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Retail Trends

The Human Spirit Prevails

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It’s been one year since March 11, 2011, when the 9.0 magnitude earthquake and gigantic tsunami hit northeast Japan, leaving some 20,000 dead or missing and obliterating towns and villages. To say everything changed that day for the people of Japan would be an understatement.

One of the companies dealing with the disaster as it unfolded was Aeon Co. Ltd., the largest retailer in Asia and Japan’s single-largest shopping mall developer and operator. Aeon EVP and Chief Strategy Officer Jerry Black was in his office -- a short distance from the epicenter -- that day. Last month he spoke with STORES editor Susan Reda, sharing how events unfolded. What he remembers most: The amazing power of the human spirit.

Where were you at the time? How close to the coast is that?
Our office is about 40 kilometers northeast of Tokyo. I was in my 18th-floor office ... in a meeting when everything started shaking at 2:46 p.m. Here we feel a lot of earthquakes, but this one was powerful. The building was swaying very heavily and things were falling over and falling off the wall ...

For maybe 30 to 60 seconds, some people tried to continue the meeting -- thinking it would stop soon. But it didn’t stop ... The building continued to sway even after the shaking stopped ... Within a couple minutes we saw the explosion of the natural gas facility over in Chiba Bay. We knew right away ... that we had a very specific disaster on our hands.

How quickly were you able to put a plan in motion?
Within 15 minutes our disaster recovery teams were organized in the board room. The tsunami warning was issued, but it had not yet hit. At 3:06 p.m. we had sent out text messages to our 22,000 people in the region. ... We sent out an automated assistance message [that] required them to push one button in response to ... questions such as “Are you okay?” “Is your family and your home safe?” And, “If necessary are you available to come in to work?”

At that point we were relying on Internet capabilities for those in the field to send us immediate damage reports ... Within one hour, we had more than 450 damage reports and the team was working at a rapid pace.

How were Aeon stores affected?
We have 443 stores in the region. On the first day 65 percent could not operate -- most of that was due to structural damage, power outages and flooding. We first focused on ensuring that our people and the stores were safe ...

The day after ... about 46 of our larger-format stores were not operational. ... we partially opened stores when possible. What was particularly scary to me was that on the first day, we had 10,000 of our people unaccounted for. Within about two weeks we had 95 percent of the stores back up and running.

Was there any loss of life in the AEON family?
We lost 21 of our people, but of those only one was on duty and killed in the earthquake. I’m told she was working to move shoppers to the top floor of one of our shopping centers when a wall inside a stairwell collapsed on her. Other than that tragic death, we didn’t lose any of our own people who were working or any of our customers.

How did Aeon employees react that first day, and over the course of the first two weeks?
Our store people were absolutely heroic. They understood that the people in the community needed them to be open, and needed access to food and water and medical supplies ... Our people did a lot of things on their own -- including handing out food and supplies as needed. Some of the largest stores began selling products from big parking lots; some of them were selling from the rooftop parking decks.

Basically they were doing anything they could to help the customers. What you have to keep in mind is that our people stayed in the stores helping customers, despite the fact that many of them were still trying to account for their own extended families.

It’s my understanding that some of Aeon’s shopping centers became temporary homes for those who lost everything. What was it like?
There were some 2,000 people in one shopping center for about two weeks. It basically became an evacuation center and our people took care of these folks. They handed out food and blankets and they helped to care for the elderly. The in-store pharmacist stayed and took care of the sick.

When I asked the shopping center manager how he organized that, he said he formed three teams. We had one team care for the evacuees, we had another team looking for missing people -- they were riding bicycles to people’s homes trying to account for the missing. The third team was working on reopening the stores.

One of the things that was really moving to me: They set up bulletin boards where people could post messages about loved ones they were trying to find. As you might imagine, people checked the bulletin boards daily. When the time came for people to leave the shopping center and move to more permanent shelter, the children wrote messages of thanks to the store personnel who had taken care of them.

Having a strong private brand [Topvalu] turned out to be a blessing. Was it a case of established relationships paying off?
Topvalu products are sourced in multiple ways including directly with domestic and overseas factories ... we have partnerships with 300 suppliers around the world.

Working with these partners and multiple sources of supply we were able to switch production locations to maximize supply. For example, milk was in short supply for some regions but we were able to provide milk from another supplier ... partnerships with domestic suppliers allowed us to gain preferential manufacturing and supply in some categories.

Concerns about radiation and its effects on the food supply were rampant. What steps were taken to assure the safety of food, stores and individuals?
Radiation was an issue almost immediately ... we set out quickly to find multiple radiation experts because we were aware that different isotopes behave differently in the food chain and they’re absorbed differently.

We were trying to understand how to evaluate food safety, given the hydrogen explosion, radiation and [government] messaging. Among the steps we took was to import more of our private brands; we imported ... things like salmon and canned tuna and bottled water from overseas -- and we did so quickly, which I think built up a lot of customer loyalty.

Aeon is well-respected for food safety and we have sound food traceability systems and standards that served us very well. We really did a lot of our own testing and we were especially proactive in providing our stores with the tools and information to communicate well with consumers.

How long did it take before some sense of normalcy returned; and what -- at the time -- were signals of normalcy?
Consumers were understandably restrained when it came to discretionary spending. We worked to come up with a promotion that helped to convince the Japanese people that it was okay to have fun again and to shop.

In an effort to spur shoppers to head back to the stores, Aeon launched the Ganbarou Nippon promotion campaign nationwide April 8-12. It included all the general merchandise stores and more than 22,500 shopping center tenants. The event also raised significant funds for the disaster victims.

We followed that campaign with another Ganbarou Nippon nationwide promotion April 28-May 2. We tried to balance respect for all the losses with helping as many people as possible -- at the same time fostering the spirit that Japan can overcome this.

Can you share some of the lessons you learned?
The first lesson is the power of the human spirit ... People came together and they took care of each other in such a selfless way. In many respects, that’s really part of the Japanese culture. They have an amazing capacity to overcome disaster. Living on an island, many people have been through numerous earthquakes over the years. Their ability to overcome and to stay strong is remarkable. Keep in mind that there was no rioting of looting here during the disaster; they took care of each other.

The second lesson for us is the power of business to collaborate with our suppliers to address and solve problems. We were facing massive shortages and brilliant business minds came together to meet the needs of our people. The third lesson is that you can never predict when and where a disaster is going to happen. Businesses need to have flexibility around supply chain systems; they need to do contingency planning and be prepared.

Japan has always been known for just-in-time inventory and it served us well. It doesn’t make a lot of sense to basically stockpile a lot of things around the country ... The flexibility of understanding who is going to do what and how we’re going to ship resources to the regions that have the greatest need is vital. It’s a lot more than evacuation and emergency planning.

In what ways were you able to work with local governments?
One of the things that stand out in my mind happened very early on. Our CEO met with the chairman of the labor union to address how people would pay for supplies, food, etc. People in the affected areas lost their wallets and their cash; their homes were destroyed. Together they came up with a plan to make payment available by means of an emergency fund. It eased a small bit of the overwhelming stress people were enduring at the time.

Here at Aeon we knew that own employees would be worried about whether they would have a job. We sent out letters assuring them that no matter what happened we were going to rebuild and ... their jobs were safe.

How was Aeon affected financially? Has there been a full rebound yet?
The disaster struck within a few weeks of the beginning of our fiscal year. Within a few days, many analysts had issued gloomy predictions about the Japanese economy and the retail sector. The Aeon management team had already made a collective decision to respond aggressively to this disaster in order to preserve sales and profits by quickly repairing and reopening our stores, shifting and repairing our supply chain and ensuring adequate product supply.

Despite the fact that we will have an extraordinary loss, primarily from the damaged facilities, we expect revenue for the fiscal year ending February 2012 to be up slightly to 5.1 trillion yen.

Are there still stores/DCs closed? Is there a timetable for reopening?
At this point all the stores are open; there are one or two that are still undergoing some retrofitting and reconstruction. The demand for food and home appliances and other home center-type goods is very strong.

Do you find yourself fearful that something like this can happen again? How do you handle the fear?
We still get some aftershocks -- not nearly as frequently as we did -- but it can be a little stressful ... Truth be told, I was not in any real danger compared to what all of our people were going though. I will say this: It wasn’t until several months later that I was sitting having dinner and realized that I could actually taste my food. You become so focused on helping people and on the enormous tasks at hand that everything else becomes rote.

How will Aeon mark the first anniversary of the tsunami disaster?
I’m not sure whether we’re going to do a memorial, but we will mark the event in ... a relatively understated way. A lot of people endured personal sacrifices, property losses and, of course, the loss of life. We want to be respectful of that and do something to mark it, but it will be low-key.