As Zozotown suits up, Japan's online fashion revolution gathers speed
04/07/2018 09:21
By Sam Nussey
TOKYO, July 4 (Reuters) - Zozotown, which swooped in as a
little-known retail website and prodded once-reluctant Japanese
consumers to shop online for clothes, is now facing stiff
competition in the industry whose image it remade.
Arriving on the scene in 2004, the site made a killing
selling clothes from shops such as Japanese boutique United
Arrows 7606.T and minimal French label A.P.C.
Zozotown's success turned its founder into one of Japan's
richest entrepreneurs, and its name adorns a baseball stadium.
But its dominance is being challenged, with retailers
expanding their e-commerce offerings and big names such as
Amazon AMZN.O and SoftBank Group Corp 9984.T eyeing a piece
of the growing business.
At stake is a $120 billion fashion market that was almost
entirely dominated by brick-and-mortar stores until a few years
ago, but is transforming amid the proliferation of smartphones
and home delivery.
Online fashion sales have grown to over 10 percent of the
total Japanese market in the past few years - with Zozotown at
the head of the pack - and are likely to surpass 20 percent in
three years, according to Nomura Securities.
"There needs to be a second player, and we are putting up
our hand," said Yusuke Tanaka, founder and chief executive of
fashion website Locondo Inc 3558.T .
To differentiate itself, Locondo specialises in shoes and,
unlike Zozotown, offers free returns - still a rarity in Japan.
It also shares inventory with fashion site Magaseek.
For now, Zozotown is "totally sweeping the board," said Yuki
Ando, general manager of web business at Sanyo Shokai Ltd
8011.T , the fashion company behind lines such as Mackintosh
Philosophy.
Zozotown is operated by Zozo, officially called Start Today
Co Ltd 3092.T .
The website set itself apart in its early days with a clean,
uncluttered design and a slice of "Ura-Hara" style - the modish
fashion of the backstreets that line the trend-setting Harajuku
district of Tokyo.
Business took off as fashion-conscious professionals in
their late twenties and early thirties started using Zozotown to
buy trendy but work-appropriate threads online from labels such
as United Arrows and Nano Universe.
Its target is now broader, selling over 6,800 brands
including, starting next week, clothes by Shimamura Co Ltd
8227.T , one of Japan's largest mass market chains. But
industry executives say it still has an enviable cachet.
Zozotown has an "overwhelming ability to attract customers,"
says Takahiro Kinoshita, a manager in the digital marketing
department of United Arrows.
RISING RIVALS
In February, fashion company Stripe International launched
Stripe Department, an online joint venture with SoftBank Group
Corp 9984.T .
The site features recommendations by stylists, and targets a
user base that's slightly older than that of Zozotown, the
company says.
Amazon is trying to raise its fashion credentials in Japan,
sponsoring catwalk shows in Tokyo. The head of Amazon Japan's
fashion unit, James Peters, says fashion is one of the company's
fastest-growing areas, but declined to provide figures.
Retailers that had historically focused on expanding their
physical presence are also shifting to e-commerce. Japan's Fast
Retailing Co Ltd 9983.T , which controls the Uniqlo brand, is
trying to grow online sales, which are currently less than 8
percent of the company's total. Chief executive Tadashi Yanai
said he wants to see that to rise to 30 percent.
Even the brands that drove Zozotown's early success are now
competing with it.
United Arrows still makes almost 60 percent of its online
sales through Zozotown. But sales on the brand's own website are
growing rapidly too - up 35 percent in the last fiscal year,
which ended in March.
Fashion company Bay Crew's Group said 30 percent of its
online sales come from Zozotown. But 60 percent are through its
own website, generating precious customer data, said Jun
Shimada, a senior executive.
EARLY ADOPTERS
Foreign companies are helping Japanese retailers polish
their online presence. Sweden's Virtusize, for instance, adds
code that allows users to compare the fit of items to those they
already own.
"Our biggest market by far is Japan, where close to 20
percent of all online retailers use Virtusize," said chief
executive Gustaf Tunhammar, adding that Europe was the
second-largest market, and that "only a handful" of retailers in
the U.S. used the technology.
Japan is also one the largest markets for UK-based
3D-A-Porter, which offers three-dimensional body scanning and
virtual clothing try-on, according to CEO Lara Mazzoni.
Zozotown, meanwhile, has deployed its own high-profile
technology to fight a slowdown in transaction value growth. Its
Zozosuit collects body measurement data that allows users to
order fitted clothing online. urn:newsml:reuters.com:*:nL4N1TZ2CA
The company is breaking new ground in deploying such
technology on a large scale, with more than 550,000 suits sent
to customers. Success would transform Zozotown, founded by punk
rock-loving billionaire Yusaku Maezawa, into a brand in its own
right.
But managing all that data in an era where privacy concerns
can roil consumers will be crucial, said Ed Gribbin, U.S.-based
CEO of apparel business and product development consulting firm
Alvanon.
"There is more resistance to providing data to retailers on
the one hand, but the bottom line is that finding the right size
and a flattering fit usually outweighs the privacy issues," he
said.
(Reporting by Sam Nussey; Additional reporting by Melissa
Fares; Editing by Gerry Doyle)
((sam.nussey@thomsonreuters.com; +81364411596; Reuters
Messaging: sam.nussey.thomsonreuters.com@reuters.net))