Nakauchi Isao

Nakauchi Isaowas a Japanese businessman who, as the founder (1947) of the retail chain Daiei, changed the relationship between manufacturers and retailers through his pioneering development of private-brand products.

Nakauchi opened his first Daiei Housewives Store, a drugstore, in the town of Senri (near Kobē) in 1957. In the early 1960s he expanded the store’s inventory to include groceries, and he later added electronics and clothing, among other items. Stores were opened across Japan, and in the 1970s Daiei became the country’s largest retail chain. The company’s initial success was due in part to Nakauchi’s push to end the traditional right of Japanese manufacturers to determine what products made it to the market and how much they would cost. Nakauchi’s views were shaped by his constantly battling authorities, making them eventually accept his markdowns and unorthodox trading activities. By pioneering the development of private-brand products as a strategy for checking large manufacturers, he changed the power relationship between providers and retailers. Some chose to categorize Nakauchi’s business philosophy as ruthless “survival of the fittest,” but by his own accord he wanted to double disposable incomes by slashing consumer prices in half. That, he believed, could be accomplished in less than 20 years by removing government regulations that stifled competition and increased costs. While maintaining that “only manufacturers worry about price-cutting,” Nakauchi proposed that the Japanese would have to start learning how to acquire interests other than their jobs if falling prices produced a shift in industrial structure and unemployment. Pushing for change and for the interests of consumers, Nakauchi became not only a maverick in the retail establishment but chairman and controlling shareholder of the country’s largest supermarket chain.

In the 1980s, however, Daiei began to face financial difficulties, which some blamed on overexpansion. Further problems arose following the Kobē earthquake of 1995, which caused about $500 million in damage to his outlets and inflicted the first financial loss ever on the Daiei empire. Nakauchi, who was severely critical of the government’s handling of the disaster, kept his stores open round-the-clock in defiance of regulations. Ordering his employees to immediately deliver relief goods to the disaster area, Nakauchi earned praise and respect. Fearful, however, that the earthquake might reverse the trend toward the liberalization he eagerly championed, he resigned from the prestigious post of vice-chairman of Keidanren (the Federation of Economic Organizations). He explained that he was fed up with making proposals to a government in whose ability to act he no longer had any confidence. Throughout the late 1990s, Daiei’s financial woes continued, and in 2000 Nakauchi resigned as chairman. Four years later he sold his company shares.