Marui
Corporate History & Strategy

In February 1931, Chuji Aoi (then 27 years old, from Toyama Prefecture) became independent by purchasing the Nakano store (in front of Nakano Station, Tokyo) of installment sales merchant Maruni Shokai, where he had been employed. The installment industry was known as a highly profitable business, and in an era when a university graduate's starting salary was 60 yen, Aoi had accumulated savings of 11,000 yen (equivalent to approximately 36 million yen today). Using this personal capital to acquire the Nakano store, he aspired to become "Japan's number one installment store" with furniture as his main product. Installment sales was a business model that involved regularly visiting customers' homes to collect payments in installments, and the density of the trade area and the construction of a collection network determined the success or failure of the business.

After founding the business, Aoi pursued concentrated store openings along Tokyo's Chuo Line. In 1935, he opened the Asagaya store, concentrating stores along a specific railway line to improve the efficiency of collection operations, which were essential to installment sales. The practical rationale was that collectors could visit customers of multiple stores along a single train line, and he established a method of expanding the customer base while suppressing collection costs through concentrated openings along a single line. This railway line-focused store opening model became the prototype for Marui's later location strategy of establishing flagship stores in front of major stations in central Tokyo.

As the business grew steadily, the parent company Maruni Shokai became wary of Aoi's business as a competitor. The installment industry was dominated by people from Ehime Prefecture, and Aoi, being from Toyama Prefecture, was originally positioned outside this regional faction. Maruni Shokai requested that Aoi change his trade name, and he complied by changing the shop name from "Maruni" to "Marui." The trade name change request was a result of overlapping competitive wariness and regional faction exclusion, and it ultimately became the catalyst for Aoi to settle accounts with his parent company and move toward complete independence.

In May 1937, Aoi established Marui Co., Ltd. with a capital of 50,000 yen, achieving complete independence from Maruni Shokai. The organizational change from a sole proprietorship to a corporation gave Aoi the management structure to make all decisions regarding store opening plans, product mix, and collection systems on his own. In the then-specialized industry of installment sales, the decision to establish an independent corporation, separating from the parent company's goodwill, laid the organizational foundation that would later enable large-scale store openings in central Tokyo and expansion into the credit card business.

Entering the 1960s, Marui shifted its strategy from small installment specialty stores scattered along the Chuo Line to opening large stores in front of major stations in central Tokyo. The concept was to become the "Mitsukoshi of the installment industry" by bringing its business model closer to that of department stores, maintaining the installment sales model while equipping stores with the same prestige as department stores in terms of exterior appearance and product selection. Under this policy, from 1966 to 1971, ten small stores were closed, and management resources were concentrated on opening large stores through a scrap-and-build approach.

The symbol of this expansion was the entry into Shinjuku. Against Marui's capital of 360 million yen at the time, 400 million yen was invested to open the Shinjuku store (later the Shinjuku Young Building). The store had twice the floor space of the Kichijoji store, which had been the largest store until then, and founder Chuji Aoi stated that it would "determine the future fate of our company." The decision to concentrate investment exceeding the company's capital in a single store was extraordinary for an installment specialty retailer and represented a gamble for Marui's transformation into a downtown department store.

Establishing a flagship store in the high-traffic location of Shinjuku meant direct competition with established department stores such as Mitsukoshi and Isetan. However, Marui captured demand from young people who could not afford to purchase expensive goods in a lump sum, by differentiating through installment payments. In an era when cash or lump-sum credit payments were the norm at department stores, Marui's installment plan was supported by young people as a means to expand their purchasing power. The backbone of Marui's large store strategy was a model of attracting young people to downtown station-front locations and increasing spend per customer through installment payments.

With the opening of the Shinjuku store as a starting point, Marui accelerated store openings at major terminal stations such as Ikebukuro and Shibuya. Marui's business structure fundamentally shifted from selling furniture and men's clothing on installment at small stores along the Chuo Line to selling fashion to young people on installment at large downtown stores. The entry into downtown commercial areas dominated by department stores, with installment payments as the pivotal differentiator, became the turning point in establishing Marui's unique position.

Until the 1960s, the top position in sales among installment department stores was held by Midoriya (now Crédit Saison). While Marui pursued large store openings in central Tokyo, Midoriya maintained a strategy centered on suburban stores, and the store-opening strategies of the two companies gradually diverged. Marui's model of attracting young people at downtown station-front locations proved successful, and in 1970, Marui surpassed Midoriya's sales to secure the top position among installment department stores. The decision to invest more than the company's capital in a flagship store in Shinjuku materialized in the form of capturing the top position eight years later.

For Marui, opening large stores in central Tokyo was a turning point symbolizing the business model transformation from small installment stores along the Chuo Line to a downtown department store. The differentiation through installment payments served as a customer acquisition weapon in competition with existing department stores, and Marui thereafter continued to open stores based on the fundamental principle of downtown station-front locations. This expansion strategy became the foundation for capturing youth consumption during the DC brand boom of the 1980s and marked the starting point of Marui's unique business model combining stores and credit cards.

In 1952, Marui's founder Chuji Aoi visited the United States and was shocked by the consumer environment where computer-based credit cards were widespread. Thereafter, Marui nurtured the concept of converting installment sales management to a card system, and in 1960 issued store-exclusive credit cards. In the first year, 50,000 cards were issued, of which 30% were created by walk-in customers at stores. This concept of migrating from ledger-based installment sales management to cards was an attempt to transplant the consumer model he had seen in the United States to Japan.

In 1966, the company pioneered the introduction of computers in the industry, embarking on the systematization of customer management. In installment sales, understanding each customer's payment status and credit information was essential, and the burden of paper ledger management inevitably increased with store expansion. Computer introduction enabled centralized management of customer data, and the system infrastructure was established to link credit card issuance screening with customer management.

In 1974, an online credit verification system went live using IBM 3650 (store terminals) and IBM 370 (center machines). Store terminals could instantly query customers' income and payment status, shortening the card issuance procedure from several days to instant completion at the store. In 1975, in-store instant issuance of credit cards was achieved, completing a system where visiting customers could receive their cards on the spot.

With the realization of in-store instant issuance, Marui rapidly expanded card membership by targeting young people in their 20s as the primary customer segment. In an era when department store credit cards required mail-in applications and several days of screening, the system allowing walk-in customers to receive their cards on the spot was a clear differentiating factor. A structure was formed where Marui's large downtown stores directly functioned as card member acquisition channels.

In the 1980s, the handling of DC brands (Designer's and Character's brands) was actively expanded. DC brand items were priced at tens of thousands to over 100,000 yen, a level that exceeded the purchasing power of young people for lump-sum purchases. Marui provided an environment where young people could purchase DC brands by combining installment payments via credit card, and installment sales of high-priced items boosted card fee income.

DC brand high-priced items and credit cards were in a relationship that mutually stimulated demand. A customer flow was established: attracting young people at stores, converting them into card members through instant issuance, and selling DC brands through installment payments. This model was a structure where the store's customer-drawing power, the card's instant issuance, and the lineup of high-priced items operated in coordination, and the system would not function if any of the three elements were missing.

In 1987, Marui achieved 26 consecutive periods of revenue and profit growth. DC brand sales expanded more than threefold in three years from 31 billion yen in FY1984 to 106.6 billion yen in FY1987, reaching 13.5% of total sales. The combination of high-priced items and installment payments drove revenue expansion in both retail and financial segments.

Credit card membership surpassed 10 million in 1988. The cyclical structure of attracting young people to large downtown stores, issuing cards instantly at the counter, and selling DC brands through installment payments formed the foundation of 10 million members. In 1984, the systems subsidiary M&C was established, advancing the in-house development and operation of systems supporting the card business.

Marui took more than 30 years from the 1952 US visit experience to complete its unique business model centered on credit cards. The accumulated systems investments—computer introduction, online credit verification, and in-store instant issuance—bore fruit in the form of 26 consecutive periods of revenue and profit growth by connecting with the external environment of the DC brand boom. However, the growing dependence on DC brands and youth consumption also inherently contained vulnerability to changes in consumption patterns after the bubble burst.

In the 1960s, Marui's main products were men's clothing and furniture. In the fiscal year ending January 1966, sales by product category were men's clothing 22.6%, furniture 19.1%, home electronics/watches/cameras 19.1%, and women's and children's clothing 13.4%, with the proportion of youth fashion being limited. Entering the 1970s, Marui began shifting its product lineup by targeting people in their 20s, or the "young" segment, steering toward expanding women's fashion. Competition with housing showrooms and volume retailers was intensifying for furniture and home electronics, making differentiation through installment sales increasingly difficult.

In the 1980s, the DC brand (Designer's and Character's brands) boom arrived in Japan, and high-end fashion led by Issey Miyake and others drove youth consumption. Marui actively expanded its handling of DC brands, and by FY1987 the product composition shifted to women's apparel at 28.4% and men's apparel at 22.9%, with apparel accounting for more than half of the total. The women's and children's clothing share of 13.4% in 1966 had reached over 51% in 20 years.

DC brand items were priced at tens of thousands to over 100,000 yen, a level that young people in their 20s could not afford to pay in a lump sum. Marui provided a mechanism for young people to purchase DC brands by combining credit card installment payments. Installment sales of high-priced items boosted card fee income, establishing a structure that generated revenue in both product margins in retail and card fees in finance. The model of having customers purchase high-priced items beyond their purchasing power through installment payments was a mechanism positioned at the junction of Marui's card business and store business.

For card members, installment payments were a means to expand purchasing power, and DC brand high-priced items stimulated demand for card installment payments. Young people seeking DC brands gathered at Marui's stores, and a flow was established where they would receive instant card issuance on the spot and make purchases through installment payments. The product lineup shift was not merely a product strategy but a business model change designed in tandem with the revenue expansion of the credit card business.

By FY1987, DC brand sales alone reached 106.6 billion yen (more than tripling from 31 billion yen in FY1984), with the DC brand share of sales reaching 13.5%. Through the product lineup shift, Marui established the brand image of "Young, Fashion, and the Red Card," which served as the driving force for revenue and profit growth throughout the 1980s. Marui's business structure fundamentally transformed from the founding-era model of installment sales of men's clothing and furniture to selling fashion to young people at large downtown stores through installment payments.

However, the growing dependence on DC brands contained structural risks. Marui's revenue structure was linked to DC brand sales and youth consumption appetite, lacking resilience in the event of changes in the consumption environment. When the bubble burst in the 1990s, youth spending on luxury goods contracted rapidly, and an era arrived when low-price, high-quality business models such as Muji and Uniqlo gained consumer support. The premise of the business model that Marui had built in the 1980s began to crumble with the bursting of the bubble.

In 1981, Marui entered the consumer lending (cashing) business to diversify the revenue sources of its credit card operations. Through unmanned machines installed in stores, it provided small-amount cash lending to young customers, using the existing card member base directly as borrowers. Since the lending was primarily in small amounts, the default rate was low, and by 1987 the outstanding loan balance surpassed 80 billion yen. Cashing, which started as an extension of the card business, grew into a business that provided stable interest income for Marui.

In the early 2000s, Marui's retail business struggled with sales growth, but interest income from cashing supported overall performance. In FY2005, before the enforcement of the revised Money Lending Business Act, the cashing business generated gross profit of 65.3 billion yen annually, making it an indispensable pillar of Marui's revenue structure. As the retail business continued to struggle, dependence on cashing revenue deepened year after year.

Marui's cashing business adopted gray-zone interest rates (approximately 27%) that fell between the upper limit under the Investment Deposit and Interest Rate Act and the upper limit under the Interest Rate Restriction Act. This interest rate range was widely established as an industry practice until it was ruled illegal by a 2006 Supreme Court decision. However, Marui's cashing balance had swelled to 250 billion yen, reaching a scale where a 10% decline in interest rates alone would wipe out 25 billion yen in annual profit.

Third-generation president Hiroshi Aoi reflected: "Because the cashing balance was 250 billion yen, a 10% decline in interest rates meant 25 billion yen in profit would permanently disappear every year." At the time, more than half of the approximately 45 billion yen in operating profit was dependent on the cashing business, creating a structure where changes in interest rate regulations would directly lead to a management crisis. The management decision to supplement the retail business downturn with cashing interest income implicitly premised stability in the regulatory environment.

In 2006, the revised Money Lending Business Act was enacted, and gray-zone interest rates were officially ruled illegal. In addition to lowering lending rates, Marui faced refund claims for illegally collected interest from the past. President Hiroshi Aoi stated that "excess interest refund claims were on a scale of hundreds of billions of yen," and the provision for interest refunds continued for 15 years through the fiscal year ending March 2021. The consequences of the management decision to depend on cashing became apparent through the regulatory change.

The entry into cashing itself was in line with industry practices at the time of 1981, and it cannot be definitively stated that it was an irrational decision by the company. However, the fact that dependence was allowed to grow to a scale of 250 billion yen in outstanding balance and 65.3 billion yen in annual gross profit created a structure vulnerable to regulatory changes. The pattern in which retail business stagnation deepened dependence on cashing, which then reversed when regulations changed, was at the core of Marui's management crisis in the 2000s.

Since the revenue decline in 1993, Marui had struggled for a decade to recover performance. As the bubble burst suppressed youth spending on luxury goods and low-price, high-quality business models represented by Muji and Uniqlo gained prominence, Marui's business model centered on DC brands and installment payments was under pressure to transform. However, within the company, attachment to the 1980s success experience of "Young, Fashion, and the Red Card" was deeply rooted, and resistance to change was strong.

To achieve a breakthrough, weekly "sales meetings" were held from 3 PM to 10 PM without dinner. Third-generation president Hiroshi Aoi (then a director) later reflected: "The very fact that the same old men kept gathering together, endlessly engaged in meaningless discussions, was itself the biggest reason why performance wasn't recovering." Despite continuing the sales meetings for more than five years, no effective breakthrough strategies were found, and the people in charge on the front lines were nearing their limits.

In August 2003, Marui concluded that the gradual approaches of the past decade could not turn around performance, and embarked on a comprehensive organizational restructuring that simultaneously overhauled the personnel system, organizational structure, and core IT systems. As discussions in sales meetings continued going in circles, management chose to fundamentally rebuild the system itself to break through the deadlock. The prolonged performance stagnation and frontline exhaustion accelerated the decision for drastic reform.

The organizational restructuring had four pillars. First, 700 voluntary retirees were solicited, representing 5% of the workforce, with enhanced severance payments of up to 20 million yen. Second, 5,500 employees, representing 95% of the workforce, were transferred to subsidiaries. Third, a merit-based evaluation system was introduced, shortening the evaluation cycle from six months to three months, reducing base pay, and increasing the proportion of performance-based compensation. A five-year transition period was established for employees whose pay decreased.

On the systems side, approximately 10 billion yen was invested to overhaul the HR and payroll system (ERP). Toshiba Solutions was selected as the vendor, and a core system was rebuilt to centrally manage HR information and payroll calculations across group companies. It was a large-scale reform that simultaneously pursued voluntary retirement, subsidiary transfers, performance-based pay, and systems overhaul, with the stated purpose of leveraging each employee's professional capabilities to improve performance.

However, pursuing all four measures simultaneously meant that for employees, their employment status, evaluation system, pay structure, and business systems all changed at once. While each individual measure had its own rationale, implementing them simultaneously placed an extreme burden on the frontlines. The reform was arguably driven more by the urgency to recover performance than by the coherence of individual systems, and the judgment to prioritize the scale and speed of reform over meticulous system design determined the eventual outcome.

The results of the reform were what President Hiroshi Aoi himself acknowledged as "miserable results." The introduction of performance-based pay lowered employee motivation, and short-term quarterly evaluations encouraged behavior skewed toward achieving numerical targets. The mass transfer to subsidiaries undermined organizational cohesion, and the emergence of treatment disparities between the parent company and subsidiaries also cracked trust among employees. There is a high probability that the premise of the reform—that the cause of performance stagnation lay in the organization and personnel system—was itself flawed.

Frequent system changes led to what Hiroshi Aoi described as a situation where "trust between the company and employees was virtually nonexistent." The organizational reform that began with the aim of recovering performance instead accelerated organizational dysfunction. In 2007, Marui abolished the performance-based pay system and halted the organizational reform. The reversal just four years after launch was a judgment by management itself acknowledging that the reform had failed to achieve its intended objectives.

This experience became the catalyst for President Hiroshi Aoi, who assumed the presidency in 2005, to fundamentally revise his management style. The shift from top-down system design to management emphasizing dialogue with frontline employees was based on lessons learned from the failure of the organizational reform. The recognition that neither "the same old men's sales meetings" nor "comprehensive system reform" but rather the rebuilding of trust with employees was the precondition for performance recovery became the foundation of Marui's subsequent management philosophy.

Since issuing credit cards in the 1960s, Marui had been issuing the red house card to store visitors. While in-store instant issuance was possible, usage was limited to Marui stores. Marui's primary customers were young people in their 20s, and a structural challenge existed: as customers turned 30, their fashion preferences changed, shopping at Marui declined, and card usage frequency dropped accordingly.

This "age-30 attrition problem" was a structural challenge inherent in the house card system. There was no means to retain customers who stopped shopping at Marui stores, and the card member base was structured to contract unless continuously replenished by acquiring new members in their 20s. Without extending card usage beyond Marui to accommodate customers' life cycles, the cost of acquiring members would continue to squeeze the lifetime revenue obtainable from each member.

Marui decided on a policy to redesign its credit card as a universal card usable at external merchants. This was a transition to a system that would secure merchant fees and revolving payment fees through everyday card transactions even after customers stopped shopping at Marui stores. The migration from house card to universal card meant a fundamental redesign of Marui's financial business model.

In March 2005, Marui acquired special licensee status from VISA. While ordinary VISA-affiliated cards process transactions through the VISA network via a card-issuing company, the special licensee status allowed Marui itself to build a proprietary system from card issuance to processing. The purpose of this license was to enable in-store instant issuance—the strength from the house card era—for VISA-affiliated cards as well.

In April 2006, EPOS Card issuance began. The card could be used anywhere in the world at VISA-affiliated merchants while also being issuable on the same day at Marui stores. Through the EPOS Card, Marui aimed to secure two revenue streams: merchant fee income from external merchants and customer fee income from shopping revolving payments. By extending card usage beyond Marui, the transition was made to a card that would continue to be used for everyday transactions after age 30.

Simultaneously with the launch of EPOS Cards, migration of existing house card members to EPOS Cards was promoted. Five years later, in FY2011, the proportion of legacy cards fell below 10%, and the member migration was essentially complete. The migration from house cards to VISA-affiliated cards was a large-scale operation involving card number changes, connection to the merchant network, and member notification, and the self-built system enabled by the special licensee status made this migration possible.

After the introduction of EPOS Cards, transaction volume at Marui stores remained flat at around 120 billion yen, while usage at external merchants expanded rapidly. A structure was formed where customers who joined at Marui stores continued to use their EPOS Cards for everyday shopping, giving Marui's financial income a foundation that was less affected by store performance. As the scope of card usage expanded beyond Marui, the age-30 attrition problem structurally moved toward resolution.

On the revenue side, shopping revolving payment fees and merchant fees grew as revenue streams replacing cashing. As EPOS Card transaction volume increased, Marui's installment receivables continued to expand, reaching a period-end balance of 349.1 billion yen in FY2016. President Hiroshi Aoi stated: "The EPOS Card launched almost simultaneously with the Money Lending Business Act revision. While cashing profits were declining, card business fees were rising, and after seven years we were able to earn back to the original level."

The fact that EPOS Card issuance began in April 2006 and the revised Money Lending Business Act was enacted in December of the same year was a well-timed decision for Marui. Without the transition from cashing dependence to shopping fee business, the financial crisis caused by the gray-zone interest rate issue could have been far more severe. The EPOS Card served as the core of Marui's financial business transformation, fundamentally restructuring the revenue model while remaining an extension of the card business that had continued since the house card era.

In January 2006, the Supreme Court ruled gray-zone interest rates illegal, and in December of the same year, the revised Money Lending Business Act was enacted. The interest rate range (approximately 27%) between the upper limits of the Investment Deposit Act and the Interest Rate Restriction Act was declared illegal, dealing a double blow to Marui's cashing business: the lowering of lending rates and the refund of past illegally collected amounts. For Marui, which held a cashing balance of 250 billion yen as of 2007, a 1% decline in interest rates alone meant the loss of 2.5 billion yen in annual profit.

Marui decided to reduce its cashing business (operating loans) in response to the enforcement of the revised Money Lending Business Act. However, refund claims for past illegally collected interest continued to arise regardless of the decision to downsize. President Hiroshi Aoi stated that "excess interest refund claims were on a scale of hundreds of billions of yen," and following the failure of the organizational reform, Marui was driven into what could be called a management crisis on the financial front as well.

Starting from FY2006, Marui began recording losses as "provision for interest refunds." Losses of approximately 20 billion yen per period continued in multiple years—24.4 billion yen in FY2007, 21.7 billion yen in FY2009, and 24.9 billion yen in FY2010. Over the 15 years through FY2021, cumulative interest refund provisions totaling 124.7 billion yen were written off as losses. With Marui's net assets at approximately 280 billion yen in FY2011, the cumulative loss of 124.7 billion yen was equivalent to more than 40% of net assets.

Although loss recording continued over a long period, losses were spread across individual fiscal years rather than recognized in a lump sum, allowing Marui to avoid insolvency. Behind the ability to continue operations while absorbing interest refund losses was the expansion of shopping fee income from EPOS Cards, which began issuance in 2006. The simultaneous growth of EPOS Card transaction volume alongside the reduction of the cashing business meant Marui barely managed in time to replace the revenue structure of its financial operations.

The cumulative interest refund losses of 124.7 billion yen over 15 years shook the very foundation of Marui's financial base. Had the timing of loss recognition been concentrated, the resulting impairment of net assets could have led to credit rating downgrades and increased funding costs, making scenarios of business continuity itself being jeopardized plausible given the scale. EPOS Card fee income's gradual replacement of declining cashing revenue enabled Marui to weather the 15 years of loss processing.

President Hiroshi Aoi reflected: "We were in a state where it wouldn't have been surprising if we went bankrupt at any time, or if we were acquired by a competitor at any time." The process of taking 15 years to settle the cost of past management decisions of cashing dependence was the most severe financial crisis in Marui's management history. This experience demonstrated the risk that excessive dependence on a specific revenue source can reverse all at once due to changes in the regulatory environment, and it became the origin of Marui's subsequent management philosophy of seeking revenue diversification through fintech and venture investments.