Vision

Leveraging the Power of Fashion and Technology to Address Social and Environmental Challenges

Based on our corporate philosophy, "Inspire the world. Deliver joy every day." we have combined the power of fashion and technology to deliver unprecedented value. The fashion industry is at a crossroads. The challenges we face —including climate change, ethical sourcing, and logistics issues— are becoming increasingly complex and diverse, reshaping the industry like never before.

We see these challenges not as obstacles, but as opportunities to build a more sustainable and valuable business by mitigating risks, controlling costs, and generating positive financial outcomes. With the expertise and technological capabilities we have cultivated over the years, we will continue to act as a platform company, working closely with our business partners, customers, and local communities, leading positive changes across the industry.

"ZOZOTOWN" 20th Anniversary: Entering a New Phase of Growth

In December 2024, our core service ZOZOTOWN celebrated its 20th anniversary since launch. Marking this milestone as a starting point for our next stage of growth, we have accelerated initiatives based on our management strategy and “5 expansion plans”

1. Attract a wider range of customers

Through hosting the "ASIA STAR ENTERTAINER AWARDS" —an event featuring top artists across Asia for which we serve as the main organizer—we successfully reached our core target demographic of younger audiences and acquired many new customers. Our regular survey—targeting men and women aged 15 to 59—on "purchase destinations that come to mind when buying clothes" also revealed that ZOZOTOWN ranked as the top brand to recall.

While we have long shared the joy of fashion with various customers through our online platform, in June 2025, we took a step further by creating opportunities for real-world discovery and connection. We hosted "ZOZO Yokocho SAPPORO" in the Susukino district of Sapporo—an experiential event designed to directly connect customers with brands and offer new encounters with fashion.

We will continue proactive promotions to reach an even broader customer base, with a view to evolving from “ZOZO for buying fashion" to "ZOZO for everything fashion."

2. Increase in frequency of purchases per capita

Given the rapid spread of AI technologies such as generative AI and AI agents, we are exploring business opportunities that are unique to us at the intersection of fashion and AI. One example is our renewed fashion coordination app, "WEAR by ZOZO," which was relaunched in 2024. Its newly introduced feature, "Fashion Genre Diagnosis," leverages our proprietary AI to articulate customers’ preferred fashion genres, increasing the referral rate to ZOZOTOWN by 1.2 times by creating opportunities to discover new fashion suited for each customer.

In addition, fashion is closely tied to romantic relationships. Research indicates that romantic relationships often lead people to become more engaged in fashion. Building on this insight, in June 2025, we launched "ZOZO Match," a matching app powered by our proprietary AI that introduces users to someone with their preferred "vibe." Through this new fashion-related experience, we aim to create more opportunities for people to enjoy fashion.

Furthermore, we are developing an AI agent specialized in fashion. Through collaboration with LINE, the communication app of our group company LY Corporation, thereby creating more touchpoints with customers. In this way, we aim to respond to changes in customer search behavior and needs, and to become a category killer unique to fashion not only in e-commerce, but also in the world of generative AI and AI agents.

3. Production support

Since FY2022, our production support platform “Made by ZOZO” has been steadily growing, with the number of production models up 119.4% and production volume up 17.8% compared to the previous fiscal year. As Made by ZOZO is a made-to-order system, it contributes to a sustainable production process that avoids excess inventory. We plan to further boost Made by ZOZO. In August 2024, we also launched "Kiyasuku with ZOZO," a service that allows inclusive wear to be sold on a made-to-order basis using the Made by ZOZO system. This service is currently in development with partner brands, and we aim to continue increasing the number of production models.

4. Expanding the Cosmetics Category and Beyond

The cosmetics category has continued to grow steadily, with merchandise sales reaching ¥14.7 billion in FY2024, a year-on-year increase of approximately 30%. It has become a prominent category within ZOZOTOWN, now ranking among the largest cosmetics malls in Japan. By leveraging the systems and logistics infrastructure we have developed in the apparel business, we have created a highly convenient environment for both brands and customers in the cosmetics category.

Looking ahead to further category expansion, in December 2024 we signed an MOU for a strategic partnership with the South Korean fashion company MUSINSA Co., Ltd. By bringing MUSINSA’s extensive K-FASHION lineup to ZOZOTOWN, we hope to offer customers new choices. We will continue enhancing our platform to make it easier for brands to open stores on ZOZOTOWN, while also exploring new categories beyond apparel. By expanding the range of products we offer, we aim to further elevate customer experience.

5. Technology Monetization

We are leveraging our technological strengths to explore new markets and create further revenue opportunities. One example is "ZOZOFIT", which utilizes "ZOZOSUIT", a bodysuit designed for 3D measurement, where we have steadily built a track record of success. Looking ahead to global growth, we have acquired all shares of LYST Ltd, the fashion shopping platform popular in Europe and the U.S., making it a wholly owned subsidiary (for details, see the CFO message). We will work closely with LYST to bring enjoyment and delight in fashion to our customers.

ESG strategy for Value Creation

We believe that taking an integrated approach to management—addressing immediate financial challenges while simultaneously pursuing the sustainability of our business —is key to enhancing long-term corporate value. That is also in line with our sustainability statement, "Connecting through Fashion for a Sustainable Future. " We have identified material issues expected to have medium- to long-term financial impact and are actively promoting actions across the four priority areas.

Key action 1
Providing the sustainable and unexpected services through co-creation with our business partners

We believe it is essential to address the environmental and social challenges facing the fashion industry together with our business partners, customers, and local communities. Since 2022, we have continuously held clean-up events with multiple brands, recycling some of the collected PET bottle waste into materials used in products on our production support platform, Made by ZOZO.

In addition, to raise awareness and provide support for the LGBTQ+ community, we have collaborated with certified NPOs and partner brands to create opportunities for individuals to express themselves through ultra-personalized styling on our platform "niaulab by ZOZO." We will continue leveraging our technology and assets—including Made by ZOZO and ZOZOUSED—to work with stakeholders in efforts that tackle both environmental and social challenges and enhance corporate value.

Key action 2
Creating workplaces and communities where everyone can live authentically with joy through the promotion of DE&I

We have a diverse workforce with a wide range of backgrounds and values. We believe that each individual’s unique skills and perspectives are the source of our competitive strength and value creation. Based on this philosophy, we have established a new HR strategy, “Creating Happiness for People and the Company through the Power of Trust,” and focus on key material issues such as "enhancing employee engagement", "strengthening talent development", and "promoting DE&I".

We think the happiness in "Jiji"(*1)— a term unique to ZOZO for referring to working — is achieved when each employee develops their strengths and uses them not only for themselves but also for colleagues and society. As a result, they earn trust and feel the joy of connecting with others and contributing to their success. To support this, we provide training on career development and diversity, fostering a workplace where every employee can fully demonstrate their abilities, build mutual trust, and respect different perspectives.

In FY2024, in response to the rapid advancement of generative AI, we provided AI training for all employees and developed 59(*2) AI tools tailored to operational needs identified through employee feedback. These efforts enhance productivity while enabling employees to embrace new technologies and leverage their skills, creating an environment where innovation can flourish.

Additionally, we continue to engage with local communities, providing career education and environmental lessons to more than 300 schools to date. We will keep offering opportunities that inspire the next generation and broaden their future choices.

1. At our company, we use the term "Jiji" to refer to work, emphasizing that it is not merely a duty but something natural and fulfilling.
2. As of April 2025

Key action 3
Contributing to a vibrant and sustainable planet by reducing negative impacts on the environment

The fashion industry is known for placing a significant burden on the environment throughout the lifecycle of its products. For this reason, reducing negative impact on the environment is one of our key priorities. We are actively promoting various actions across our business to achieve this goal.

Under our "2030 Carbon Neutral Declaration," we plan to switch all electricity used at our sites to 100% renewable energy, while also implementing energy-saving measures such as optimized air-conditioning control systems. In addition, our greenhouse gas reduction targets have been certified by the Science Based Targets initiative (SBTi).

To address the "2024 logistics issue" caused by the implementation of labor-related work-style reform laws, we have implemented measures such as the “Order Consolidation Function(*1)」” and “Slow Delivery(*2)」,” which reduce the number of shipments and the associated environmental impact. Since 2023, the default delivery method has been set to “Safe Drop(*3),” and approximately 80% of ZOZOTOWN orders are now delivered using this method. These initiatives reduce CO₂ emissions and ease the workload of delivery drivers. Furthermore, we continue to reduce environmental impact through daily operational measures, such as optimizing the routes and frequency of the employee shuttle bus "ZOZOBUS," automating logistics facilities, and switching to environmentally friendly packaging materials.

1. When multiple orders are placed separately, this function consolidates them into a single shipment.
2. A new delivery option in which items are shipped between 7 and 10 days after the order date.
3. As of July 2024. The percentage is calculated based on orders eligible for “Safe Drop,” where customers selected this delivery method.

Key action 4
Maintaining and improving sound management and a strong administrative structure by strengthening governance

As a platform company that faces various business partners and customers, we believe that respecting human rights and caring for the environment throughout the supply chain is essential to our business. Based on this, in May 2025, we conducted a questionnaire on ESG as part of our supply chain due diligence, targeting our suppliers. The results confirmed that there were no serious human rights violations or compliance breaches; however, the questionnaire helped us identify potential ESG risks among suppliers and understand how they are managing them. Additionally, we regularly provide sustainability-related e-learning programs to all employees and hold study sessions on human rights with outside experts, thereby working to enhance the knowledge of both employees and business partners. We will continue to enhance these efforts to prevent and mitigate ESG-related risks across the entire supply chain.

Message to Our Stakeholders

Guided by our corporate philosophy, "Inspire the world. Deliver joy every day," we will continue to combine the power of fashion and technology to create new value that has never existed before and to take on the challenge of addressing social issues. Through these challenges, we aim to strengthen our relationships with all stakeholders and enhance our corporate value. Moving forward, we will boldly advance toward building a sustainable society and creating a future where everyone can enjoy fashion.