Business Model

Multi Service Retailer“Multi Service Retailer”
beyond the Framework of Retail
While our core Department Store Business attempts to improve asset efficiency by changing its business model andwe think there is enough room for growth, given the business environment surrounding the Company including
depopulation and changes in consumption quality, from a medium- to long-term perspective, it is obviously difficult togrow substantially if we stick to the domain of department stores, and furthermore, the domain of retail.

History of retail industry
1940sIncreasing
wealth andmilitarypower(War)1950s

Economic recovery
Jimmu
BoomTimes

1868
Meiji Restration

1960s

1970s

High economic growth period
Iwato
BoomOlympic
BoomIzanagi
Boom

Three essential Income-doubling 3C
status symbols
plan

1980s

Oil
Shock
DC brandboomBubble
collapse

2010s
Collapse ofLehman
Brothers

IzanamiBoom

Foreign luxury brands
were popular

1985 Hakuhodo
1999 NTT DoCoMo“Emergence of segmented masses” “I-mode” was created

Flourishing of small/family-run stores and department stores Flourishing of general merchandise stores (mass consumption society)Department store
Supermarket●Western-style architecture,display of goods;●Uniforms;●Entry with shoes on; and●Female elevator attendants

2000s
Low-growth period

Bubbleeconomy

1956 Economic White Paper 1962 Hayashi Shuji“It is no longer postwar”“Distribution Revolution”

1904 Kabushiki Kaisha Mitsukoshi Gofukuten(Department Store Declaration)
1907 Kabushiki Goshi Kaisha Daimaru Gofukuten
1910 Kabushiki Kaisha Ito Gofukuten
New initiatives including:

1990s

Stable-growth period

Foreign fast fashion brands
accelerated entry into Japan
Rapid growth of inbound tourism
Expansion of sharing economy

Diversiﬁcation of business categories (post-mass consumption society)

61〜68
Daimaru achieved
top sales in Japan

91
00 Sogo ﬁled for civil rehabilitation procedure
Department store sales peaked
03 Renamed Millennium Retailing
82 - 83 Seibu Department Store ad copy
“Oishii Seikatsu (delicious life)”
07 J. Front Retailing07 H2O Retailing
69 Tamagawa Takashimaya SC opened 85 Tsukashin opened
08 Isetan Mitsukoshi Holdings

57 Daiei opened 1st store
72 Daiei achieved top sales in Japan
58 Yokado was established
56 Seibu Store was established 69 Jusco was established
80 “Mujirushi Ryohin” was created
69 Ikebukuro Parco opened
87 “Loft” was created

01 Mycal went underOther

74 7-Eleven opened 1st store
97 “Rakuten Ichiba” was launched
75 Lawson opened 1st store
04 “Zozotown” was launched
73 FamilyMart opened 1st test store
16 FamilyMart and76 Tokyu Hands opened 1st store 90 United Arrows opened 1st store
Uny merged
93 Outlet Mall Rhythm
76 Beams opened 1st store
16 Mitsubishi Corporation(Japanʼs 1st outlet mall in Saitama)
made Lawson its subsidiary
84 Uniqlo opened 1st store
76 Shinjuku Lumine opened

Regulation Demographics

1937
Department Store Law

18 Mercali became listed

1973
Large-Scale Retail Store Law (covering large supermarkets as well)1868
34 million

1967
Exceeded 100 million

2000
Large-Scale Retail Stores Location Law
1998 Productive-age
population (15-64year olds) decreased

1985
121 million

2004
Population peaked at
127.87 million

Depopulating
society

Therefore, under the current Medium-term Plan, we are working to change our business portfolio toward“discontinuousgrowth,”which is not an extension of past growth, with the aim of developing as a“Multi Service Retailer”beyond theframework of retail. In our business portfolio, while striving to growing the core Department Store and Parco Businesses,
we will expand into new areas such as the Real Estate Business and the Credit and Finance Business using thestrengths of the Group to increase their shares.

Multi Service Retailer
Expanded needs to relieve concerns/
frustrations in daily life
Rise of sharing economy

Advent of IoT era

Consumption shift from products
to services/experiences

Expanded demand for HR services

Increased urbanization

Diversiﬁed payment methods
Advanced ﬁnancial services

Multiple retail business brands(Multi Retailer)

Strong customer assets of 6 million people
Store assets in urban areas20Business Model

Two years have passed since the Medium-term Business Plan started in fiscal year 2017. So far the Real EstateBusiness has grown steadily partly thanks to the opening of Ginza Six and Ueno Frontier Tower and its share ofoperating profit exceeds 10%. In the meantime, the Credit and Finance Business focuses on building foundations toachieve dramatic growth during the period of the next Medium-term Business Plan. Going forward, we will consider
entering into new service areas to relieve customers of concerns and frustrations based on the Group Vision, including
realization of the Lifetime Service Hub plan by building the Group’s integrated database, M&A and alliance.

Structure (Core Businesses)

Strength (Core Competence)

Transforming business model

Store assets
in urban areas

RetailInformation
Real estate

Creditand ﬁnanceservice

Increasing leasing area
(Urban Dominant strategy)

600万人のCustomer
assetsof産顧客資
6 mn

Accumulated

hospitalitymind

New growth businesses

Building the Groupʼs integrated database(Lifetime Service Hub)

The Group’s strengths

1Store assets in urban areas across JapanThe Group has store assets including department stores, Parco and Ginza Six in major cities across Japan,
from Sapporo to Tokyo, Nagoya, Osaka and Hakata. In key areas, we will promote the Urban Dominant strategy
for growing with local communities by putting together small- and medium-sized stores around these flagshipstores as their core and attract new crowds to live in harmony with local communities.

2

Good customer assets of more than six million people
Daimaru, Matsuzakaya and Parco have good customer assets of more than six million cardholders. Department
stores have an organization of affluent gaisho customers whose sales share exceeds 20%. In fiscal year 2019,
we newly introduced an app to retain good customers who use other companies’cards and were not reached
by us so far.

3

Accumulated hospitality
Hospitality arose from customer services based on the corporate credo of Service before Profit and thecustomer-first principle and has been developed in the history. This spirit leads to services provided by a staffing
service subsidiary and the system to maintain high quality services through training at stores where many
people from suppliers work.
Integrated Report 201921