Kutsu no Marutomi
Corporate History & Strategy

In 1950, Tominaga Mitsuyuki (founder of Kutsu no Marutomi) opened 'Marutomi Shoe Store' in Nagoya and entered the shoe retail business. At the time, the predominant daily footwear in Japan was geta (wooden clogs), and shoes were luxury items used by a subset of urban office workers. Accordingly, shoes were primarily expensive custom-made items crafted by artisans who measured each customer's feet individually, priced at levels comparable to a university graduate's starting salary, and were not products that ordinary citizens could easily purchase.

Tominaga recognized this situation as a market that was immature on one hand, but with latent demand that could be unlocked if the price and supply method were changed. He believed that shoes were expensive not because of quality but because of the production method, and was exploring delivery methods different from conventional custom-made shoes.

Tominaga visited shoe factories and proposed the manufacture of ready-made shoes through assembly-line production. At the time, the very concept of mass-producing shoes as ready-made products was unusual, and factory reactions were often negative, but he achieved production at 600 yen per pair. Marutomi Shoe Store sold these at 1,000 yen, offering a price range dramatically lower than conventional custom-made shoes.

This pricing repositioned shoes not as special durable goods but as everyday consumables. Despite being a small-scale operation run by a husband and wife, the focus on procurement and sales yielded rapid sales of ready-made shoes, generating substantial profits in a short period. The founding of Marutomi Shoe Store became the prototype for the chain store model of mass sales of low-priced products in the subsequent multi-store expansion.

From the late 1970s through the 1980s, suburban roadside commerce developed rapidly in Japan alongside the proliferation of private automobiles. Specialty stores with parking facilities were established along arterial roads, and consumer behavior of purchasing daily necessities and durable goods in bulk became established. The positioning of shoes was also shifting from luxury items purchased at department stores or downtown specialty shops to everyday products selected and bought in suburban locations.

Kutsu no Marutomi had grown through low-price sales of ready-made shoes, but recognized that demand expansion had limits with store deployment focused solely on urban areas. After the enactment of the Large-Scale Retail Store Law, the opening of large stores was constrained, while suburban specialty stores below a certain size retained opportunities for new openings, and roadside locations appeared as growth opportunities.

Around 1980, Marutomi announced a policy of nationwide expansion of 'Kutsu Ryutsu Center,' a suburban shoe specialty store. Stores were named after the local area, adopting a strategy of building recognition as a community-oriented mass-market shoe specialty shop. Stores were located along roadsides and equipped with parking to attract families and car-driving customers.

At the time, the Large-Scale Retail Store Law imposed upper limits on store floor areas for suburban outlets, but Marutomi compensated for the scale constraints by opening numerous small stores. By keeping per-store investment low and rapidly expanding the store network over short periods, the company simultaneously pursued nationwide recognition and increased procurement scale.

'Kutsu Ryutsu Center' succeeded through its roadside location and low-price appeal, rapidly increasing store count throughout the 1980s. It became established as a format well-suited to suburban consumption patterns and grew into Marutomi's flagship brand. Centered on this format, the company established its position as a nationwide shoe retail chain.

On the other hand, this success also resulted in deepening dependence on a store-opening model premised on suburban roadsides and the regulatory environment. In later years, when commercial facility-based store openings became mainstream, this model would turn into a competitive disadvantage, but in the 1980s, it was the strategy that most powerfully drove Marutomi's growth.

Kutsu no Marutomi had expanded its business scale through multi-store deployment centered on shoe retail, but as the number of stores increased, dependence on a single format emerged as a structural concern. While the shoe market had high daily necessity, demand fluctuations were modest, and the room for growth through new store openings was beginning to show its limits.

In this context, the company was examining retail formats compatible with suburban locations as the next business domain after shoes. Toys emerged as a candidate—a product category that could target family customers as the primary visitor segment and achieve both turnover rate and average transaction value. The possibility of transferring the roadside store-opening and multi-store management expertise cultivated through shoe stores also supported the consideration.

In 1985, Kutsu no Marutomi commenced expansion of the toy specialty store 'BANBAN.' Stores were fundamentally based on suburban locations, with roadside stores equipped with parking lots as the primary format. The product assortment centered on toys with an age- and gender-neutral composition, targeting family unit visits.

In designing the format, the company referenced precedents of suburban toy specialty stores already deployed by other companies while applying the multi-store management and procurement frameworks established in the shoe business. Although toys had different product turnover characteristics and seasonality compared to shoes, they were positioned as an independent business, with store-opening decisions and operational structures managed separately.

BANBAN accumulated store openings through suburban locations and family-oriented store configurations, forming customer touchpoints distinct from the shoe business. By handling toys—a product with high experiential appeal—the visit frequency and purchase motivations exhibited different characteristics from shoes, broadening the business portfolio.

Through this initiative, Kutsu no Marutomi transitioned to a structure with revenue sources not dependent on shoe retail. The toy business was positioned as a format premised on independent expansion, and became one of the foundations for subsequent multi-format development. It served as a case of transferring store-opening and operational know-how accumulated in the shoe business to retail in a different industry.

Kutsu no Marutomi had grown since the late 1970s by opening numerous small specialty stores primarily along suburban roadsides. Under the Large-Scale Retail Store Law, the opening of large commercial facilities was suppressed, and standalone stores located along daily traffic routes could expect a certain level of customer traffic. In the late 1980s, chain expansion was accelerated, and sales scale was driven upward by the increase in store count.

However, in the 1990s, the underlying assumptions changed. Against the backdrop of relaxed enforcement of the Large-Scale Retail Store Law, suburban shopping centers increased, creating a structure where shoe specialty stores competed within the same facilities. Standalone small stores fell behind in customer-drawing power and were placed at a disadvantage in price appeal and product turnover as well. The conventional growth model was strongly dependent on the regulatory and locational environment, and those foundations had begun to crumble.

In 1994, Marutomi made the decision to close approximately 180 stores at once, primarily those that had become unprofitable. This was not a gradual reduction but a large-scale restructuring within a short period. The judgment was that if small stores with declining sales were preserved, the fixed cost burden would cascade into compressing company-wide earnings.

The closures primarily targeted small-scale stores in suburban roadside locations and sites where customer traffic had declined. It was a decision that clearly severed the growth strategy of store network expansion, prioritizing the rebuilding of profitability and business structure. At this point, the company shifted its policy to prioritizing profitability over quantitative expansion.

The mass closure of approximately 180 stores was accompanied by a reduction in sales scale in the short term, but delivered the effect of compressing fixed costs. On the other hand, the sudden store restructuring caused the company to lose its momentum as a growth enterprise, and also left the impression of business instability on the market and trading partners.

This mass closure was an event that clearly demonstrated that the small suburban store model had reached its structural limits. Afterward, Marutomi was compelled to transition away from management premised on store expansion, confronting the need to fundamentally reconstruct its business model. The 1994 mass closure became an irreversible turning point for the company.

Kutsu no Marutomi listed on the Second Section of the Nagoya Stock Exchange in 1990 and advanced nationwide expansion with 'Kutsu Ryutsu Center' as its flagship. Broadening its formats from shoes to toys, apparel, and bags, the company built a network of over 1,700 stores by the mid-1990s, reaching a peak of approximately 171.7 billion yen in revenue in the fiscal year ending February 1996. The growth was supported by the Owner System introduced in 1987, which drove store expansion.

However, in the 1990s, profitability declined due to stagnant consumer spending and intensifying competition with discount stores. After the revision of the Large-Scale Retail Store Law, suburban shopping centers emerged, and the model premised on small roadside stores turned into a competitive disadvantage. The very structure premised on store count expansion could no longer withstand environmental changes.

Marutomi had been closing unprofitable stores from the early 1990s, closing 180 stores between 1994 and 1995. In 1999, the company announced a management improvement plan targeting a return to profitability through the closure of 380 stores over three years, but even after closing 311 stores in the first year, performance did not improve and losses expanded. The plan was revised repeatedly, and measures including the dispatch of directors from the main bank and format conversion were attempted.

However, sales plunged and credit concerns materialized. In December 2000, the company was unable to secure funds for bill settlement and abandoned self-directed restructuring. It filed for the commencement of civil rehabilitation proceedings, effectively going bankrupt with total liabilities of approximately 76.1 billion yen.