Strategy & Business

Review of FY2023

In fiscal 2023, gross profit and shipping income increased due to the expansion of product transaction volume in the "ZOZOTOWN" business and "LINE Yahoo Commerce (*)," sales increased due to growth in the advertising business, aggressive promotion of "LINE Yahoo Commerce," and the logistics center "ZOZOBASE TSUKUBA 3," the largest facility in terms of total floor space, number of inventory items that can be stored, and other facility capacity, went into full-scale operation in November 2023. In addition, the active promotion of "LINE Yahoo! Commerce" and the full-scale operation of "ZOZOBASE Tsukuba 3" in November 2023, which is the logistics center with the largest floor space and the largest facility capacity in terms of inventory storage capacity, resulted in a record high merchandise transaction volume of 574.3 billion yen and operating income of 60 billion yen.

(*) "LINE Yahoo Commerce" is the sum of "Yahoo! Shopping" and "ZOZOUSED Yahoo! Auction Store.

In this fiscal year, the average shipment unit price rose 4.3% from the previous year due to an increase in the number of items purchased per order in line with a rise in the average product unit price and the ratio of combined purchases. The Company was able to make more efficient advertising expenses due to a change in the use of real promotion expenses; the ratio of points and other expenses increased from the same period of the previous year.

Future Investment Strategy

1.Strategy: "More Fashion x Better Fashion Tech - Explore your style. Make you delighted.-
We are developing various measures based on the management strategy "More Fashion x Better Fashion Tech - Explore your style. Make you delighted". The outfit-sharing app "WEAR," which celebrated its 10th anniversary last year, was relaunched as "WEAR by ZOZO" in May of this year, and has begun to provide users with "suitability" through functions such as the use of AI to clearly indicate users' preferences, which until now could not be expressed in words. We have begun to provide "suitability" to users. The effect of this "suitability" service on ZOZOTOWN has also become apparent. Since people who experience the Ultimate personalized-styling service "niaulab by ZOZO" tend to visit ZOZOTOWN about 1.5 times more frequently and also increase their purchase amount on ZOZOTOWN by about 2 times (*), we will further clarify what "suitability" is by utilizing various data acquired, we will continue our efforts to provide more encounters with fashion that "fits" online as well.

(*) Calculated based on the behavioral analysis data of approximately 1,000 people who experienced the service between February 2023 and April 2024 during the first 30 days after their experience. Excluding new and dormant members at the time of application.

2. Category Expansion Following Apparel

ZOZOCOSME, a cosmetics specialty mall that we have been focusing on as part of our efforts to strengthen categories other than apparel, has become one of the largest cosmetics EC with a transaction volume of 11.3 billion yen, partly because popular cosmetics brands have opened new stores one after another. We will continue to aim to expand the transaction volume by fostering the image of "ZOZOTOWN for cosmetics. We have also set the direction for our next challenge, and will be preparing for it this fiscal year.

3. Measures aimed at specific targets

In order to attract a wider range of customers, ZOZOTOWN hosted a pop-up store of a Korean fashion EC and sponsored an event featuring K-POP artists, thereby increasing awareness of ZOZOTOWN among younger customers. In addition, ZOZOTOWN actively promoted its products, including web commercials promoting children's items, to the particularly important target of mothers among the family segment. Going forward, we intend to continue to attract new users by promoting the wide range of products offered by ZOZOTOWN, considering the younger generation and families to be important targets.

4.Investment in logistics centers

In FY2023, we will invest approximately four times as much as we have invested in new logistics centers to date, and have opened a new logistics center "ZOZOBASE TSUKUBA 3," which is 30% less manpower than existing centers due to automation. With the population expected to steadily decline in the future, we will invest approximately 5 billion yen in our existing logistics centers this fiscal year to promote further automation to increase efficiency and reduce manpower.

Improvement of capital efficiency

We believe that generating profits that exceed the cost of capital leads to an increase in corporate value, and we have set return on equity (ROE) as an important management indicator and strive for highly capital-efficient management, with the goal of maintaining at least 30%, taking into consideration the level of other companies similar to ours around the world. The ROE for FY2023 was 55.0% (60.1% in the same period of the previous year), ranking first among companies in the Nikkei 500 for the second consecutive year and far exceeding our target.

Shareholder Return Policy

The Company's basic policy regarding the return of profits to shareholders is to implement and consider the return of profits to shareholders while comprehensively taking into account such factors as business performance trends, financial conditions, and future business and investment plans, and while maintaining a balance with internal reserves. The Company also emphasizes returns to shareholders, aiming for a total return ratio, including share buybacks, of more than 80% on average over a five-year period of which the dividend payout ratio is 70%. Going forward, we will continue to do our utmost to enhance corporate value by maintaining a sound financial structure, achieving return on capital in excess of cost of capital, and implementing fundamental measures to achieve sustainable growth.

Message to Stakeholders

In recent years, in order to continue our sustainable growth, we have been actively working to strengthen our management from a long-term sustainability perspective, in addition to our current financial challenges, and we have received high recognition both in Japan and overseas. In April 2024, the company was included in the Nikkei Index, and has also been included in various ESG indices and selected as a constituent of all six ESG indices for domestic stocks used by Government Pension Investment Fund (GPIF).

We will continue to pursue sustainable business growth and deliver valuable services to our stakeholders as a platform provider in the fashion industry, while striving to realize our corporate philosophy of "Inspire the world. Deliver joy every day" in both the short- and medium- to long-term we will continue to pursue sustainable business growth and deliver valuable services to our stakeholders as a platform for the fashion industry.