President and Representative Director,
MARUI CO., LTD.

MARUI GROUP has completed the transition to shopping centers and fixed-term rental contracts, which was advanced based on a five-year plan beginning with the fiscal year ended March 31, 2015, to transform its business model from department stores that procured and sold products to shopping centers that generate rent revenues from fixed-term rental contracts. The ratio of fixed-term rental contracts reached 106% during the fiscal year ended March 31, 2019. Having stabilized our earnings bases through this transition, our most pressing task is to evolve our stores to next-generation Marui stores. As the focus of consumption shifts from goods to experiences, there is no clear answer, no goal, for the value we need to provide. We therefore must forget the past successes that have led Marui stores to generate massive profits by selling goods in physical stores.

The next step in the evolution of MARUI GROUP stores will be digital native stores and stores that do not sell. Today, it is possible to purchase anything from the Internet, whenever, wherever. If one only seeks to buy something, the Internet is more convenient than physical stores, and the act of going to stores is now becoming a source of stress as a result. This sentiment is particularly pronounced among the younger digital native generation. As this generation becomes the main proponent of consumption, the number of people who shop at stores will likely decrease. MARUI GROUP seeks to win the support of these new consumers by proactively inviting digital native brands into its stores to evolve these stores into venues for the type of experiences and close communication that cannot be provided via the Internet.

Our evolution to digital native stores will require that we move away from our previous focus on products and their sales to a focus on customers and the experience we sell them. One point that needs to be stressed is that the transition to digital native stores and stores that do not sell will not eliminate sales, but will rather create a virtuous cycle in which sales are made both at physical stores and via the Internet.

Important to this transition will be our ability to locate and give form to customer needs. I am confident that this is the area in which MARUI GROUP employees are the most capable. MARUI GROUP boasts strength in the form of its store staff, who are adept at customer service and communication, as well as its in-house IT and distribution systems, which are highly adaptable to change. By building on these strengths and communicating our new vision for retailing to external stakeholders, and inviting them to join hands with us in realizing this vision, I believe we can attract numerous business partners that resonate with our ideals to help us shape the future.