Zozo Inc 3092

Heavy Fixed Costs Weigh on Short-Term Profitability but Better Top-Line Outlook Will Improve Margins

Zozo’s Zozotown is the largest pure-play fashion e-commerce platform in Japan, with over 9,000 brands and 11.7 million active users on the platform, both of which are the largest in Japan. Zozotown charges a high average take rate of 30%, because of the high value it provides to tenants, through 1) access to the largest pool of young fashion-conscious customers in Japan, and 2) fulfillment services tailored to fashion brands, which include measuring size, photographing, storage, picking and packing products, shipping, and returns. Through collecting large amounts of user traffic data over the past two decades, Zozo’s site algorithm generates highly sophisticated personalized recommendations, which translates to superior conversion rates of 14-%16%, compared with the industry average of 4%.