TOKYO -- Even as the Zozotown marketplace remains a top destination for young Japanese shopping for clothes online, the company behind it needs to come up with a design for continued growth.
Start Today's transaction value totaled 212 billion yen ($1.9 billion) for the year ended March 31, the company reported Friday, with the figure topping the 200 billion yen mark and more than doubling from just five years earlier. The surge was thanks to "an increase in new-shop openings and promotional activities," Chief Financial Officer Koji Yanagisawa said in an earnings briefing.
As a measure of sales, this puts Start Today in the same league as apparel-industry leader Onward Holdings. The e-commerce company's operating profit jumped 48% to 26.2 billion yen, extending the streak of higher profits to a 10th year since its 2007 listing.
Start Today generates revenue from fees paid by virtual shops on Zozotown. In this regard, its business model is the same as a department store's. But Start Today, having no physical locations or salesclerks, enjoys dramatically lower fixed costs. Profit apparently topped the earnings of such big department store operators as Isetan Mitsukoshi Holdings.
Launched in 2004, Zozotown offers one-stop shopping for such popular youth brands as United Arrows and Beams. It is credited with helping popularize buying clothes online. The portal boasts a strong fan base of 20- and 30-somethings, with a 21-year-old Tokyo college student saying: "I don't shop for clothes on Rakuten, but I do buy them on Zozo."
Internet shopping for apparel is hardly new anymore, though, and some players seek to take a bite out of Zozotown.
Take the e-commerce giants strengthening their own apparel offerings. Fashion is one of the fastest-growing segments in the world in sales, said an official at Amazon Japan, which became the headline sponsor of Fashion Week in Tokyo last October. Virtual mall operator Rakuten launched the Rakuten Fashion Square website that year.
Vendors on Zozotown are also broadening their sales channels. If the 3,900-plus brands on Zozotown get their own independent online stores, they would surely pose a threat to the portal.
Start Today is plotting its next moves. A private label it has been working on will be ready sometime in fiscal 2017, President Yusaku Maezawa said at Friday's briefing. But this stands to cannibalize popular brands already offered on Zozotown.
And in late June, Zozotown will shut down a fashion resale marketplace launched in December 2015, having failed to make inroads into market leader Mercari's empire. As Start Today's earnings have grown, its challenges have come into sharper focus.