The modest owner of two American mountains explains how an aircraft-deployment
theory helped build his sporting-goods empire
Katsuro Ogino is the kind of property and merchandising mogul you expect
to find jet-setting across oceans and hobnobbing with the rich and famous
in Sun Valley and Gstaad. His family-owned sporting-goods business, Victoria
Co., Ltd., has a market value of several billion dollars. In the past two
years, he has used some of the value as leverage in making sizable investments
in American real estate - not office towers in New York or Los Angeles but
an entire mountain in the Rockies and another in Vermont.
Along one pricey stretch of land in Tokyo's Kanda district, moreover, he
owns seven large sportin-goods stores, where skis and skiwear account for
about 70% of the sales and golf and tennis equipment porovide the remainder.
Yet when Ogino, 40 strolls through one of his shops wearing his rumpled
blue suit and cardigan sweater, even Victoria employees sometimes fail to
recognize him.
With only a few assistants, Ogino works in a cramped seventh-floor office
that sports a map of Japan on the wall and a couple of books on mergers
and aquisitions on the shelves.
In the following interview, he tells how his single-minded pursuit of tactical
advantage has helped him build one of Japan's most successful retailing
operations:
I'd like to answer by posing a hypothetical question: Two countries are at war, one has an air force of 100 planes and the other has only 10. Let's assume the skies are clear and that the planes and pilots are equally good. If the two forces were to meet in a dogfight, how many planes would be left after the battle?
Wrong. Statistical analysis suggests the result would be approximately ten losses to two. It would seem that the obvious implication for business as well as battle is that the bigger, stronger side always wins. But what if the outnumbered side managed to knock out three or four planes? This would constitute a victory of sorts. In other words, use of tactical ploys can provide the underdog with a momentary local advantage over his superior opponent.
Scoring in a specific area even if the overall battle is lost. For example, the commander of the smaller force tells one of his pilots to fly ahead as bait, in an effort to pull out four or five of the enemy in pursuit. If the tactic works, the remaining nine planes would outnumber the pursuers, and shoot some or all of them down, with only three or four losses of their own. Of course, the enemy might not fall for the ruse, but the point is that careful planning can improve your chances.
I'll tell you. My brother (Teibu Ogino, now chairman of Victoria's board)
and I inherited some property in Kanda from our father. We had always liked
sking and decided to go into the business, opening our first shop in 1972,
just when the sport was gaining in popularity. There were other sporting-goods
stores in the area, but we managed to do pretty well and soon opened two
branches in the same neighborhood.
Several years later, we were considering expanding into other big markets
like Osaka and Sopporo. But one of my friends, a proponent of the Lanchester
theory [consultant and author Shinichi Yano - ed] who now runs a management-consulting
firm in Tokyo, said it would be suicidal to branch out too early.
"Secure your home base first," he said. "Don't spread your
forces too thin; instead, concentrate on your home ground." So we kept
our fourth, fifth, sixth and even our seventh shops in Kanda, where we now
control abot 60% of the floor space. We also have about 60% of the sales,
surpassing competitors such as Alpen and Mizuno, neither of which has more
than 20% of the business in kanda.
Victoria accounts for some 30% of ski and skiwear sales in greater Tokyo
region, but probably only about 10% nationwide. Other companies such as
the giant discount chain, the Daiei, sell skis and skiwear. But they also
sell bread and butter and thousands of other products, too. We expect sales
of about $557 million this year, but Daiei will probably pull in about 25
times as much. They would crush us if we tried to compete with them as general-purpose
stores, but in the area of skis, they can't touch us.
Take our highly specialized stores in Kanda:
There is one primarily for women, one for kids, and so on. Some of our floors
are devoted entirely to gloves or goggles. Customers come to Victoria because
they know they'll find exactly what they want. The whole point of the Lanchester
theory is to become the dominant player in your own field.
Yes, I believe it is. A lot of companies use it to make siting decisions.
Japan is different from the United States in that so much of the economy,
something like 60%, is concentrated in the Tokyo metropolitan area. And
in the case of some consumer products, a large proportion of the Tokyo market
happens to be clustered within just a few blocks, whether it be Akihbara
for consumer electronics or Kanda for skis and skiwear.
If you succeed in Tokyo, you may not have to worry about anyplace else,
because smaller shops in other parts of the country tend to be less efficient
and thus less profitable. A large proportion of our overall profits comes
from the Kanda shops, but we do have more than 100 directly managed outlets
nationwide, which help boost our total sales volume and give us a lot of
clout with industry suppliers.
Of course. The theory says there is a point of optimum saturation. Beyond that, it works against you. If customers felt that the only place to buy skis in Kanda was Victoria, they'd stop coming here. They want variety, competitive prices, a chance to shop around before buying. But we're strong enough to defend ourselves against rivals.
Although approximately 80% to 90% of skiwear is made in Japan, the proportions
are reversed for skis, boots and bindings. About 70% of this equipment is
imported, making the ski industry unique among Japanese consumer markets.
I imagine the importers are very pleased. This is a big market - maybe as
big as or bigger than that of the United States in dollar terms. For reasons
of both fashion and superior performance, Japanese skiers tend to prefer
imports and the typical customer spends at least $700 per purchase. Our
main suppliers are established European companies such as Rossignol, Salomon,
Atomic and Nordica as well as American makers such as K-2 and Olin. It's
easy for them to sell in Japan because the market is so concentrated.
We're involved in several new projects in the United States, Australia and elsewhere, and I really can't go into much detail about our investments because some of the negotiations are currently under way.
Sure, we'll probably have a ski shop or two, and encourage Japanese skiers to visit the resorts. But that's not the main thing. We're interested in developing real estate and other spin-off businesses. A lot of this is done through our bankers. You know, when it comes to running a ski resort, it doesn't really matter if the owner is Chinese, Japanese or American.
No, but we've got one for company employees. You have to understand that
I'm not a very flashy guy. I like to stay out of the limelight.
This article first appeared in the March 1990 edition of Business Tokyo
magazine.
[Business Tokyo is no longer published - ed]
Return to home page