The sōgō shōsha‘s longevity, up until this point, can to a certain extent be attributed to their adeptness in being able to rapidly acclimate themselves to the changes in the business and economic environment over the years. By moving quickly and being flexible, the sōgō shōsha have been able to find new products, new customers and new markets to supply. Through it all though, their role as a trader, supplier and intermediary has remained the core of their business.

Keys to evolving

However, this does not mean their business model has not evolved. From simple middlemen collecting commissions, the sōgō shōsha were able to develop other expertise in information (global network), logistics, finance and risk management that allowed them to diversify their product base and extend their market reach. And by combining these functions they were able to add large-scale project development to their business model mix. Furthermore, by injecting investment into the formula they have been able to integrate their supply chains much further, with value-added operations at certain junctures, and create a new earnings base in the process.

That said, over the last 50 years, the number of sōgō shōsha has fallen from 12 to 7. Given Japan’s declining population and low growth prospects, there is every possibility that this number could be reduced further.

In the near term, one of the keys to the sōgō shōsha’s further evolution, even though they currently have a strong global presence, will be their ability to adapt their current upstream-downstream supply chain business model, which is still somewhat Japan-centric, and their large-scale project development in growing overseas domestic and regional markets in various forms. In the midterm, the challenge will be to further innovate, meaning to combine and coordinate their logistics, finance and other nontrading functions, including new technologies, to create seamless supply packages for their individual customers, and possible new businesses, while at the same time using investment and their global network to gradually integrate these domestic supply chains into regional and/or global upstream-downstream supply chains.

What new industries may emerge, in the longer term, and what form new business will take remains to be seen. However, they will certainly be influenced by new technologies and the digital transformation.

So, the other key, most crucial to the sōgō shōsha’s continued evolvement and even existence, is staying ahead of industry and business trends.

Complacency — a death knell

It seems the sōgō shōsha go through a major transformation or adjustment about every 20 years or so, usually brought on by drastic changes in the external environment or a crisis of some sort. This was first seen in the 1950s, amid the competitive scramble by a plethora of specialized trading companies to become sōgō shōsha. Then the late 1970s saw the winter of the sōgō shōsha period in which manufacturers began to eliminate them as middlemen. Next was the latter half of the 1990s following the bursting of Japan’s economic bubble and ensuing domestic economic downturn along with the emergence of the internet and global mega-competition.

As mentioned, not all of the sōgō shōsha have been able to survive on their own, having either merged, been absorbed or having downsized into specialized traders.

Why did they fail to adapt? Was it complacency, were they too conservative, or did they take on too much risk? I lean toward complacency and conservatism — maintaining the status quo. They were basically late in adjusting to industry, business and even economic trends.

It has now been nearly 20 years since the last major transformation, which begs the question, are the sōgō shōsha due for another changeover?

In the last major transformation in the early 2000s, the surviving sōgō shōsha overhauled their management systems adopting the latest methods, adapted new technologies and techniques to their functions, and began investing in such new areas as information technology, renewable energy, biotechnology, nanotechnology, health care, alternative fuels, financial services and environmental-related business. This was spurred by radical domestic and global changes and actual financial crises among some sōgō shōsha.

However, since that last transition, the sōgō shōsha have not really faced any real crisis, financially or otherwise. Yet, concern over the potential effects of the digital transformation on their businesses and possible limits to the vertical nature of their business and organization has been pushing them to build a healthy sense of crisis to avoid the sōgō shōsha’s death knell — complacency.

New technologies, incubation

The sōgō shōsha, have been investing and creating strategic and cooperative tie-ups in the areas of information technology, artificial intelligence, the “internet of things,” 5G, blockchain technology, industry 4.0, big data, fintech, the sharing economy, electric and autonomous vehicles, smart cities, fuel cell batteries, energy storage systems, space flight, and many other technologies and smart systems much too many to mention here. The sōgō shōsha also have tie-ups with universities and research centers on new technology development.

The sōgō shōsha are looking to both create new businesses with these technologies or apply them to existing business to create efficiencies, much of which is related to digitization and the digital transformation.

Marubeni Corp. does this through their Digital Innovation Department, which works with all the business divisions to find potential new business or applications, for example, in AI, big data or the IoT, in each of their industries through the entire supply chain. They also do this through such company-wide committees as IT strategy and hydrogen business, or the automotive task force, which looks at EVs and autonomous vehicles, among others.

Taking EVs as an example and given that Marubeni and the other sōgō shōsha see EVs as a wave of the future, they are involved not just in EVs themselves, but the entire EV ecosystem and supply chain, from the supply of advanced materials to EV makers to the supply of lithium carbonate and hydroxide — raw materials used in lithium ion batteries — to battery manufacturers.

They also provide manufacturing equipment to battery manufacturers and market the lithium batteries to EV manufacturers and renewable energy power producers. Furthermore, the sōgō shōsha supply EV chargers to the market and are looking at the potential of EV charging stations.

This also can be connected to smart cities, where the sōgō shōsha may be involved in renewable energy and waste to power plants (IoT applications), lithium and hydrogen energy storage and EV batteries, EV chargers, building and home energy management systems using AI and smart energy devices such as smart meters. Autonomous driving services could also be added to this mix.

These are just a few examples of the current direction the sōgō shōsha are headed in terms of new industries and new business. In fact, if you wanted to know where new trends are leading you might well look at where the sōgō shōsha are investing.

Interestingly, as many of these new technologies come from startups and small businesses, the sōgō shōsha may develop a new function or role as incubators. Their marketing, finance, logistics and global networking functions would seemingly make them ideally suited for this task.


Another direction the sōgō shōsha, or at least Marubeni, is heading, is in what might be called the cross-pollination or cross-fertilization of its businesses. The sogo shosha’s businesses are basically vertically integrated upstream to downstream by industry. As such, each of these divisions are organized vertically including their subsidiary companies. However, there has been little cross-divisional or cross-group business being done. This actually applies to many areas in Japan including the government, where the ministries tend to act as individual silos.

Marubeni is looking to innovate across their divisions and subsidiary companies to create new businesses or give existing businesses new ways to profit and leverage the value of the Marubeni Group as a whole. To do this they have created the “Global Crossvalue Platform,” which includes a business model canvas that lists and explains 340 different businesses in the Marubeni Group aimed at finding potential new business ideas. Also, a business plan contest was launched with more than 160 proposals from throughout the group with the winners to become potential new businesses.

In addition, as part of this, Marubeni Academia was started, in which a diverse group of participants have been specially selected from the entire Marubeni Group to take part in a series of open innovation platform sessions based on both inside and outside expertise with the aim of creating new business models.

Don’t bet against them

Pundits have been predicting the demise of the sōgō shōsha for nearly 50 years now, yet most of them are still standing. Can they survive the next 50 years? It is not out of the question that a larger shōsha might absorb a smaller one, or that two sōgō shōsha might merge into one to gain size and competitiveness. Much depends on how they fare in overseas markets from this point. However, given the amoeba-like ability they’ve shown to adapt to a variety of unfavorable circumstances and considerable change I wouldn’t want to bet against them.

This is the 12th part of a new series of reports written by industry specialists and the final installment about Japanese general trading companies, or sōgō shōsha.
Patrick Ryan is a senior analyst engaged in global industry research in the Marubeni Research Institute, the research arm of Marubeni Corp. He has previously worked in International HR and International Corporate Strategies for Marubeni.

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.