Originally from Chicago, Seth Sulkin, 56, first came to Japan in 1987 as a financial journalist for the Wall Street Journal, but soon switched careers and went into real estate. Thirty years on, he is now CEO at commercial developer Pacifica Capital. When the pandemic hit, he launched his first internet startup, a gourmet food-delivery service called Food-e that courriers meals to homes from such high-class restaurants as Nobu Tokyo, the Tokyo American Club and Elio Locanda Italiana.
1. How did Japanese financial news become your beat? I joined the Wall Street Journal around the time Japan was starting to become an economic superpower. I woke up one morning and the Plaza Accord was happening. I ran over to the Plaza Hotel and had a chance to interview the Finance Minister Noboru Takeshita. After that, I covered a lot of Japanese investment in the U.S. and interviewed Japanese organizations all the time. Eventually, I decided that Japan was the place I wanted to report from.
2. Why did you stop doing financial journalism? Two years into my assignment, I decided I wanted to get out of journalism. I was seeing lots of changes at the time in the business news world, and I didn’t see myself doing it for 30 or 40 years. So, I decided to go back to graduate school and change careers. I went to Stanford for graduate school. I came back to Japan to enter Stanford’s language institute in Yokohama where I studied for a year and was able to become fluent in Japanese.
3. Do you have any tips about learning Japanese? I have a lot of advice on this. If you want to become fluent, you have to quit work and concentrate only on Japanese. You should also find the best program you can. A good program with the appropriate time commitment is the only way. It is possible to become fluent in a year — I did it — but I couldn’t have done it part time.
4. What was it like studying the language in the early 1990s? I am jealous of people studying Japanese now. Just before I finished my studies, Canon developed the Wordtank electronic dictionary and it saved me several hours a day that I was spending with the Nelson kanji dictionary. I wish I had something like (Wordtank) from the beginning.
5. When does real estate development come into the picture? From 1991-93, I worked on big infrastructure projects all over the world for a quasi-governmental Japanese organization that did economic development work. This was my true start in real estate development. I then opened my own firm in ’95, Pacifica Capital, building American-style shopping malls in Japan. I was going all over the country — Kanto, Kansai, Kyushu — bringing American retailers into Japan.
6. How did Pacifica go from shopping centers to hotel development? By 2004, I saw that there was very little room to innovate in the shopping mall industry. Japan already had too many shopping centers. We moved into mixed-use commercial development in central Tokyo and, after the 2011 earthquake, we started building solar power plants for a few years. We were successful at that, but when the Japanese government changed the renewable energy subsidies, I looked at what sector I could get involved in that had less government regulation and had a real future. I felt that hotels were the best opportunity.
7. You seem to be comfortable making major shifts in business when needed. How do you make such transitions work? I apply the same skills to real estate development that I used as a journalist, which means I follow trends and develop networks of sources for information useful to producing a successful product. As a financial journalist, I needed to write something that my readers wanted to read, and that meant understanding financial markets. The same is true with real estate. I need to know the markets and trends, I need to know what banks are willing to invest in, then I need to take that knowledge and build something that will be popular with consumers.
8. What differences do you see in the business cultures of Japan versus the U.S.? In the U.S., you don’t need to have a lot of experience or a reputation, you just need to have a good idea. If you have a good idea, you can find a way to make it happen. I can’t say the same is true about Japan. I feel bad for young entrepreneurs trying to launch a business here. It is incredibly difficult, and the Japanese government is doing nothing to make it easier.
9. Why is that? First of all, Japanese banks only like to lend to people who don’t need money. So, you can either get a loan at a low interest rate or you can’t get a loan at all. The other thing I see is that Japanese tend to be afraid to fail. In Silicon Valley, for example, failing is not seen as a bad thing — it’s seen as a learning experience. In Japan, failing is seen as a bad thing and people are risk averse. Having risk-averse banks with risk-averse venture capitalists makes success extremely difficult in Japan.
10. Let’s talk about your new food-delivery startup, Food-e. What is it? Food-e is a gourmet food-delivery service that I created to save my favorite restaurants during the pandemic and to create a counter cyclical business that would benefit from the economic circumstances of the pandemic.
11. So Food-e was born out of the unique circumstances of the pandemic? Yes. My other businesses, hotel and commercial real estate, were all getting slammed by the pandemic, so I felt that having a business that would benefit from the food-delivery demand caused by the pandemic and had a strong likelihood of continued success after the pandemic ends, would ultimately be a good counterweight to businesses that were suffering. My hotels run restaurants directly, and my commercial properties have restaurant tenants, so I am very involved in the food and beverage industry. Listening to restaurant owners and chefs tell me why they weren’t doing delivery is what really got me to start Food-e.
12. What reasons did they give? They all noted that the commissions charged by the popular delivery services are simply too high for their business model. They are generally in the 35% to 40% range. Unlike fast food, when you eat in a high-end restaurant, typically 30% to 60% of your bill is going to be alcohol. But when you do delivery, most people don’t order alcohol. The profits from alcohol are critical to the business model of a high-end restaurant. So, without alcohol sales subsidizing the food, these restaurants simply can’t afford the 35% to 40% commission for the meals to be delivered without raising their prices by the same margin and shrinking the food portions. They know their regular customers would not want that.
But it is not just about money, it also about the quality of the delivery itself. Other delivery services get a lot of complaints about the drivers being late, the food being cold, shaken up or even missing. Sometimes the drivers even eat the food. For good-quality restaurants, they are just terrified of that.
13. So how does Food-e address these problems? I changed the balance. Other services have a low average order size, high restaurant commission and poor delivery practices. Food-e works with professional drivers, we meticulously work with the restaurants to choose quality packaging and we have much larger average order sizes that allow us to charge an affordable commission to the restaurants.
14. You launched in October 2020. How are things going so far? It is still a work in progress, but orders are definitely growing and word of mouth is starting to take off. We know targeting the high-end consumer base works. We have seen successful gourmet delivery services in other markets, for example in London with a service called Supper; it’s a city that has similar demographics to Tokyo along with a lot of quality restaurants. So we’re very confident in our own success as well.
15. How do you choose your restaurant partners? For some of the restaurants we approach, we already know there is something about them that we think is right for Food-e. But we get a lot of restaurants contacting us now, though we reject a number of them. We have to do our research by looking at reviews, the menu, photos and, of course, we taste the food.
16. Is this your first startup? In a sense, opening a hotel is a form of startup. But Food-e is my first internet startup. I am so happy I had the network and experience with Pacifica, without which there is just no way I could have done it. I can’t imagine what it is like for entrepreneurs without the connections and experience.
17. What are the differences between Food-e and your other businesses? They are both “people businesses,” so having a network of contacts is critical for both. But Food-e is much more of a sales business. I have to go out and have conversations with chefs and restaurants every day and sell them on Food-e. I’ve been doing business with Japanese companies for 35 years, and I always thought Japanese companies were slow decision makers. What I am seeing now, when I meet with a restaurant owner, is that they usually make the decision within the first meeting, while I am sitting there. It has been a pleasant surprise for me.
18. Do you consider yourself a foodie? Absolutely, I love good food. I love eating out and the stimulation of the design or the architecture and the atmosphere. In my hotel business, I select every chair, the carpet, the walls, the art — I select everything, so the design process is something I connect with at a good restaurant.
19. What is your ideal meal? I don’t eat meat, but I like fresh, colorful and healthy food. I’m very much into the presentation and sourcing of all food.
20. Does Tokyo strike you as particularly rich in food culture? Oh, yes. We all know the anecdote that Tokyo has the greatest number of Michelin-starred restaurants in the world. It also has by far the most number of restaurants in the world, and it is great to see the food-delivery market growing here now.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.