Co-Creation Sustainability Management Business Model

Co-Creation Sustainability Management Business Model

Pioneer Spirit of Creating Opportunities

MARUI GROUP’s Founding Spirit

Over the 87 years since MARUI GROUP’s founding, we have continued to adhere to our commitment to a pioneer
spirit of creating opportunities, a principle advocated by our founder. This spirit has driven us to continuously
innovate and evolve our business model, which began with installment sales and integrates stores, credit cards,
and the Internet, in conjunction with changes in the times and in customer needs. A look back at the past suggeststhat MARUI GROUP’s business has always focused on the concept of inclusion that we are advocating today.

“Creditability should be built together with customers”

Post-War Japanese Economic Miracle

Words of Founder Chuji Aoi

Unique business model merging retailing and finance“Pioneer spirit of creating opportunities”
Adeptness at evolving and creating innovation in response to the needs of the times

Japanese Asset Price Bubble

Age of Declining Birthrates and Aging Populations

Accumulation of physical goods

First Great
Innovation

Pursuit of more-fulfilling lifestyles and market maturity

Customers

New families

Customers

Younger generations

Customers

All ages (everyone)

Products

Furniture, consumer electronics,
and other durable goods

Products

Fashion

Products

Lifestyle proposals

Credit cards Japan’s first credit card
StoresSecond Great
Innovation

Monthly installment payment
storesThird Great
Innovation

Akai Card (Red Card) in-house
Credit cards
credit card
StoresStoresDepartment stores
FY1991
Achieved peak
performance
EPS: ¥103.2

FY2006
Began issuing
EPOS cards
EPS: ¥70.4

1966
Introduced industry’s first computer

FY2007
Revision of
Money Lending
Business Act
EPS: ¥12.9

1960
Issued first credit card in Japan

Real estate model

FY2009Recorded first loss due inpart to financial crisis of 2008
EPS: –¥31.9

FY2018
EPS: ¥93.2

FY2011
Recorded second loss
Commenced massive
business restructuring
EPS: –¥86.4

FY2019
Entry into
securities business
EPS: Target of ¥110
(record high)
FY2015
Stabilized earnings
structures of stores
EPS: ¥58.9

Earnings per share (EPS)
1931 Founding

FY2021
Promotion of financial inclusion
EPS: Target of ¥130 or more

Credit cards Multipurpose EPOS card

Fiscal year ended
January 31, 1973

Fiscal year ended
January 31, 1980

Fiscal year ended
January 31, 1990

Fiscal year ended
January 31, 2000

Fiscal year ended
March 31, 2006

Fiscal year ended
March 31, 2010MARUI GROUP of Installment Payments

MARUI GROUP of Fashion

MARUI GROUP of Inclusion

Founder: Chuji Aoi

Second leader: Tadao Aoi

Third leader: Hiroshi Aoi

Period as president: 1931–1972 (41 years)

Period as president: 1972–2005 (33 years)

Period as president: from 2005

MARUI GROUP’s business initially involved selling furniturethrough monthly installment payments. Furniture in thosedays was exceptionally expensive, meaning that somepeople lacked the on-hand funds necessary to purchase furniture. We sought to include these individuals and address
this issue through sales on installment payments, a schemethat merged retail and finance. The Company continued tocontribute to affluence in each coming era by developing
department stores that offered installment payment plans,
issuing Japan’s first credit card, and eventually introducing
the industry’s first computer.

In the 1980s, the need for credit sales of durable goods
declined, leading other stores using the monthly installment
payment system to abandon retailing to focus on finance.
MARUI GROUP, meanwhile, turned its attention to the growing field of fashion. This transition enabled us to include theyounger generations that had previously been a neglected
demographic. We thereby were able to stimulate new credit
demand, revolutionizing credit sales without abandoning
retail. As a result of this strategy, we achieved our peak
­performance in 1991.

Due to the impacts of the revision of the Money Lending
Business Act and the 2008 financial crisis, MARUI GROUP
was forced to record losses on two occasions. This development spurred MARUI GROUP to pursue innovations in threeareas. In customer base innovation, we drastically realigned
our focus from catering primarily to younger generations todeveloping a business that wins the favor of customers of allages, genders, and physical characteristics. Credit cardinnovation led to the launch of the multipurpose EPOS cardin 2006, an evolution of our prior in-house cards thatbrought further change as our earnings began to come less

4897

GOOD
THRU
有効期限

MONTH / YEAR

Fiscal year ended Fiscal year ending
March 31, 2018 March 31, 2021

from cash advances and more from card shopping transactions. As for retailing innovation, we started transitioning ourstores from the consignment buying system, which entails
procuring and selling products, toward real estate-model
shopping centers to enable them to provide both goods andexperiences. This business structure transformation stabilized the earnings of stores. In addition, the transformation
made it possible to undertake co-creation store development initiatives with customers and increase the number ofvisiting customers and purchases.

Co-Creation Sustainability Management Business Model

Co-Creation Sustainability Management Business Model

Business Model Integrating Stores,
Credit Cards, and the Internet

Stores of the Future Not Focused on Selling

Through the business reforms that began in 2006, we have been undertaking a massive transformation in
MARUI GROUP’s stores and credit cards while leveraging the platform provided by the Internet to createa business model integrating stores, credit cards, and the Internet. Rather than developing operations in eachof these areas on an individual basis, MARUI GROUP aims to expand the intersection between these businesses
to create joy for customers through a concerted effort.

StoresExpansion of Business Model Integrating Stores, Credit Cards,
and the Internet through Integrated Group Management

MARUI GROUP is currently in the process of transitioning away from stores using the consignment
buying system, which entails procuring and selling products, toward real estate-model shopping centersand fixed-term rental contracts. This transition is scheduled for completion in the fiscal year ending
March 31, 2019. As a result, our earnings structure will shift from generating income from net consignment revenues to receiving rent revenues. This transition has laid the groundwork for our efforts to create
the stores of the future. Capitalizing on the customer bases and customer service expertise cultivatedthrough the operation of conventional stores, these new stores will not focus on selling products or services. Rather, they will offer value in the forms of experiences and a sense of community.

Physical stores

Total of 26 Marui and Modi stores in major cities and other locations across Japan
Epos Card Co., Ltd., employees stationed at stores to provide customer service(stationed at 22 facilities not operated by MARUI GROUP)
Specialty stores (located at 7 facilities not operated by MARUI GROUP)

Omni-channel

Try-on stores in which customers can try on products in stores and purchase
via the Internet

Credit Cards Encouraging Long-Term Use by Everyone

StoresPhysical stores welcoming
200 million customers a year

Credit Cards

Expansion ofintersection between
stores, credit cards,
and the Internet

Credit Cards

Internet

6.6 million
cardholders

Platform provided
by the Internet

Group company Epos Card Co., Ltd., has accumulated big data through its years of engaging in the­co-creation of creditability with its 6.6 million cardholders, who are largely composed of people fromyounger generations. Committed to our mission of promoting financial inclusion, we will endeavor toutilize such assets to develop credit cards that encourage long-term use by everyone, regardless of age
or income. Moreover, we aim to go beyond the limits of our previous cards, which primarily provided
payment, lending, and other settlement-related services, to supply cards that offer asset building anda wide range of other services.

Characteristics
and scaleAround 6.6 million cardholders largely comprising people from younger generations
Card shopping transactions totaling ¥1,600.9 billion, up 15% year on year, in the fiscal
year ended March 31, 2018
Transactions at external facilities and Internet shopping sites accounting for 93% of
total card shopping transactions

Expanded scopeFirst cards to be issued for foreign exchange students in Japan
Cardholder growth achieved through anime business
Evolution from cards focused on settlement services to cards offeringvarious financial services

Platform Tailored to Individual Customers Realized
through Enhanced IT

InternetThrough its operations merging stores and credit cards, MARUI GROUP has developed IT and information systems as well as a distribution platform. We have also been taking steps to enhance our IT andother foundations through means such as the establishment of the Digital Transformation Promotion
Department in 2018. Through these enhancements, we will merge our stores and credit cards in amanner that accommodates the current age of the Internet and smartphones to create a platform tailored
to individual customers that can be applied to our e-commerce, securities, and other new businesses.

Total Group Transactions

Group Employees

E-commerce

Proprietary “marui web channel” Internet shopping site and partnership with externalInternet shopping sites¥2,189.4 billion

5,548

Intra-Group
coordination

In the fiscal year ended March 31, 2018, total Group transactions
rose 13% year on year, exceeding ¥2 trillion for the first time. Of thisamount, approximately 70% was attributable to card shopping transactions in the FinTech segment.

The average number of consecutive years of service for employees is20; 44% of the Group’s employees are women; and 43% of employees have experienced intra-Group profession changes.

IT systems supporting integration of retailing and finance
System staff with retailing and finance experience
Big data accumulated through co-creation of creditability

Enhancement ofplatform

EPOS card user interface built specifically for smartphones
Intra-Group distribution systems supporting Internet sales

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Co-Creation Sustainability Management Business Model

Co-Creation Sustainability Management Business Model

Unique Pure Holding Company System
Contributing to Integrated Thinking
We adopted a pure holding company system in 2007. This move clarified the roles of Group operating companies
and of MARUI GROUP CO., LTD., and made it possible to develop a business model integrating stores, credit
cards, and the Internet. Later incorporating the perspective of inclusion into management gave rise to a cycle inwhich the expansion of the intersection between stores, credit cards, and the Internet contributed to the growth of
the intersection between the interests of stakeholders, driving further increases in the intersection between stores,
credit cards, and the Internet, forming a structure like a Moebius strip.

Outward Propulsion and Unifying Force of Management
individual specialties and expertise in the process, they
exhibit an outward propulsion that drives them awayfrom the rest of the Group. For this reason, if we do notalso increase the unifying force of our management, ourbusiness model based on Group integration, a corestrength of MARUI GROUP, will lose its potency. The taskof heightening this unifying force lies with the pure holding company. Having all Group employees be, in essence,
employees of the pure holding company effectively creates a unified MARUI GROUP, which in turn allows for thebalanced exertion of outward propulsion and unifying
force. The unifying force is perhaps most aptly symbolized by the new business of tsumiki Securities Co., Ltd.
As seen in this business, this force allows us to combine
the expertise, knowledge, and other human and intellectual capital of Group companies to transform these formsof capital into the organizational capital of the Group.

Another major goal of the adoption of the pure holding
company system was to incorporate a long-term perspective into management. The longer the timeframe
used when thinking about corporate management, themore the scope of thought will broaden, spreading fromthe Company to include the industry and eventually thewhole of society. The presidents of operating companies
are required to pursue earnings based on a relatively
short-term perspective while the president of the holding
company is expected to adopt a long-term perspective
for addressing sustainability and social issues. It is
incredibly difficult for the same person to fulfill both ofthese roles. Based on this realization, we adopted thepure holding company system in part to clarify the distinction between these two roles. This system has thus
made it possible for management to engage in integrated
thinking aimed at realizing Groupwide optimization thattranscends the differences and contradictions between
individual businesses, thereby enabling the developmentof a business model integrating stores, credit cards, andthe Internet.
Having incorporated the perspective of inclusion into
management, MARUI GROUP views the expansion of theintersection between stores, credit cards, and theInternet as being interconnected with the growth of theintersection between the interests (happiness) of stakeholders, forming a relationship that can be illustrated asa Moebius strip in which an increase in one intersection
drives the growth of the other, prompting us to pursue

increases in both. This relationship makes it possible for
MARUI GROUP to create corporate value over the longterm while simultaneously generating value for stakeholders and for all of society.
Scope of Thinking and Timeframe
Scope

Earth

Sustainability
management

Pure holding
company

Society

Industry

Company

Operatingcompanies
New businesses
Existing businesses
Short termLong term

Timeframe

MARUI GROUP differs from a standard pure holding
company in that all Group employees are hired throughthe Company and that, even if an employee is appointed
to an operating company, they will still have access to thesame shared human resource systems available at theCompany. This framework makes it possible for employees to undergo profession changes between Group companies and for us to arrange Groupwide project teams inwhich employees transcend the boundaries of theiroperating companies to discuss management issues.
These features of our framework are what make our business model of integrating stores, credit cards, and theInternet possible.
Our goal in adopting the pure holding company
system was to simultaneously heighten the outward propulsion and unifying force of our integrated Group management. As operating companies grow, exercising theirIntegrated Thinking Spawning Both Corporate Value and Social Value

Organization of the Group after Adoptionof the Pure Holding Company System
Batch hiring of all employees, shared human resource systems
MARUI GROUP CO., LTD. (pure holding company)
MARUI CO., LTD.
Epos Card Co., Ltd.

Expansion of intersection between stores,
credit cards, and the Internet

Inclusion
perspective

Growth of intersection between
interests of stakeholders

AIM CREATE CO., LTD.

tsumiki Securities Co., Ltd.

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Co-Creation Sustainability Management Business Model

Co-Creation Sustainability Management Business Model

Framework of Business Model Integrating
Stores, Credit Cards, and the Internet
MARUI GROUP’s business model, which integrates stores, credit cards, and the Internet, is supported by a framework for transforming the isolated strengths dispersed throughout the Group into the strength of the entire Group.
By advancing its business activities as a unified whole, MARUI GROUP aims to create a business that makes ongoing and wide-reaching contributions to society in order to forge longer lasting relationships with customers.

Integrated Group Management Underpinning Business Model Integrating
Stores, Credit Cards, and the Internet
Transformation of Isolated Human Capital into Organizational Capital of the GroupMARUI GROUP possesses four strengths that enable it to transform isolated strengths into the organizational capital of
the Group. MARUI GROUP’s practice of integrated Group management provides the foundation that gives rise to thesestrengths. When isolated, our precious human capital cannot be effectively translated into the strength of the organization. However, when we are able to transform this human capital into the strength of the Group, into organizational
capital, through co-creation with customers and other stakeholders or through MARUI GROUP’s corporate culture, we
can utilize this capital to create value through our business model that integrates stores, credit cards, and the Internet.
P50 MARUI GROUP’s Unique Integrated Management Approach

Earnings Structure Targeted in MARUI GROUP’s Main BusinessBusiness Forging Long-Term Relationships with Customers
MARUI GROUP believes that, by drastically altering its prior business approach, it can forge relationships with customers
that continue over even longer periods. Rent guarantee and asset building services entail relationships in which recurringtransactions are conducted with customers over periods of 3, 5, 10, or even 20 or more years. Accordingly, these services encourage customers to use their EPOS cards as their main credit card and thereby contribute to increases in thenumber of Gold cardholders. In the future, we anticipate that the co-creation of creditability through the forging of suchlong-term, trusting relationships with customers will be more important than ever.
P38 Promotion of Financial Inclusion for the Benefit of Everyone

LTV Generated through Recurring Income
Previously, our earnings structure has focused on product sales. This earnings structure faced a serious issue in terms ofthe volatility of earnings as performance in retailing can be heavily impacted by external factors, such as weather, foreignexchange rates, and trends in inbound travel in Japan. However, by advancing the transition to shopping centers andfixed-term rental contracts, we are shifting the source of our earnings from product sales to rent revenues. In addition,
we anticipate a relative increase in payments for recurring transactions and subscription services through credit cards.
These two changes will expand the portion of our earnings that is accounted for by recurring income. This trend is
expected to contribute to stable growth in the overall lifetime value (LTV) of the Group as we accumulate earnings.
P66 Medium-Term Management Plan
Projected Path of Improvement of LTV through Accumulation of Recurring Income

Customers and other stakeholders

Input

Exchanges

Perspective as other

Diverse perspectives

In-store customer service experienced by
all employees after joining

Personnel exchanges between Group companies
through profession changes

Business processes premisedon co-creation with customers

Groupwide project teams for discussing
management issues

Previously

Going Forward

Earnings structure heavily influenced by external factors

Stabilization of LTV through recurring income
Product
sales

Product
sales

A
RecurringincomeFour Strengths

B

RecurringincomeSupporting Business Model
Integrating Stores, Credit Cards,

1st yearand the Internet

Co-creationof value

28

Empathy

2nd year

3rd year ……………………………

1st year

2nd year

3rd year ……………………………………………………………
A. Recurring transactions, subscription services, etc.
B. Stable revenues from transition to shopping centers andfixed-term rental contracts

Innovation

Unification

Problem-solving perspective

Integrated perspective

Creation of new industries from
inclusion perspective

Integrated Group management made possible
through pure holding company system

Co-creation with start-ups and other companies

Shared Groupwide human resource andcompensation systems

Transformation of Intellectual Capital into Financial Capital
Rental guarantees, cumulative investments, and sharing services are all businesses in which MARUI GROUP will be able
to exhibit greater strength the more it amasses intellectual capital and other management resources. By utilizing suchintellectual capital in the integration of stores, credit cards, and the Internet, MARUI GROUP aims to transform this capital by operating its business without depending on significant amounts of assets and liabilities and thereby limiting total
assets. Through this approach, we will target stable increases in return on invested capital.
P85 Target Balance Sheet

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Co-Creation Sustainability Management Business Model

Co-Creation Sustainability Management Business Model

More detailed information can be found on our corporate website.
www.0101maruigroup.co.jp/en/sustainability/themes/

Identification of Four Core Themes for Inclusion

Process for Establishing Core Themes

In November 2016, MARUI GROUP defined four core themes for inclusion as it redefined the focus of its businessof serving all customers from the perspective of inclusion. By commercializing these themes through our businessmodel integrating stores, credit cards, and the Internet, we aim to expand the intersection between the interests ofstakeholders.

Stakeholder Engagement
STEP 1

In identifying the expectations for MARUI GROUP as well as the themes it should prioritize, we held meetings with longterm investors, ESG-minded investors, sustainability experts, nonprofit organizations, and other stakeholders in thegreater society as well as with customers, business partners, and Group officers and employees.

Identification and Organization of Social Issues
Core Theme 1

Core Theme 2

Customer Diversity and Inclusion

Workplace Inclusion

We will seek to develop products, services, and stores thatbring joy to all customers, regardless of their age, gender, or
physical characteristics.

Based on MARUI GROUP’s corporate philosophy of striving
to “continue evolving to better aid our customers” and“equate the development of our people with the development of our company,” we will provide all employees withvenues through which they can excel.

STEP 2

Management-Level Discussions and Decisions
STEP 3Inclusive Store Development 

P77

Development of an Organization That Utilizes Diversity  P52

Inclusive Product Development 

P79

Healthcare Management 

P55

Financial Inclusion 

P38

Human Resource Investments 

P70

Core Theme 4Ecological Inclusion

Co-Creation Corporate Governance

We will develop businesses with low environmental impact,
and contribute to the realization of a low-carbon society anda circular economy, and propose ecologically sound lifestyles
that are in harmony with nature and the environment.

We will develop management frameworks that include stakeholders in order to achieve harmony between the interests
and the happiness of all stakeholders.



Verification of Activities and Quantification of Results
STEP 4

Activities are verified at least once a year as we continuously practice engagement with stakeholders. Taking into consideration issues pointed out by stakeholders, we have been preparing a long-term vision based on the four core themes
and are examining possible key performance indicators that can be disclosed with regard to those themes for which targets can be set. Corporate governance frameworks that include stakeholders will be an important theme for MARUIGROUP as it seeks to incorporate sustainability into its management.

● Inclusive productdevelopment

Sustainability Management 

Responsible Procurement

Cultivation of Future Leaders 

P97

Innovative Services

Risk Management 

P100

P65

Material

Product Initiatives

Highly material

Co-Creation with Stakeholders

Materiality for Stakeholders

P101

At meetings of a committee headed by the president, a series of discussions were held among the relevant officers anddivisions to decide four core themes pertaining to inclusion. Responsibility for these themes was assigned to the
Sustainability Department and the ESG Promotion Department, and the themes themselves were disclosed in
Co-Creation Sustainability Report 2016 and in the sustainability section of MARUI GROUP’s website.

Major Initiative Matrix

Core Theme 3

Environmental Footprint Reduction With a focus on co-creation management; the impact of this co-creation management on the economy, society, and theenvironment; and its relationship with our medium-term management plans and human resource strategies, we identified
and organized the issues facing society while referencing internal and external guidelines, such as those of ESG-rating
institutions, the Global Reporting Initiative, ISO 26000, the Sustainability Accounting Standards Board, and theInternational Integrated Reporting Council, along with the SDGs.

■ Reduction initiatives
related to private
brand products
 ealthcare manageH
ment underpinningpersonal growth evelopment of anDorganization thatutilizes diversity■ Groupwide environmental impact reduction initiatives■ Revolutionary services
contributing to reduced
environmental
impacts● Financial inclusion● Inclusive store
development

 ultivation of futureC
leaders■ Responsible procurement activities withbusiness partners

 o-creation withC
Stakeholders

 uman resourceH
investments for new
growthRisk management

Sustainability
Management

Material

Highly material

Materiality for MARUI GROUP
Customer Diversity and Inclusion

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Workplace Inclusion

Ecological Inclusion

Co-Creation Corporate Governance31

Co-Creation Sustainability Management Business Model

Co-Creation Sustainability Management Business Model

Creation of an Inclusive and Flourishing Society
MARUI GROUP practices forward-looking co-creation sustainability management that leverages its core value—
the co-creation of creditability. As part of this practice, we have identified social issues for the Company toaddress from the perspective of inclusion, and we are commercializing initiatives for addressing these issues
through our business model of integrating stores, credit cards, and the Internet. We thereby aim to simultaneously
improve corporate value and resolve social issues. The new businesses born out of this process will drive thegrowth of the MARUI GROUP and eventually become the main focus of its operations.

Inclusion as Both a Philosophy
and a Business Strategy
Co-creation is, at its core, the quest to realize an inclusive society. A society cannot be said to be happy if happiness is only provided to certain groups. Rather thanfocusing on bettering the Company, MARUI GROUP iscommitted to addressing social and environmental issues
through co-creation with its stakeholders. In this manner,
we view inclusion as both a philosophy and a businessstrategy.

Business Model Integrating Stores,
Credit Cards, and the Internet

StoresConcern for the future among younger generations
Increasingly more serious global environmental issues
Digital divide stemming from the spread of the Internet

Main Focus of MARUI GROUP’s
Operations Going Forward

Simultaneously improving
corporate value andresolving social issues

Commercialization of
New Initiatives throughBusiness Model Integrating Stores,
Credit Cards, and the Internet
Existing Business

Expansion ofintersection
between stores,
credit cards,
and the Internet
Credit Cards

Social and Environmental Issues
Declining birthrates and aging societies

A Flourishing and Inclusive Society
Offering Happiness to All

Existing Business

Existing Business

Existing Business

Internet

Co-Creation of Creditability

Perspective of Inclusion

Core value of MARUI GROUP based ona belief of the founderTransformation of existing businesses based ona new way of thinking about business

Co-Creation of Happiness
Expansion of the intersection between
the interests of stakeholders

First step of financial inclusion (securities business)

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