Marui Co., Ltd.
Marui Co., Ltd.
Sales: ¥556.35 billion (US$4.46 billion)
Stock Exchange: Tokyo
Marui Company is one of the largest department store chains in the Tokyo area, operating 33 large stores near major railroad stations. In fiscal year ending February 1991, Marui was by far the most profitable retailing chain in Japan, with profits of ¥58 billion, or 10% of sales. The chain’s customers are predominantly fashion-conscious and wealthy young Japanese in their late teens to early 30s. Marui has pioneered the use of credit shopping in Japan, and the credit business provides a large share of the company’s revenues. Marui has concentrated on new stores in prime downtown locations but plans to develop large stores in the potentially lucrative suburban areas and also to increase the specialty content of its branches.
Marui’s history dates back to 1931 when founder Chuji Aoi opened a store selling household utensils and furniture in the downtown Tokyo district of Nakano. Aoi was an energetic young retailer, who saw a market opportunity and acted on it. Born in Toyama prefecture on the west coast of Japan in 1904, he graduated from the Takaoka Technological High School at the age of 18 and joined a Tokyo trading and retailing company, Maruni. The company was part of Zenshiro Tasaka’s Maruzen group which, as a retailing chain, still existed in the early 1990s. The stores within the group were the first in Japan to allow customers to buy goods on monthly installment plans. Tasaka had pioneered credit sales in Japan on the southern island of Kyushu in 1895 by selling lacquerware to customers on monthly installment plans. Chuji Aoi stayed with Maruni in Tokyo for nine years. Using savings and borrowed money, he then used his credit retailing experience to open his own store. The time seemed right for such an operation. The Tokyo region had been devastated in 1923 in the Great Kanto Earthquake. Although the city had largely been rebuilt, there was a high demand for furniture and the prospect of credit sales was attractive to customers. The store was initially called Maruni, reflecting the initial capital provided by his old company. Aoi’s venture flourished and he increased his stock range to include clothes, shoes, electrical goods, and suitcases. By 1935 he had opened another store in nearby Asagaya. At the same time, the company name changed to Marui. In 1936 the business had expanded to such an extent that an adjacent building was acquired and the entire Nakano store renovated. The following year, in order to open a third store in the Tokyo district of Shimokitazawa, Aoi sold part of his share in the stores and formed Marui Co., Ltd., raising ¥50,000.
By 1939 Aoi had opened two more Marui stores in Tokyo. Although Japan’s wartime economy boomed, it was not geared toward consumers. During the period 1941 to 1946 all Marui stores ceased business and were destroyed in the subsequent saturation bombing of Tokyo by the Allies. In August 1946, however, Aoi began selling furniture from the site of his old Nakano store. He was in effect starting again, and by 1947 he had rebuilt and reopened the store, with 1,190 square meters of sales space. Aoi had raised ¥200,000 in capital. Furniture was in high demand again in postwar Japan and the store flourished. By 1950 the number of stores had risen to five and in that year four high school graduates joined the company as management trainees. The monthly payment schemes being offered by the company to customers were used to advertise Marui and differentiate it from its competitors. In 1951 many new products were stocked, such as baby clothes and bedding. A fleet of trucks was purchased for supplying and distributing goods to the stores, which by 1952 numbered eight. The first neon sign appeared over Marui’s Shinjuku store in this year. In 1953 Japan’s economic recovery began. Marui began advertising on the radio and selling gift vouchers that were valid in all eight stores. The company had become a chain with annual sales of more than ¥1 billion and 260 employees who had their own union. In 1955 customers were offered a ten-month payment scheme for selected goods. Opening hours were extended by instituting a shift system among the women counter sales staff—men counter staff did not participate.
Tadao Aoi, the son of the founder, joined the company in 1956 and was anxious to observe how credit sales chains operated in the United States. In 1957 he went on an inspection tour to look for new ideas. In 1959 Marui Advertising—now AIM Create Co., Ltd.—was formed, to attend to the company’s promotional needs. In the same year Aoi established Maruishinpan to provide credit services to consumers. The following year saw the issue of the first Marui credit card and the establishment of Marui Transport—now Moving Co., Ltd.—which provided house-moving services.
The year 1961 was the 30th anniversary of the opening of Aoi’s first store. There were by then 18 branches around Tokyo and sales totaled ¥5.7 billion. In 1962 the largest Marui branch was established by the renovation of the Shinjuku store. More than 2,000 square meters were added to the site, and the nine-story structure became one of the largest stores in the installment retail industry. The early 1960s marked a consumer boom in Japan and a time of expansion for Marui. In the period 1960 to 1967 sales floor space trebled to 35,000 square meters. A listing of Marui on the Tokyo Stock Exchange followed in 1963. In 1965 Aoi’s son Tadao Aoi was promoted to vice president in preparation for his eventual succession to the helm of Marui. The year 1966 was important for Marui, as the company implemented its “scrap and build” policy of redeveloping its sites into large-scale stores that were cost-efficient and comfortable for customers. Most stores were affected.
Major capital investments were made in the operation of the stores with the introduction of an IBM 360 mainframe computer to handle the company’s accounts and customers. To organize Marui ’s work force of 2,900, training schemes were introduced primarily for sales staff. By 1969 Japan had the second-largest gross national product figure in the world. A key part of this success lay in the high percentage of earnings that the average Japanese saved. The Japanese consumer at the time did not generally buy on credit. Marui ’s slogan at the time, “Play now, pay later,” seemed to contradict this trend but Marui provided for the young and not so cautious consumer who expected to be fairly well off in the near future. In 1971 the Marui Computer Centre was founded to centralize computer operations. Real estate and travel services began to be sold through Marui stores. An overseas trade department was set up within the company to handle imports of goods.
An organizational change occurred in the company in 1972 with Chuji Aoi becoming chairman, allowing his son Tadao to take over the running of Marui as president. Tadao’s brother Chuzaburo remained on the board of directors. In a 1974 cover story on world leaders, Time magazine featured Tadao Aoi along with the crown prince of Japan as representative of the country’s rising leaders. In 1975 the Red Card, a house credit card, was offered to all Marui customers. The new cards had an initial interest rate charge of 9%, substantially higher than base rates, but the difficulty in arranging small consumer loans in Japan at the time attracted customers to Marui. In 1974 the company introduced on a trial basis point-of-sales computer system to monitor transactions. The system was installed in all stores in 1977, linking them together and speeding up transaction time. This system greatly increased the number of Marui card holders. During this time the number of Marui stores remained constant at 33, while the floor space was increased annually to reach 183,000 square meters in 1978. Constant renovation and the opening of specialty stores within existing stores accounted for the increase. Marui began to advertise its Red Card heavily and this, as well as the card’s innovative nature, accounted for its success. The television and press advertisements were aimed primarily at the youth market and often won awards for their wit and originality. By the end of 1980 the number of card holders had reached four million. In the following year Marui began offering consumer loans in the form of cash-dispensing services to customers.
At the company’s 50th anniversary in 1981, it had annual sales of ¥260 billion and almost 7,000 employees. The company had by now developed expertise in the development of retail and credit control software. In 1984 Marui established the company M&C Systems to sell this knowledge to other retailers. Card holders could now withdraw money from all branches of Marui. Within a year this feature had increased the number of holders to six million. Branches of Marui also had online information on exchange rates and other financial indicators.
In 1985 a new management division was added to the company to cope with the expanding work force. On the retail side, Marui continued the policy of expansion within existing sites and the opening of specialty boutiques within the stores. This strategy continued to be successful. By 1988 the combined membership figure for all card holders exceeded ten million. In 1990 Marui formed a joint venture with Richard Branson’s Virgin Group in the United Kingdom in the establishment of Virgin Megastores Japan. The ownership of the company was split equally between Virgin and Marui, and the pilot plan was the opening of a small version of Virgin’s UK megastores in Marui’s Shinjuku branch. The deal gave Marui excellent international publicity and increased its prestige among young Japanese consumers. For Virgin it provided a foothold in the lucrative Japanese retail market while avoiding the excessive costs of renting or buying prime floor space in Tokyo.
Financially Marui has continued to grow steadily, increasing profits even in fiscal year 1990, in the wake of Japan’s market crash. Marui has 464 cash-dispensing machines in operation, 69 of them outside Marui stores. Recently established service centers, separate from the stores, offer a wide range of financial services. The policy of developing specialty boutiques, such as the “In The Room” store in the Shibuya branch of Marui, has been successful. In 1991 the company was continuing its slow but steady opening of new stores and expanding to the residential areas around Tokyo and possibly Osaka. Tadao Aoi has remained in charge of Marui, although his son Hiroshi is already on the main Marui board and looks set, some time in the future, to take control of the company his grandfather founded.
AIM Create Co. Ltd.; Moving Co. Ltd. (87%); Marui Zero One Net Co. Ltd; M&C Systems Co. Ltd.; CSC Service Co. Ltd. (70%); Virgin Megastores Japan (50%); M-One Card Co. Ltd. (68%).