This page is referenced by:
The Franchise Network
control; space; network; medicine distribution; wholesale system; Toyama; Doshōmachi; Honmachi
Previous paths have explored the importance of controlling the individual space of the franchise drugstore. This path, however, examines the value of managing the spatial arrangement between franchises within a broader network. Here, the interactions not only occurred between franchises within the network, but between different prospective franchise systems, whether it was Hoshi's or Shiseidō's or some other competitor's distribution network. It involved controlling the locations of individual franchises over a given region, in order to maximize sales.
As a newcomer trying to break into Japan's pharmaceutical industry in the early twentieth century, Hoshi relied on franchises because they addressed two fundamental problems. First, franchises helped the company gain a foothold into an already well-entrenched medicine distribution system in Japan. Second, they helped provide brand recognition. The selling of medicines, after all, is about selling promises, which is based on trust, reliability, and name recognition; franchise licenses ensured that merchants would sell Hoshi-brand products, rather than those of other brands.
Hoshi's franchise system attempted to overtake the prevailing wholesale system (tonya seido) for distributing medicines, which was similar to the distribution systems of other consumer goods. The wholesale system resembled, in both structure and function, the medicinal distribution system from Tokugawa times, which was composed of an intra-Asian network that funneled medicines from Nagasaki through monopolies in Ōsaka's Doshōmachi and Tokyo's Honmachi. The linchpin connecting manufacturers to retailers was, of course, the wholesaler (tonya), which substantially provided the same functions as their Edo period predecessors. The wholesaler took orders from the "ordering stores" (chūmonya) and the "stores selling to stores" (miseuriya). These stores then provided medicines to regional wholesalers (chihō-tonya), which were the final distributors to retail stores, doctors and pharmacies across the nation. This system roughly lasted from the beginning of Meiji up to the late 1930s.
Hoshi's franchise network also attempted to overcome another patent medicine network from Toyama, which was a sales system that explicitly catered to the rural backwaters of Japan's seacoast and which also had its origins from the early modern period. Toyama patent medicines were, perhaps, better known for how they were sold -- through a door-to-door system of peddling throughout the countryside -- than for the efficacy of the medicines themselves (gyōshō). The guiding ethos -- and principal sales slogan -- behind the sale of these medicines was the elevation of humanitarian needs over business interests: senyō kōri (“use first, pay later"). Medicine peddlers traveled to individual homes, and left a box of assorted medicines at the doorstep. Customers would have easy access to medicines the moment a sickness would occur, and they would only use what they needed. About half a year -- or perhaps even a year -- later, the merchant would return to settle accounts, restock supplies, and then customize later shipments. These deliveries and collections were often timed with the rhythms of rural life, often during or after seasonal holidays like New Year's or the summer festival of the dead, O-bon. Despite falling sales, partly due to state medical authorities criticizing the unscientific nature and poor quality of the medicines sold, this system of peddling medicine continued, adapting to the socio-economic changes of the twentieth century.
A rough sketch of Hoshi's franchise network is as follows. The company permitted only one franchise in each town or village. It did so to avoid, at all costs, competition among franchises as well as promote a cooperative group mentality among them. Each individual store, in a sense, had a sphere of influence in its designated area -- the store directly purchased its merchandise from Hoshi Pharmaceuticals, and it had the sole right and responsibility to sell goods for its area. The company likened these privileges to the "same special privileges as government-granted monopoly rights" (senbai tokushu wo etaru to tōitsu no tokuken). In practice, of course, there were a number of franchises that continued to sell other competitor's products in addition to Hoshi's, and if found out, they were summarily expelled.
The production of a space necessarily involved controlling the people who inhabited particular places. The next page, Placing People, further describes this logic, and the pages thereafter describe how this occurred through particular sites and vehicles.
Incentives and Rewards
incentives; sales; market; profit; loyalty; turnover
Although the structures of its franchise system enabled it to be successful, the company had to adapt its structures to fit the realities on the ground. One issue was that despite the company's measures to ensure franchise loyalty, the company often encountered disloyal merchants -- who openly dabbled in other manufacturers' distribution networks -- particularly as it grew larger and expanded its reach further into a national market. The financial health of the franchises on the ground was paramount. The success of the system was built upon maintaining franchise loyalty to the parent company; if individual franchises did not make profits, they were often tempted to skirt company orders or to leave the company's network.
Hoshi Pharmaceuticals employed a number of incentives and rewards to promote the fast turnover of its products and maintain strong ties with its franchises. For example, in January 1919, the company introduced a program called the "Friends of Hoshi (Hoshi kōkai)," which established a club for high-performing stores. Anybody could be a member as long as certain sales figures were reached, and ideally wanted every franchise would want to join. The requirement was an average of above one yen of sales per day or 365 yen per calendar year. If a store reached this goal, it was awarded between 3 and 200 yen, with the amount determined by a lottery. The winners were celebrated and ranked in Hoshi Pharmaceuticals' company newspaper.