Brief Biography of Takatoshi Mitsui

Takatoshi Mitsui (1622–94, Genna 8—Genroku 7) was the man who brought prosperity to the Mitsui family, one of the “Big Three” merchants. Takatoshi was born in Ise-Matsusaka (Matsusaka City, Mie Prefecture) in 1622 (Genna 8).

The Mitsui family’s ancestor was a small-scale feudal lord serving the Rokkaku clan, but when that clan was defeated in a battle against Nobunaga Oda, the lord fled to Ise. By the lifetime of Takatoshi’s father the family had come to operate a pawn shop as well as a business dealing in sake, miso, and soy sauce in Matsusaka. The store brand “Echigo-ya”was derived from [the younger] Takatoshi’s grandfather, Takayasu Mitsui, who held the title “Echigo-no-kami” (guardian of Echigo province). However, the older Takatoshi’s wife and the younger Takatoshi’s mother, Shuho, actually ran Echigoya’s day-to-day business operation. In the “The Mitsui Mind that was Cultivated in Matsusaka,” published by the Mitsui Public Relations Committee, states:

While Takatoshi [the younger] is considered the founder of the Mitsui Group, he did not start his business from scratch. His mother Shuho was a very intelligent woman, so skilled in business that she practically managed the “Echigo Lord's Sake Brewery” at that time. She was extremely thrifty, but at the same time very generous and faithful to her customers. The youngest of four sons and four daughters, Takatoshi probably grew up watching his mother when she was at her best as a merchant.Footnote 1

A major turning point for Takatoshi was his first trip to Edo at the age of 14 (under the traditional Japanese age counting system). Makoto Seoka describes subsequent events as follows:

Takatoshi first went to Edo in 1635 (Kan’ei 12). At that time, his father had already passed away and his mother had joined a Buddhist temple and was living a monastic life. Takatoshi’s reason for going to Edo was to help his eldest brother Toshitsugu run the Edo branch of the business. At the time, Toshitsugu had his own store in Kyoto and left the operation of the Edo branch to his younger brother, Shigetoshi. But four years later, Shigetoshi returned to Matsusaka to support the family’s aging mother. As a result, Takatoshi became the Edo store manager and the business thrived. He worked hard, dreaming of becoming a "Kyoto merchant who owns a store in Edo." However, back in Matsusaka, Shigetoshi died at the young age of 36. Then Toshitsugu, who had always felt threatened by Takatoshi’s outstanding entrepreneurial abilities, used Shigetoshi’s death as an excuse to order Takatoshi to return to Matsusaka to take care of their elderly mother.Footnote 2

After returning to Matsusaka in 1649 (Keian 2), Takatoshi Mitsui eventually started his own financial business, lending also to feudal lords. In 1673 (Enpo 1), after the death of his eldest brother Toshitsugu, Takatoshi opened a kimono store in Honcho 1-chome, Edo. Takatoshi, who became the patriarch of the Mitsui family, introduced innovative storefront sales (Tanasaki Uri) that later came to be known as the “Edo marketing method.” He achieved great success with a series of retail innovations, to be discussed in detail in the next section. Takatoshi’s mother, Shuho, passed away in 1676 (Enpo 4).

Takatoshi Mitsui, achieving great success with his “Edo marketing method,” moved his business headquarters from Matsusaka to Kyoto in 1686 (Jokyo 3). He opened a money exchange store, setting the stage to focus on the financial business. Four years later in 1690 (Genroku 3), the Mitsui family, under the name “Echigoya Hachirobei-Mitsui Jiroemon”, received an order to oversee the Osaka Gold and Silver Exchange of the Shogunate.

In 1694 (Genroku 7), Takatoshi died. Shortly before his death he ensured that his estate would not be divided among his children for the rest of their lives by drafting a will that included instructions for handling his property.

Groundbreaking Nature of “Tanasaki Uri” (Store-Front Sales)

What kind of retail innovation did Takatoshi Mitsui introduce at his Edo store? The Mitsui Public Relations Committee publication, “The Birth of Echigo-ya and Takatoshi’s New Business Method,” explains:

When his male children reached the age of 15, Takatoshi sent the boys to apprentice with merchants in Edo. He also sent other young men that he recognized as having potential to Edo as apprentices, steadily laying the groundwork for his future success in Edo. In Enpo 1 (1673), 24 years after Takatoshi returned to Matsusaka, his eldest brother Toshitsugu died of illness. With his mother's permission, Takatoshi decided to relocate to Edo, achieving his long-cherished dream. Takatoshi was already 52 years old. His sons, who were in training in Edo at the time, included: the eldest, Takahira, 21 years old; the second, Takatomi, was 20; and the third, Takaharu, was 17. Takatoshi instructed his sons to rent a small store in Edo Honcho 1-chome, the most prestigious kimono district in Edo, and opened "Mitsui Echigo-ya Drapery Shop" (Echigo-ya) under the brand name "Echigo-ya Mitsui Hachiroemon". He next opened a purchasing office in Kyoto managed by Takahira, and the Edo store by Takatomi. Takatoshi did not go to Edo but issued instructions from Matsusaka.

The trade name "Echigo-ya" was inherited from a store in Matsusaka. The name "Hachiroemon" comes from the fact that Takahira changed his own name to "Mitsui Hachiroemon Takahira" emulating (his father) Takatoshi's adulthood name "Mitsui Hachirobei Takatoshi." The name "Hachiroemon" became the honorary family name of the Mitsuis, assumed by successive generations of the patriarchs.

Although he assigned experienced children and staff members to his newly opened kimono stores, there were already several large, well-established kimono stores in Edo at the time. But Takatoshi developed brand new business methods through his ingenuity. His representative business practices were "store-front sales " and "selling products in cash without credit." At that time, the two most common methods of selling kimono at first-class kimono stores were "Misemono Uri" (demonstration sales) in which the shopkeeper would go to a customer’s home, show the customer a sample, take an order, and tailor-make the kimono, or "Yashiki Uri" (house sales) in which the shopkeeper would bring the pre-made goods directly to the customers and sell them. Payment was made either twice a year at the Bon Festival time [summer] and at the end of the year, or once a year in December. As a result, nonpayment and interest inflated the price tag, leading to poor turnover of funds. Takatoshi abolished this system and switched to store-front sales, lowered the price, clearly stated the price, and encouraged cash-only transactions. The revenue from cash-only sales accelerated the turnover of funds, and this was especially useful to suppliers who received payments twice a year. Another novelty was the practice of "Kiri Uri" (fractional sales) which was forbidden among kimono dealers at the time, as kimono fabric was sold only by fixed length. However, Takatoshi sold it in custom lengths in response to customer demand, and thus cultivated a huge new market among Edo townspeople. In addition, the "tailoring sales" (shitate uri) service, in which tailoring was done instantly on the spot, also became very popular. Echigo-ya eventually became known to the townspeople as an equal to other prosperous venues such as theaters and fish markets (Shibai Senryo, Uogashi Senryo, Echigoya Senryo), who all earned 1,000 ryo daily.Footnote 3

The traditional “demonstration sales” and “house sales” were retail methods that targeted wealthy individuals who could afford to own their own large houses. In contrast, the “store-front sales” initiated by Takatoshi Mitsui were for mass market customers. By the late seventeenth century, the market economy in Edo had developed enough that townspeople could walk in and purchase kimono. Seizing this new business opportunity, Takatoshi spearheaded a groundbreaking innovation in retailing: the Edo marketing method.

The Ground-Breaking Nature of Takatoshi Mitsui’s Retail Innovation

Business historian Masahiro Uemura labels the retail innovation by Takatoshi Mitsui as “cash-only, clearly marked price sales,” describing it as follows:

Among the marketing methods of the Edo period, the "cash-only, clearly marked price sales” method is considered unique and epoch-making. This has become established as a contemporary sales method, a low-profit, high-volume method of selling goods. During the Edo period, continuous and long-term commercial relations were the norm, so credit sales were established as a standard practice, and the retail industry was no exception. It was the Mitsui family who developed an innovative commercial method to break such norms and succeeded in rapidly expanding its business.Footnote 4

The cash-only sale of kimono with clearly marked prices was introduced by Takatoshi Mitsui, the founder of the Mitsui family. It was an innovative sales method that broke with conventional practice, along with selling wholesale to regional merchants, store-front retailing, and fractional sales of kimono fabric. Traditionally, it was common for a kimono merchant to visit samurai mansions in Edo individually, take orders based on the customer's needs, and then sell products on a credit basis. However, as Edo grew rapidly, there was a great demand not only from samurai families but also from the general public. In order to meet these new demands, a new way of sales became necessary. Takatoshi Mitsui opened a store in Honcho 1-chome in Edo in 1673 (Enho 1), but in order to stand out amid a group of older, established stores, he needed to devise a new business method. Thus, the cash-only, clearly-marked price sales method was born. Since there was no need for bargaining, new customers had peace of mind when purchasing goods, and because transactions were settled in cash, the price was kept low, allowing for a casual shopping experience. Also, for Mitsui, since cash sales enabled quick and reliable cost recovery and cost reduction, mass sales became possible. It saved time involving price negotiation and was suitable for a city like Edo, a crossroad for large unspecified numbers of people.Footnote 5

As Uemura notes here, the retail innovation implemented by Takatoshi Mitsui subsequently “took root as a contemporary sales method.” Front-of-store sales, replacing traditional methods such as “demonstration sales” and “house sales,” subsequently became the dominant retail method, continuing to this day. It is only recently that e-commerce has come to shake up store-front sales. Although the advent of this type of retailing was found in other countries, it is important to note that Takatoshi Mitsui introduced it while Japan was closed to the world. Japan was separated from overseas under the isolationist policy, and for Takatoshi as well as other merchants, Japan was the “world.” Under such circumstances, Takatoshi, who introduced the “world’s first” retail revolution, was another standard bearer of breakthrough innovation, as in the case of the Konoikes who introduced double-entry bookkeeping.

Introduction of the Joint Ownership System

With the success of Takatoshi Mitsui’s retail innovation, the Mitsui family made great advances and became one of the “Big Three Merchants”. The Mitsui family’s business had two pillars: a kimono dealer and a money changer. In 1710 (Hoei 7), the family established “Omotokata” as an organization that supervised both their kimono stores and their money changing businesses.

It was Takahira, the eldest son of Takatoshi Mitsui, who created “Omotokata.” Takahira also followed in the footsteps of his father in handling family property. As noted, Takatoshi had created a mechanism to keep the family property from being divided during his children’s lifetime. Takahira institutionalized this within the family’s constitution by personally preparing the document “Sochiku’s Will.”Footnote 6

Miyamoto explains this development as follows, based also on Shigeaki Yasuoka’s theory:

In the case of the Mitsui family, the founder Hachirobei Takatoshi, hailing from Ise-Matsusaka, went to Edo, opened a kimono shop, and made a fortune. By the time of his death in 1694 (Genroku 7) he owned kimono stores and money changing stores in Edo, Kyoto, and Osaka, and continued to run multiple stores. Three months before his death, Takatoshi wrote a will with instructions on the division of the property. The total assets were to be divided into 70 parts, and a total of 6 sons and 3 sons-in-law (adoptees of the Mitsui family), a total of 9 people, were to be given the inheritance in proportions prescribed by Takatoshi. However, after Takatoshi's death, the heirs submitted a letter to his eldest son, Takahira, requesting that the bequeathed assets be managed without splitting it as their common property.Footnote 7

While the pledge submitted by Takatoshi's heirs to the second-generation patriarch, Takahira, was valid for only one generation, Takahira wrote a will (called Sochiku’s Will) in 1722 (Kyoho 7), according to which the "principal money" was to be divided into 220 parts. He did not approve individual claims by equity right holders, but rather established collective asset management as the house rule. Since then, the equity interest of "Omotokata" has been held only by Mitsui's nine families (later increased to 11 families). In addition, division of ownership and disposal of assets was not allowed, and each household, as a rule, practiced sole inheritance. So ownership became exclusive and permanent.

According to Shigeaki Yasuoka, it is more accurate to explain the ownership of the Mitsui family's "Omotokata" through the concept of "Gesamteigentum" (joint ownership) of Germanic village communities, rather than that of "Miteigentum" (co-ownership) in line with Roman law. In other words, in "joint ownership," the group of asset owners has the right to manage the entire asset, and each of asset owners has the right to claim profits from the asset he owns. As stressed by Yasuoka, joint ownership was the concept underlining the Mitsui family's approach toward “Omotokata.”Footnote 8

Since the joint ownership system introduced by the Mitsui family did not allow for the division of family assets and blocked any individual property owners’ rights to dispose of property, it served to restrict ownership. In time, store managers grew more powerful than Mitsui family members, and consequently the family came to hire professional managers during the Meiji period. The hiring of professional managers laid the conditions for Mitsui’s development as a zaibatsu, as will be discussed in Cases 4 and 5 of this book.