Market Environment

We estimated that the total size of the apparel and accessories market in Japan during this fiscal year ending in March 2014 would reach to 15 trillion yen. And the size of apparel e-commerce market in a broad sense accounts for approximately 880 billion yen among the whole market. (In-company estimation based on the statistics such as the Current Survey of Commerce provided by Ministry of Economy, Trade and Industry).

Among these, the size of Japan’s e-commerce market (sum of Internet-based-commerce and mobile-based-commerce) in the fashion area has reached to approximately 1.3 trillion yen (* according to research firm Fuji-Keizai as of FY2014 ). In the past several years, the online retail market size has been growing at a rate of around 10%. When it is compared to the entire market size of the fashion industry itself, however, the e-commerce penetration rate in the industry is only accountable for 9%. We believe that there is still considerable room for growth in the fashion e-commerce market where our main business belongs to.

Breaking down the fashion e-commerce market by merchandise attributes, it can be classified as the three following groups: the high-end zone, the trendy-zone, and the volume (mass)-zone. The market size of the trendy-zone fashion e-commerce is about 330 billion yen (* in-company estimation as of 2014), where in terms of e-commerce penetration rate is only about 4%. The low penetration rate is due to several reasons, such as a sense of anxiety of customers buying something unable to see and touch before actually purchasing. However, the Internet environment enables us to invest our free time, shopping comfortably and efficiently, therefore the size of the e-commerce market has gradually been expanding in response.

We have captured almost 40% share in the trendy-zone fashion e-commerce market, also making effort to improve our website usability as well as the service level to reduce disadvantages the e-commerce market may carry, as much as possible. Considering the circumstances that the e-commerce penetration rate in the UK and US fashion industry has already reached around 10% ~ 20%, we expect that the figure in the Japanese fashion industry will be similar to 10% in the near future.

As we mentioned earlier, we have captured almost 40% share in the fashion e-commerce market (the trendy-zone fashion market). It might be early to say for sure due to the data unavailability regarding the market situation in the industry as a whole, we do believe the market size of our competitor in second place is about 20 billion yen and it represents only about one fifth of our size. Even Rakuten Ichiba, having the largest share in the entire fashion e-commerce market, is not in direct competition with us since their main target is the volume (mass)-zone fashion. The online shopping website operators for flash sales and parallel import items such as Gilt, Glamour and YOOX are emerging these days, however, they are not strongly competitive with us since they are mainly selling luxurious fashion brands.

A competitor relatively close to our business model would be ASOS plc. However, 50% of their sales are currently derived from their own-label collection. ASOS is now gradually becoming a SPA fashion e-commerce.On the other hand, we are not responsible for the inventory risk of products provided by merchants opening their shops on our online shopping mall. Therefore Our business model is a rare instance compared to other competitors.

*SPA: Acronyms for specialty retailer of private label apparel. The clothing retail strategy that is commonly known for covering a whole processes of retail business in-house including planning, manufacturing, logistics, promotion and sales.

Mid-to-Long Term Management Plan

The effective countermeasure we believe to achieve as our mid-and-long term goal is, domestic total transaction value should be 500 billion yen, increasing the ratio of the apparel and accessories e-commerce market to the market as a whole. In this regard, building more convenient infrastructures of fashion e-commerce for both users and brand suppliers is essential.

Market Expansion Strategy

Further expansion of ZOZOTOWN Business in fashion e-commerce market.
Covering several fashion categories by offering e-commerce consulting service.