Sunday, July 14, 2002

Toshio Narita, of Niigata, Japan, makes onigiri in the food department of Shirokiya as part of the Niigata festival at the store in Ala Moana Center. Last year, Shirokiya's local managers took over the store from Japanese parent Tokyu Department Store Co.

Saving Shirokiya

A year after nearly going
under, local managers have
turned the store around

By Russ Lynch

Tough competition from big new stores and economic setbacks since Sept. 11 have hampered many island retailers, causing some to close or cut back.

However, one is thriving: the Shirokiya department store in Ala Moana Center.

Its operators say that is because its financially troubled parent in Japan, Tokyu Department Store Co., was persuaded to sell the store last year to Shirokiya's own management who, in turn, kept it aimed squarely at its traditional audience: local consumers of Japanese goods.

"When Tokyu owned the business, we always had to follow their guidelines. Decisions had to go back to Japan for approval. But now we can make decisions here, based on what is best for our customers. We don't have to go through all the red tape," said Tadatoshi Suzuki, chairman of the holding company that bought the store last year for $1.

The store has about 180 employees and has annual sales of about $35 million.

Suzuki, now a resident of Japan, spends a lot of time in the islands and has spent years living here in key posts at Shirokiya over the past 35 years.

Tadatoshi Suzuki, president of Shirokiya, says the store intends to keep a consistent focus on importing Japanese products to sell to local customers.

Walter Watanabe, store manager, was born in Hawaii and has worked at Shirokiya since 1974, when he was still in college.

"We serve the local people in the islands; 80 percent of our customers are local. We're not geared for tourists," said Watanabe, a director of Shirokiya Inc. The business depends on treating island residents right and doesn't depend on tourists, although tourists do come into the store and buy, Watanabe said.

Mainland tourists buy expensive kimonos, such as wedding kimonos that can go for thousands of dollars, and take them home to use as wall hangings. They also buy many of the lower-priced items, such as fine china and lacquerware.

But the store's main business is local. That is one of its keys to survival, Watanabe said.

A feature that continues to attract Hawaii residents, and not just those who came from Japan or are of Japanese ancestry, is regional fairs, which occur six or seven times a year and show off foods, arts and crafts that are particularly representative of a region in Japan. There are also smaller demonstrations in the store throughout the year, keeping the atmosphere lively, he said.

Under the management structure in place now, there are seven owner-directors, four of whom live in Japan and three in Hawaii, explained Suzuki, who in addition to his director post is chairman of Shirokiya Holdings LLC and president of Shirokiya Inc.

Shirokiya employee Joshua Baldovi, right, helped Hiro Hikisa Thursday with a Sony Clie, a personal digital assistant, in the electronics department.

Suzuki was sent to Hawaii from Japan in 1967 to manage the food department and the toy store.

He stayed until 1971, then went back to Japan. He came back to serve as general manager and vice president from 1976 through 1984.

He was with Tokyu-owned Saint-Germain Bakery as director of the overseas division from 1985 to 2000, when he retired.

Tokyu had been looking for a way to get out of the retail business in Hawaii. In the end, Tokyu agreed to sell the store to Suzuki, Watanabe and the others, for $1, taking a $23 million loss.

"It was a very sweet deal," Watanabe said. "We were very lucky that Tokyu felt that Shirokiya was valuable to this community."

The corporation wanted to see the 44,000-square-foot store stay, despite its own troubles.

Tokyu Department Store, the retail arm of giant Tokyu Group, was piling up red ink in what would end up to be a $470 million loss for the fiscal year that ended in July 2001.

Shirokiya and the Saint-Germain bakery business were Tokyu Department Store Co.'s only operations in Hawaii and they made money some of the time.

But the parent company's retail operations ran into trouble in the late 1990s with the plunge of the Japanese economy.

Tokyu Group also has a travel business in Hawaii and once owned the Hawaiian Regent Hotel, now a Marriott property.

But its biggest business in Hawaii is still the Mauna Lani Bay Hotel & Bungalows on the Big Island's Kohala Coast.

The Japanese financial press widely reported the companies troubles and went so far -- erroneously, as it turned out -- to report that Tokyu would simply close all its overseas retail operations.

It did close its Pearlridge Shirokiya store in March 2001 and the Maui store last May. But Ala Moana stayed open and Suzuki, Watanabe and their partners were delighted that Tokyu agreed to pass the ownership over to them at essentially no cost.

"We didn't have to mortgage our homes," Watanabe said. What the buyout group did find out fast was that the structure with the Japan parent created overhead expenses that cut into local profits. There was too much inventory, too much reporting to the head office and too many expenses related to operating as a Japan-owned business, he said.

The challenge after the ownership change was to keep the business going at a profit, and the way to do that was to keep on doing what the store had been doing.

"We are doing quite well. We are profitable," Suzuki said.

The store did need to cut some expenses and reorganize, Watanabe said.

"We cut our warehouse space in half and reduced inventory," he said. Executives worried that the smaller inventory might end up in reduced sales but sales have risen.

The store is on a 30-year lease from the shopping center and that runs out next year. However, General Growth Properties, owners and managers of Ala Moana Center, have kept the door open for renewal talks and it seems likely the store will stay.

Meanwhile, it is business as usual.

"We try to create a friendly atmosphere in the store," Watanabe said, making it a place where people like to stroll around, sample wares and chat with sales clerks and each other.

"Our merchandising is quite different" from the rest of the stores at Ala Moana, resulting in an "only in Hawaii" mixture that brings island residents back regularly but also pleases visitors, he said.

"We still need the Japanese connection" for purchasing and other activities in that country, so it helps to have some directors in Japan, Watanabe said.

One of the busiest spots in the store is the electronics department, which Watanabe said is the biggest revenue producer. Sales there are led by the high-ticket items, such as digital cameras and television sets.

What keeps people coming to Shirokiya electronics section despite such competitive giants as Circuit City is service, Watanabe believes.

"We have representatives from Sony, Panasonic, Canon and Fuji and so on here all the time," he said. "We can help you get your equipment serviced. We can show you how to operate it. People want to go to a place where they feel comfortable and can trust us."

Shirokiya has workshops in its electronics department from time to time, where customers can bring in, say, a Toshiba VCR and have a Toshiba expert look it over and make repairs.

One innovation that is rapidly rising in popularity is Book-Off, the discount Japanese-language books and music section on the main floor of the store.

Really popular with local customers is the Saint-Germain Bakery, where there are often lines waiting for fresh-baked breads and pastries.

Real estate analyst Stephany Sofos of SL Sofos & Co. said she thinks one of the reasons Shirokiya is doing well is that it has become a place to go for tourists.

"Westbound tourists are liking it now," she said. "It's a flavor they can't get in Los Angeles or New York." Plus, she said, Japanese visitors see it as a bit of home.

Whether it will survive General Growth's lease negotiations will depend on what management can demonstrate in terms of expected future revenue, Sofos said, because the shopping center owner "is really about how much dollars you are going to be bringing in."

The store faces a lot of competition, not just in the consumer electronics area from the likes of Circuit City and Video Life but from such vendors of Japanese foods as Marukai and Daiei, Watanabe said. Shirokiya's answer is to target its customers, looking for the best it can bring them, he said.

Fumiya Matsushima, one of the original employees from the 1959 opening and now manager of the personnel division, said she felt "very lonely" when the threat arose last year that the store might close.

"This is a Japanese store," she said, like nothing else in Hawaii, and she stayed because she really felt she was spreading good things about Japanese culture.

When the store became owned by its own management -- she is one of the three local owners -- she felt "a feeling of a fighting spirit" to make a go of it, she said.

Regular customer Jiro Ohashi said the store is unique. He believes the range of top-quality Japanese goods the store sells can't be matched and it is particularly important to him that it is a convenient place to shop.

He said the Japanese foods have a "traditional Japanese taste" hard to match elsewhere and many items in the store can't be found easily in Hawaii.

In the end, it wasn't Tokyu Group's ongoing involvement in Hawaii tourism that kept Shirokiya here, it was persuasion from the Hawaii management.

"The Hawaiian people persuaded them," Watanabe said. "It's because the Hawaii people voiced their opinions,."

Nearly 30,000 people signed "keep Shirokiya" petitions and letters to Japan, including dignitaries such as U.S. Sen. Daniel K. Inouye.

"This Shirokiya is really the people's store," Watanabe said.

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