Sogo & Mizushima

Interesting history of Mizushima and Sogo. Sogo was the #1 dept store of Japan in the 1980-1990s but later went bankrupt.

Growth: it grew big with the use of unconventional methods including buying land and using that as collateral to borrow to grow. As land prices grew, Sogo did very well, expanding up to 30 stores in Japan and then going overseas. As a result of difficult discussion with original Sogo owners, Mizushima also took the route of establishing new dept stores under new entities, with only he himself owning majority stake in all of them.

Mizushima was quick tempered, scolding and dismissing a staff for mishandling a TV commercial and newspaper ad project, and changed the project lead over such a trivial matter. But his charisma allowed him to obtain big loans from banks and to at least make an impact in the retail world (introducing the concept of dept stores, and grew to be #1 in 1980-1990s).

Undoing: However, his methods came to his undoing when land prices fall, Sogo's debt ballooned and grew to saddle the co. While the actual business also suffered when old stores become dated, newer concepts such as standalone monobrands, malls, shopping streets came about. Mizushima foresaw the changes but was unable to change fast enough.

Kishicho Sogo: He wanted to start this last Sogo but was stopped by the bank. To make things work, he put in his own wealth of 50bn yen (c.500m USD) to open the store. In 1996, things became very bad, stores cannot keep up with grandeur, visitor traffic fell, Sogo went bankrupt in 2000 under 1.8 trillion yen of debt.

Mizushima was also investigated for wrongdoings, in the end, they found that he withdrew some money (c.USD 1.5m) before the bankruptcy officers can check. This was intepreted as criminal offense (withdraw to avoid seizure of assets after bankruptcy procedures) and he received a sentence.

However he was also still well respected. In an OB meeting of Chuo University, he received the loudest applause despite being labelled as a criminal. Nikkei wrote a special about him in 2013.

Lessons Learnt:

1. Growth always have to be sustainble, the fast and bigger the growth, the harder the fall. Sustainable growth means doing things slowly but steadily, not using too much leverage, keeping things simple.

2. Always strive to do good: While Mizushima seemed to have done good, he perhaps did enough bad that caused his downfall. For a bankruptcy to affect his personal finance and for putting him in jail over a small matter also meant he really had some really tough enemies and they were all out to get him.

3. Flexibility: It is very important to be flexible, always change when things change. Mizushima foresaw the end of dept stores but could not change either bcos it was his baby, he couldnt change it, or he was too slow. He was also not flexible enough to just say no to the last Sogo which caused his own demise in some ways. Ego is a dangerous thing.