Start Today cancels free shipping

Oct 15

Start Today introduced free shipping in 2012 in the face of growing competition from Amazon which had already lured some of its key merchants like United Arrows to its portal. The service was always going to be expensive for a business that relies on the consignment model, and last month it capitulated, introducing charges again for low value shipments. Instead, however, it is offering free shipping for same day delivery around Tokyo, a first for Japan.

Start Today has cancelled its free shipping policy in the wake of rising costs. As of October orders of less than ¥3,000 placed on Zozotown will carry a ¥350 shipping charge. The Zozotown operator introduced free shipping in November 2012 in an effort to stem the loss of customers to Amazon which offers free shipping on any order. The move helped increase membership and sales, with transaction values rising 19.6% in FY2013 – exceeding ¥100 billion for the first time. Zozotown’s membership remains the jewel in its crown, with the number of active customers (who made a purchase in the last year) rising from 1.7 million to 2 million. The percentage of so-called guest buyers (those who purchase without registering) has risen sharply,  from 700,000 to 1.2 million, making a total of 3.2 million, 58% women, with an average age of 31.4. Smart phone purchases exceeded those from PCs last year, hitting 52.7% against 45% for PCs.

However, the shift towards lower ticket items on Zozotown meant that the burden of free shipping had become a significant cost, especially for a business with none of the logistical reach of Amazon. During last year, average per item purchase values for its active customers fell 3.1% to ¥5,773 and shipments ballooned from 7 million in FY2012 to 9.3 million. Although Start Today increased operating profits by a very healthy 45% in 2013 to ¥12.4 billion, shipping costs as a percentage of transaction values increased from 2.9% to 3.2%. The additional cost was paid for by a 3.1% reduction in marketing expenses, in particular the cancellation of TV spots.

While the cancellation of free shipping will be a gift to Amazon, Start Today has introduced free same day shipping for the Tokyo area – down from ¥500 previously. This is a more affordable move for Start Today given its own DC is in Chiba, and by focusing on a smaller area where 35% of its customers are based, can generate some economies of scale. Later on it hopes to offer a similar free same day delivery service in Kansai, and then by tying up with hundreds of apparel boutiques across the country, arrange for similar services in regional cities too – a neat solution for a business that will never be able to match the logistical power of a general shopping portal.

By cancelling the nationwide free shipping policy, Start Today says cost control will improve markedly and allow funds for more marketing. It is forecasting transaction values up 15.5% in FY2014 to ¥132.4 billion and operating profit up 10.7%.

Start Today continues to experiment with new ideas for growth. During FY2013 it opened and then closed its younger market mall, La-Boo, due to poor sales, but is hoping for steady growth of its used clothing business, Zozoused – sales more than doubled to ¥2.3 billion last year and are expected to double again this year. It also continues to rapidly increase the number of fashion stores represented through Zozotown, something it can do easily since it takes no risk on inventory for the bulk of the merchandise sold, increasing 492 stores to 621 last year. An update to the mall interface is also planned, and given the growing dominance of smartphone sales, high function apps will also be introduced. The social shopping app Wear no longer allows in-store scanning, but Start Today claims it is driving some sales to Zozotown – Start Today bought out a similar service called Fukulog earlier in the year to boost the platform and launched Wear in Taiwan in May.

Start Today publishes Wear book, buys e-publisher

Start Today published a book of fashion looks from its fashion app Wear in August. Called Wear Coordinate Book, the publication includes the top 500 most popular fashion looks posted by Wear users in recent months.

Costing ¥830 the A5 book features popular models as well as tips on taking good selfies in outfits and some fashion tips from leading stylists. Start Today includes rankings of the most popular brands used in more than 1 million uploaded items on Wear in shoes, apparel and accessories, providing readers with a quick review of current trends – at least among Wear users.

Publishing is set to be more than just a new hobby for Start Today. In August it acquired Yappa, a Tokyo-based e-publishing business that has published online editions of over 900 magazines since launching in 2000. It works with many of the leading print publishers. As well as helping it expand into publishing, Start Today will use the acquisition to increase synergies with Zozotown and Wear, in particular promoting Zozotown brands through online magazines and creating links for Wear users to add magazine-featured fashion items to their Wear collections.