MARUI GROUP Co., Ltd. MARUI IR DAY-Medium-Term Management Plan Business Strategy Briefing-<Questions and Answers＞

Retailing Segment
Q.

I understand where E-commerce is going, but other companies arethinking the same strategy. Department stores are also strengthening
their operations in E-commerce. The case of Surugaya is very easy tounderstand. I think your company is planning to increase the numberof such approach, but is it enough to fight them by itself? What are theadvantages for business partner of opening a store in a category otherthan fashion that your company is expanding in the future? What kindof points will you appeal to increase the product lineup? I think there
are some business partners that are located in Marui but have opened
stores in other companies of E-commerce.
On the other hand, what is the consumer's competitive advantage?

A. First of all, I believe that the greatest advantage for shop owners is that
we have both real store and E-commerce store. We get to hear from ourcustomers that the greatest merit is that they can receive and return
E-commerce purchases at stores in real stores, which gives themreassurance.
200 million customers visit the Marui store every year, but this system
is not used much. We would like to utilize a great number of customers
entering the real store and to strengthen E-commerce annunciation in
the real store. As for the way to strengthen the notification ofE-commerce, as I explained about the efforts of “Mercari Station”, weare thinking of setting up a space to properly notify and guide
E-commerce.
Next, regarding the site, although the download of the application has1

exceeded the plan, there is a problem in the usability. We will work toimprove the situation by listening carefully to the voices of ourcustomers and using Co-Creation. We also conduct interviews withgroup employees regarding points for improvement. We aim to build amore better product lineup and more better usability in ourE-commerce.
Q. To confirm, I think other department stores are thinking the same thing.
Your company's advantages are having real stores and its ability toattract customers. Is the brand that you have been excavating so far themain focus of differentiation?
Also, is it high hurdle to trying deploy general products that othercompanies handle in E-commerce in your E-commerce?
A.

I will answer in terms of production lineup. Needs are changing
drastically before and after the impact of the COVID-19. E-commercein MARUI GROUP has been focusing on fashion but is struggling.
In this environment, we would like to promote the development ofenhanced categories. The first one is life miscellaneous goods. Sales oflife miscellaneous goods are getting very good due to refraining fromgoing out. We would like to introduce products that are different fromdepartment stores and are reasonable and easy to use. The second one
is cosmetics related products. I think there are many luxury cosmetics
in department stores, but we would like to introduce products that arevery reasonable, easy to use and cost effective.

Q.

I think the measures to support tenants are very typical of you.
However, you have to change tenants in the future. I think you aresupporting all tenants now, but I think you need to draw a line toreplace tenants in the future. Will you continue to wait until thecontract expires as usual, and replace the existing contract gradually?
Or should you discuss with your business partners to some extent andreplace them speedily? I would like you to tell me the way of thinkingof balance between supporting business partners and changing tenants.

A.

we will accelerate the shift from the merchandise category to the2service and experience category. It is expected that severer situation
comes for tenants that sell goods due to impact of the COVID-19.
We will provide supports such as measures to strengthen thepartnership, but we have to judge individually the overall flow of themarket due to the COVID-19 effect and the actual strength of tenants.
In the future, we will reduce the composition of the fashion category
from 60% to 30%, and I believe that the sense of speed will not change
at all.
Q. The sense of speed will not change, does it mean that the speed will
not increase?
A. We will try our best to speed up, but I think the overall speed will befaster due to the COVID-19 influence. We want to make sure that weare not left behind too.
Q. In real stores, you have introduced the D2C (Direct to Consumer)
brand and shifted to stores that do not sell goods, and attracted
customers. On the other hand, why has E-commerce been so slow tobreak away from its dependence on apparel? We don't hear much about
the E-commerce site going down in the environment of the COVID-19,
so I think it's a serious problem.
A. I believe that the reason for this is that we have been so obsessed with
the idea of expanding the fashion category that we have delayed ourefforts in other categories. We have been focusing on categories otherthan fashion since last year. Introduce of products other than cosmetics
increased year on year, but went below our target. This was due to adelay in starting the deployment. We are also currently take anapproach for EPOS Card members. In April, the number of new users
by EPOS Card members increased.
Q. As the number of experience-based tenants increases in real stores,
sales of non-goods will increase. When you try to combine real storeswith E-commerce, I think more tenants cannot create a sense of theworld in the E-commerce. Can you match real stores and theE-commerce brand?
3A. In the suburban store called Family Mizonokuchi store, only food floor
was open during the temporarily closed. We used the event space ofthe floor to hold our E-commerce experience event. We received many
comments from customers such as, "I didn't know I could buy such a
product in Marui's E-commerce.". In this way, we plan to introduce
products that are supported by a wide range of customers in order tomatch real stores with E-commerce stores.
Q.

You say that you will increase the number of tenants with newexperience value, and I imagine that stores like Shinjuku Marui Annex
will increase. As a way of thinking about Retailing's profits, will it
promote to increase the number of customers by introducing newtenants and increase profits by issuing cards, rather than increasing thevalue of tenants? It also makes Retailing and FinTech more seamless,making it pointless to separate Retailing from FinTech. I think there
will be more situations that the store employees inform customers ofEPOS Card during their services, but how do you explain it to them?

A. First, it is about the profit of the store. The core of the profits offixed-term rental is how much rent fee can increase against the market
rent. The foundation is to increase profit by value up the rent at thetime of the contract and the renewal of the contract. Furthermore, inorder to maximize the LTV of credit cards throughout the Group,
employees at each of our stores work with tenants to acquire newcredit cards.
Next, there is the operation entrust. MARUI GROUP employees
recommend EPOS Card to customers while undertaking the operationsof tenants. This is an image of our Retailing and FinTech businesses
working together. Employees in the field understand that both theincome from fixed-rent housing and the improvement of EPOS Card's
LTV are contributing to the overall increase in MARUI GROUP'sprofits.
Q. I think that the skills required in the field will change in the operationentrust. Are the employees convinced that Retailing and FinTech areunited in raising the value of MARUI GROUP as a whole?
4

A.

Yes. Attracting new customers and acquiring new cardholders toimprove LTV have been firmly established in the DNA of MARUIGROUP employees.

FinTech Segment
Q.

I have a lot of questions from investors, especially from overseas
investors, so I would like to ask about rent guarantees. Given therecent news that credit guarantee companies are suffering, there is aquestion as to whether there is a possibility of an increase in bad debts
in your rent guarantee business, and how much do you have to pay
customer’s dept instead? I think there is no problem, but I would likeyou to explain the structure.

A. The environment is actually tough. 250 companies have entered therental guarantee market of ¥200 billion, and many small-andmedium-sized companies have entered the market. It seems thatcompanies that do not have financial strength are becoming moredifficult to operate the guarantee business in the COVID-19 epidemic.
Therefore, it is predicted that oligopoly will increase considerably inthe future. As I mentioned before, the government has established aguarantee system for bad debts, which guarantee the housing ofindividuals, "housing security benefit". Customers who cannot pay rent
can use the system, although government have certain standards. We
are guiding the use of such a system. Even so, there are small numberof people who end up with bad dept in a year. But the ratio of bad debt
write-offs in rent guarantee business is extremely low, at around 0.1 ~
0.2%, because they cannot live in their houses without paying rent.
Therefore, the overall impact is expected to be minimal.

Q. You've been pursuing strategies to maximize your share of household
finances, but the environment is changing. How are you going to get
the right side of household? As we discussed earlier, I think it's an5

opportunity, but what is your policy?
A. The big one on the right side of the household budget is the rent
guarantee, but about this I explained in the presentation, so I will
explain the other big pillar, the recurring payment. 37% of the active
members of EPOS Card use recurring payments such as utilities. The
remaining 60% have not made this payment yet by EPOS Card. Thereis still a lot of room for growth because there are many unusedcustomers. In response to this type of customer, when we conduct asurvey of customer needs, there are many people who say that it istroublesome and that they do not know how to do it. Therefore, we arepreparing a system that can easily switch to card payment by linking
member information with business partners in EPOS Card. In addition,
we are developing an application that makes it easy for customers tosee their own payment status. In fact, many customers use recurring
payments only for electricity or only for gas bills. If they use it for
multiple payments, they can save a lot of points. We would like toencourage customers to use our services more and more by making
them aware of this.

Q. What role does the FinTech business play in relation to the strategy for
introducing D2C tenants that you explained? If there is a new business
opportunity, please let me know. It's interesting to hear that you will beworking on supporting D2C, such as tenant operations outsourced byMARUI. Will FinTech's role in brick-and-mortar stores remain thesame?
A. If tenants are attractive, new customers will come to MARUI stores.
Attracting customers is an opportunity to attract new members. I will
work hard in cooperation with stores.

Q.

As a medium-term strategy for MARUI GROUP, you said thatinvestment in Co-Creation will carry out not only in D2C but also in6

various venture companies. Are there attractive areas in the FinTech
segment, such as business partners and technologies? Please tell methe direction.
A. In addition to D2C, we believe that MARUI GROUP will actively
pursue investment opportunities in Co-Creation through synergy withour core businesses, therefore the number of investment destinations
will increase. In the FinTech segment, we have expanded ourmembership through a variety of initiatives, including nationwide
expansion and expansion of collaboration with anime, as part of our
medium-term strategy. Increasing membership and credit card usage
will help the FinTech segment profit growth. Collaboration through
Co-Creation investment will be an important initiative for new growth.
Looking back, Fintech has made little progress with its business
partners over the past few years. I regret that we were unable to engage
in business partner’s management. Therefore, we have been expanding
our partnerships with outside commercial facilities and expanding ourmembership by providing rental guarantee services. As the group's
Co-Creation investment will enable the group to collaborate with eachmajor company in the future, we would like to strengthen cooperation
with companies in the FinTech segment in order to increase
membership and improve LTV. At this time, we have not decided towork with any specific industry. I want to proceed with that incooperation with MARUI GROUP.
Q. I’m sure there are a lot of partners, but you said that the funding will
go to tech ventures, D2C brands, etc. What do you want in relation toFinTech? What is the direction of the target content?
A. From now on, we want to focus on companies like Minna Denryoku
Co., Ltd.,. FinTech was unable to take a straightforward approach tothe environment. I think that through cooperation with companies suchas Minna Denryoku Co., Ltd.,, we can attract new members andcontribute to society by encouraging EPOS Card members to use
renewable energy.

7

Q.

Could you tell us will EPOS Card participate in the Maina pointsystem (individual number card point system by government) ?

A. We are not talking about it now, but we will enter as an applicablecompany. At first, it was said that the system was not very attractive
for credit card companies, but we would like to enter the market alongwith the major companies' moves.

Q. The revolving and installment payments accounts receivables on page
48 of the presentation material is different from the figure in FACTBOOK. What's the difference?
A. The difference from FACT BOOK is that in addition to thecard-revolving credit business, we operate the driver's license credit
business as an individual installment plan, and the balance for thatamount is shown as the difference.
Q.

I think it should be annotated. When the base is explained withdifferent numbers, there is a part we can’t well understand. I would
like to request for improvement.

A. I'm very sorry. Sincerely I understood.

Q. In your last Financial Results Briefing, you said that over time you will
increase investment in Co-Creation and increase the capital efficiencyof your entire balance sheet. In such a case, the revolving andinstallment payments accounts receivables may increase. The balance
sheet can be lightened by further increasing liquidation. Is it going inthat direction in relation to Co-Creation investment? At the earnings
briefing, you said that you will increase capital efficiency overall andin particular build up intangible fixed assets, and there will beCo-Creation investments as the trinity. The revolving and installment8payments accounts receivables become large in terms of current assets
and interest-bearing dept on the balance sheet. Until now, the ratio ofliquidated accounts receivable was set at 25%, but will the ratio beraised to 30% or 40%? As the amount of Co-Creation investments
increase, does such a direction arise for the optimization of the entire
company?
A. In our current medium-term management plan, we have set the ratio at
25% at the end of the fiscal year ending March 31, 2021. As you say, I
think we should increase this ratio as much as possible in view of thecapital efficiency. We estimate that we can increase this ratio up to40%. In the next medium-term management plan, we would like toimprove efficiency a little more, but the details have not been decided,so we would like to talk more clearly in the next medium-term
management plan.
Q. Does the possibility arise considering the current pace of transaction
volume in the FinTech segment and the optimization of the overallbalance sheet?
A. Exactly what you said.

9