Standing out in the hyper-competitive world of E-commerce — ZOZOTOWN

ZOZOTOWN is a Japanese online fashion and lifestyle e-commerce marketplace. While there is no lack of e-commerce sites in Japan, ZOZOTOWN was one of the first to provide an online platform for fashion brands that operated solely in offline retail space. With this, consumers have a one-stop site to shop for apparel at the comfort of their home (and on their smartphones). Launched in 2004, ZOZOTOWN soon became popular among both consumers and retailers and, merely 3 years after its establishment, the company became public. More than 10 years after its founding, the company continues to grow. In the financial year ending March 31st 2018, Start Today, the operating company recorded 270,542 million Japanese Yen worth of transactions with more than 32,669 million Japanese Yen operating profit.

Credit: http://ukeuri-trend.info/zozo-teiki

What is the driving force behind ZOZOTOWN’s success in this hyper-competitive world of e-commerce? In this article, I am going to touch on how ZOZOTOWN nailed it from by first focusing from the consumers’ aspect and how this inevitably shapes the business aspect of the brand. To keep the article short, I am going to refrain comparisons with other competitors but may do so at a later stage.

Consumer Aspect

E-commerce sites operate in a fiercely competitive market. While advertisements can bring consumers to your site, it is a good user interface that will make them stay and potentially make a purchase. In a recent NPS (Net Promoter Score) survey by NTT Communications, ZOZOTOWN emerged top among 11 other EC sites. One of the key reasons attributing to this is the user interface of the site. Respondents cited ease of usage and simple purchase journey. With a clean site design and intuitive categorization of products for easy search, it is not difficult to understand why ZOZOTOWN stands out among others. When you make it simple for your consumers from start (search process) to end (transaction completion), they will in turn repeat their visits and purchases.

Customer service is paramount for e-commerce sites, especially when you do not have physical staff tending to the customer. Besides, online apparel shopping has the longstanding issue of getting the correct sizing for consumers. ZOZOTOWN circumvent this with free return policy (albeit for paid premium members). While uncontrolled return is bad for the business, research from the University of North Carolina’s Flagler Business School found that having a rate of return do correlate with the sales and profit (to a certain extent). In other words, when customers know that they have the option to return a purchase, they would be more willing to buy and do repeat purchase.

There is no doubt that customer engagement is one of the keys to customer loyalty. One way ZOZOTOWN employed to keep their customers engaged is through 「WEAR」 an SNS application where users (which include models and celebrities) can share their outfit coordinate. How many times have we bought an item only to face with the question of what it can go with? By having this social network of sharing outfit coordination, consumers can reference and find items to match. On top of that, they can purchase directly via the site when they like an item from the outfit coordinate. In 2015, it was announced that the sale on EC sites via 「WEAR」 exceeded 10 billion Japanese Yen per month! Providing ideas and suggestions on outfit coordination coupled with a wide selection of brands and products, ZOZOTOWN essentially created both an inspiration and shopping site for consumers.

Business Aspect

Consumers’ attention is fleeting when it comes to shopping online where everything is a click away. If your site is not offering what they are looking for, you lose your potential customers to other sites quickly. With a varied product selection coupled with easy searchable categorization (by brands, type of product and popularity ranking), ZOZOTOWN soon became a huge household name in Japan. There are currently more than 1500 brands on the sites, including popular brands such as Beams for apparel to studio CLIP for lifestyle goods. Besides the major brands, ZOZOTOWN allows smaller brands who are either not able to build their own online channel or those who cannot fork out a physical store altogether a chance to reach potential consumers. By having popular (and a wide selection of) brands in one place, consumers will naturally gather at the same place and vice versa!

Another point of success lies with ZOZOTOWN’s consignment business model. Although ZOZTOWN handles the end-to-end process of product sale from warehouse storage, packaging to dispatch, they do not own any of the inventory (although they are in the midst of creating a private brand). All the product belongs to the brands and anything unsold will be returned to the brands. With a consignment business model, ZOZOTOWN does not hold any risk for unsold inventory!

Since the start of ZOZOTOWN, the focus has been on apparel and lifestyle goods targeting female consumers in their 20s and 30s. This focus may minimize the product range but also means it is more targeted (i.e., ZOZOTOWN will not find themselves dealing with perishables goods). This focus also means less risk when ZOZOTOWN handles all aspects of product sale. By handling this full process of product sale means consistency between brands as well as logistics control. Most importantly, ZOZOTOWN can command a higher percentage of commission from their sellers compared to their competitors. Handling the end-to-end sale process is feasible because ZOZOTOWN chooses to focus on non-perishable products such as apparel and lifestyle goods!

Credit: http://netappoint.blog.fc2.com/blog-entry-383.html

The success of ZOZOTOWN shows us the importance of focusing on your customers — with the customers at the center and building a business model based on their needs. This article does not aim to be comprehensive on the brand and business model. Rather, I want to point out the success factors of the ZOZOTOWN and how the brand stood out among other competitors. By maximizing the benefits of shopping apparel online and circumventing the downsides, ZOZOTOWN created an optimized environment for shoppers. Coupled with a business model shaped by consumers needs with a wide product selection, ZOZOTOWN provided a differentiated proposition in a hyper-competitive market of e-commerce.

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This article was originally published on my LinkedIn