted a very wide swath of consumers, thanks to adding the high-end brand boutiques. But now, all the brands are available everywhere. Louis Vuitton is available in every department store. They spread out too much. So the department stores are again starting to face real hardship.

Do you think the department stores have too many branches?

There are too many stores in general, whether we are talking about supermarkets or shopping centers. Of course, department stores have the same problem. When it comes to Japan’s distribution channels, they have built too many stores. And each one has the same product lineup. Mitsukoshi, Isetan, Takashimaya, Seibu ― they all have the same merchandise. In Shibuya there is Seibu and Tokyu ― so you have the problem of whether you really need both.

When I was head of Seibu Shibuya, I thought department stores would get stuck with too many stores, so I thought we needed to aim to have Shibuya Seibu specialize on fashion or specialize on home furnishing products. For example, a department store is about 3300 m2, but you could split it up and have different areas — five specialty blocks of 660 m2 in the total space. You’d have the fashion area, the home furnishing area, the food area, like a complex. The concept would be completely different than a normal department store, so you bring together five specialty stores and get a completely different selection of merchandise.

But even if you don’t even have 3300 m2, you could just do a specialty store of fashion and home furnishing. If all the department stores are exactly the same and they are competing, whoever is biggest is going to win. Within Shibuya, Seibu can’t beat Tokyu. So we opened Loft and Seed with the idea of doing a complex of specialty shops.

Otherwise, the suburban and urban department stores are all seeing tough times, because there is no difference between them.

Isetan is currently viewed as the leader in the department store battle. What makes them different in your mind? 

Isetan is very strong in the field of fashion.

Another factor: most department stores have a division where salesmen go to the houses of reliable high-end customers. Mitsukoshi is very strong in this field. However, Isetan never really tried to do much of this. Isetan came up from the basic position of selling goods at the store. And today, out of all the department stores, Isetan has the most “own-risk” merchandise and can introduce new products earlier than anyone else. I think they are trying extremely hard compared to the other department stores.

However, if you look at Isetan’s revenue, only the Shinjuku branch is doing well. Isetan built too many stores. You can say this about all the department stores. The stores out in the provinces are doing very poorly. And since they are all competing out in the provinces, no one is a winner. They are all losing.

Can you talk about the role of consignment in department store inventory?

The consignment system has become a big part of all department stores. If you put a Louis Vuitton boutique right on the first-floor facing the road, a lot of customers will come in to buy Vuitton. But the margin that LV pays to the department store is very low. So even though the department stores provide the best space, only the revenue goes up. Profit does not increase. And this practice has only snowballed for the last twenty years. I do not think this is very sensible from a business perspective.

Merely chasing immediate sales means you do not put much energy into the own-risk business, but just push the responsibility onto the manufacturers and brands, who then sell things for you. Then you are in the business of just lending out space, which means revenue and sales both decrease. And when the number of customers goes down, the department store can’t bounce back. The department stores have fallen into a very tough situation.

Young people are not shopping at department stores these days, but they also have a lot less disposable income, relative to ten years ago. Do you think Japan still needs such a massive distribution channel at a high pricing premium? Should department stores lower their prices?

They most likely will be forced to lower prices. Until now, the Euro and Dollar were expensive and the Yen was cheap, so imports were going to be expensive. The last decade has been relatively ritzy so expensive things sold well and prices generally went up. There was also the problem of low yen and high material costs. But Japanese customers weren’t the ones supporting these high consumer prices: it was Chinese and Korean tourists. They would go to the Ginza department stores and buy high-priced goods.

Now with the current economic crisis, there are fewer foreign tourists, and department stores are doing poorly. So part of the reason why department stores have drifted away from their old way of consumption is that they were doing well over the last ten years. The department stores must have a business model where they can easily increase revenue when the global economy goes bad. But presently, the number of customers is down and the department stores are not trying very hard, so I think you can say that they are in an extremely difficult situation.

Lately the department store sector has seen a lot of mergers. Do you think this will lead to a long-term solution?

That’s a difficult question. I think it was inevitable that they started to do M&A.

What is difficult is that department stores each have their own unique internal culture. If you just add them together, there will be a lot of internal tension. And just inside a single department store chain, there are differences in local culture with each location, so even if you standardize them, you are not going to see success by selling the same product or standardizing visual merchandising at each location. Each location has a different culture of daily life, so you have to make the product selection reflect that. But that costs money, which limits how much you can pursue economies of scale. So with the mergers of the moment, will they absolutely improve the business? I think we already see that it hasn’t helped them. They are struggling.

In the 1990s, Seibu was not just a department store but created a special segment of consumer culture you could call “Saison Bunka”: PARCO, Mujirushi Ryohin, LOFT, SEED, WAVE, etc. The tone of that culture was close to the magazines of Magazine House, like Popeye and Brutus, emphasizing sophisticated urban culture and cutting-edge international art. But this culture has really seen setbacks over the last decade. Why do you think there was a decline?

After I left the Saison Group, Seiji Tsutsumi also left, and there was no one in the company to protect that unique corporate culture. It became all about chasing efficiency. Cultural activities were judged as a waste of money and cut. They stopped taking on charismatic products at their own-risk and changed the product line to un-risky things you could get anywhere. Soon there was no difference between Seibu and anywhere else. The “Saison Culture” got watered down. It’s too bad.

Japanese consumers these days do not seem particularly interested in new culture. Everything popular is very approachable, predictable, and low-risk. Japan had some of the most interesting consumer culture at the end of the 20th century, but that desire to keep up with the rest of the world feels a bit diminished.

It’s like you say. The era has changed. And it’s one reason why there are no longer any really novel things out there. Also, young people’s high level of sensitivity towards trends has faded. They want stability, almost to the same degree as the elderly.

As I say that, there are trendsetters in every generation. Even in the past, not all everyone young always knew about the latest things, but a certain faction of trendsetters would react well to new products. Opinion leaders would fly towards something, and it would go from there. Culture would progress in that kind of flow.

Even now, there are young people who have amazing taste, to a degree we could have never imagined when I was young. But I think you can say that department stores and specialty shops no longer have products that impress these youth. Fashion is becoming street fashion, and fashion leaders are becoming media celebrities out on the streets. In the past, the designers were the heroes. There was a time when everyone was grateful to see things the designers recommended, but now it’s changed to where the trends come from the street leaders. That’s a huge change. But I think there are certainly still trendsetters showing up in various fields. If you look at the big picture, we live in a time where international culture is everywhere in Japan. Young people of today should more actively feel excited about this, but compared to when I was a youth, they are definitely more subdued.

Lately, you have been extremely active in the field of environmental protection. Does it strike you odd that so many leaders of 20th century consumer culture are now becoming leaders for a new non-consumerist lifestyle?

I often talk about “culture and civilization.” In the 20th century, consumerism evolved and spread across the world as civilization. In that sense, our lives became very rich, and civilization moved forward. Conversely, however, looking from the perspective of “culture,” little by little we lost our “Japaneseness,” the Japanese lifestyle, and spiritual richness. If you ask Japanese people today, “Do you feel rich? Do you feel blessed?” there are so few people who say they feel rich. I will go to Bhutan this year, and we see the Bhutanese as people living in poverty, but they are extremely happy. From that perspective, I feel like civilized values and cultural values are totally different.

The 20th century only pursued civilized wealth, making things like 24-hour shopping and having light at all times possible. But since we only pursued that, the contradictions led to the development of our current environmental problem. In the 21st century, I think it is critical that we try to go back to 19th century values. I believe, by doing that, we can embrace our problems and find solutions.

Amongst those of us who promoted consumer society in the past, there is a slight feeling of guilt. We did what we did at the end of the 20th century, but in the 21st century, we think it’s necessary to have a different kind of “richness” ― to make a paradigm shift. I believe this will become a spiritual issue.

Do you believe that Japan can lead the world in this area?

Yes, I think so. I believe that Japan has a few cultural factors that make it a great example for the rest of the world. For example, as the Japanese word kachou fuugetsu [the beauties of nature] implies, I think we need to go back to paying attention to nature for completely understanding all the little seasonal changes.

I think we are in a deplorable situation where we are only waking up to the fact that Japan must take leadership after being told the merits of our country by Westerners. When you think about our 21st century environmental problems, Japan is the country with the least amount of natural resources. So I think it is important that Japan presents its values and its idea for a new lifestyle that preserves nature and values seasonal change.