On May 26, the general shareholders meeting of Sanyo Shokai rejected the RMB Capital’s new proposal of reformation of the board directors, and passed Sanyo Shokai’s proposal that includes reappointment of Masayuki Nakayama as the Representative Director.

On April 14, in the ‘Revitalization plan,’ announced ahead of the general shareholders meeting, the company attributed that causes of their poor business performance to “delay in marketing reform, unreasonable stretch goal, and halfway structural reform,” and aimed to improve brand value and recover the fundamental earning power. From now on, reconstruction is going to be made under new organizational structure led by Shinji Oe with past experience at MITSUI & CO., LTD. and proven contribution to the revitalization of GOLDWIN INC., who was promoted to the president from the executive vice president, and Masayuki Nakayama, who turned from the president to the executive vice president.

The new management expressed their firm intention to “reinforce,” “perform thoroughly,” and “push through” each measure for management reform including creation of the organization capable of short-term solution, centralized management of all brands, permit system for purchasing, sales channels control, branding strategies, and so forth.

However, despite such strong and brave words, there have not been any signs of effectiveness of the growth strategies. The ‘revitalization plan’ does not mention anything about future trends or changes in consumption behavior. Consequently, they don’t know who are the customers and they don’t have clear views on fashion. Even though the plan is a material intended for investors, value proposition of Sanyo Shokai, operating as an enterprise, to the customers and to our society is weak, which makes the customers unsatisfied with the plan.

In the first place, the problem is the lack of foresight and responsiveness to changes in consumption structures and distribution structures over the last 30 years. For the 30 years, therefore, downfall of apparel market was obvious, shrinking from 15.3 trillion yen to 9.2 trillion yen, and simultaneously, total sales of the department-stores market declined from 9.7 trillion yen to 5.7 trillion yen, losing the demand of as much as 4 trillion yen from the peak period. The true nature of the problem is not something to do with ‘Burberry,’ warm winter, or consumption tax hike, let alone inbound tourists. All I can tell is that, this is not a unique problem to SANYO SHOKAI LTD. but a problem common to Onward Kashiyama Co, Ltd., World Co., Ltd., Isetan Mitsukoshi Holdings Ltd. or Takashimaya Co., Ltd. Therefore, the industry will not thrive in future unless the past fundamental problems that caused the loss of 4 trillion yen are corrected.

On May 15, Renown Incorporated commenced civil rehabilitation proceedings. On May 26, NAKAGO CO., Ltd. announced that they are going to close down NAKAGO Fukushima at the end of August. On the same day, Aomori Kokusai Hotel filed for its bankruptcy. What this means is that the COVID-19 took away in one fell swoop the period of time allowed for the companies to solve the shelved structural problems associated with apparel industry, department stores, local economy, etc.

For the time being, we have to live alongside the COVID-19. This being said, we are responsible for turning this tough time into opportunities for our future; otherwise we cannot be rewarded for the great sacrifices. “When everything is over, do we really want to recreate the same world as before?” (How Contagion Works: Science, Awareness and Community in Times of Global Crisis, Paolo Giordano) – This is what I mean.

This Week’s Focus, May 29

Takashi Mizukoshi, the President