In Japan, Mobile Commerce Attracts New Capital

Many young Japanese consumers now use their phone as their preferred shopping device and investors are piling into all kinds of fashion apps from styling guides to flash sales. JapanConsuming reports.

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TOKYO, Japan — Mobile shopping is the fastest growing segment within Japan’s ballooning e-commerce sector. The latest figures from the Ministry of Internal Affairs & Communications suggest that mobile commerce jumped 16.2 percent in 2011 to ¥1.17 trillion. Merchandise sales made up the largest share, totalling ¥583 billion ($5.9 billion). Mobile commerce for merchandise was also the fastest growing segment, up 32.9 percent year-on-year.

These high-level statistics are reflected in real world results for fashion and retail businesses. Fashion e-tailer Zozotown garnered 40 percent of its sales from mobiles last year, while e-commerce giant Rakuten says mobile transactions now exceed 30 percent of total sales. Perhaps not surprisingly, there is a current glut of venture-backed smartphone apps for retail and fashion. Unlike the previous generation of services, some are mobile-only, particularly those targeting consumers under the age of 30, who often use their phone as their sole Internet device.

VIP flash sales site Muse is one example. It has just raised ¥350 million ($3.6 million) in second round funding from investors such as Itochu Technology Ventures, following initial funding of ¥150 million ($1.5 million) in 2012. Muse offers a similar service to Gilt Groupe and Glamour Sales, and claims 200,000 users with sales of around ¥50 million ($510,000) per month, despite launching just 18 months ago. What is different about Muse is that by targeting women in their 20s through more casual fashion brands, more than 70 percent of traffic and 50 percent of sales come through phones. It is putting almost all the new funding into app development, and already 20 percent of its members use its smartphone apps to participate in sales.

Leveraging user-generated looks

Vasily, which operates online fashion styling service iQon, raised ¥300 million ($3.1 million) earlier this year from Globis Capital Partners, Itochu Technology Ventures and others, following a first round of funding in 2011. iQon allows users to organise clothing and accessories from a large number of fashion brands into so-called ‘looks’ which they can then share. Each item has a direct, fee-earning link to fashion e-commerce sites such as Zozotown.

iQon is also available on PCs, but the service really took off after the introduction of mobile apps. More than 300,000 looks have been registered since the service launched in 2010. Vasily has just tied with Italian outlet fashion portal Yoox to offer a greater variety of brands from overseas, particularly luxury brands like Prada and Gucci. iQon hopes this will increase the appeal for both its existing user base of 20s and teens, and help it to attract more women in their 30s and 40s too.

iQon’s competitor, Dre’che, owned by Kakaku.com, responded by launching its own mobile apps last summer with 7,000 items registered at launch. There are also other SNS fashion sites like Zoolook and Fukulog which let users post pictures of themselves in various looks and link to brands which send promotions and event invitations. Zoolook has tied with stores and brands as diverse as Isetan, Dresscamp and Shel’tter, all of which are promoted to users within the app.

Linking fashion with social networks

A different take on the social fashion experience comes from Origami, a Japanese app launched this Spring, but one aimed at a global market. Origami is a mobile app that lets users bookmark brands and shops and follow them to receive updates on new product, offers and events, all in a well-designed UI that is similar to news services like Zite. The app includes an e-commerce function making it easy for users to buy product listed in updates immediately. SNS hooks allow for easy sharing of information and also sharing of purchase data.

Origami claims this SNS facility is its key differentiator; by just clicking on a picture on another user’s page, the user is taken through to the brand’s Origami page which it says ensures better connections to the brand. Brands and stores can register with Origami for promotion and e-commerce, and clients already include Beams, Mori Museum, Hysteric Glamour, Bang & Olufsen, and MoMA Designer Store. Condé Nast Japan is partnering with Origami to provide trend information on fashion and gadgets and Digital Advertising Consortium is providing funding.

Helping customers find the fashion they want

With so much fashion information and so much time taken up scouring all these new apps and look-books, other new services are offering to do the work of finding great fashions for you. Bemool has a team of female fashion stylists who select clothes and accessories they think their largely male users will like based on pre-registered fashion tastes, size and budgets. The service costs ¥3,000 ($30) to register and ¥2,000 ($20) for each proposed look and users can of course click through to buy products in the look. A more expensive personal shopper service has stylists buying clothes for users in store, and then shipping product directly to them.

Another beneficiary of venture funding recently is online fashion and home retailer Laso, set up by a former Itochu man, and specialising in designer brands such as Salvatore Ferragamo, Jimmy Choo, Balenciaga and Prada. Laso also offers home and interior brands not sold in Japan such as Bed Bath & Beyond. It raised ¥200 million ($2 million) from US firm DCM in March. Laso is a CtoC service similar to Buyma; Japanese or Japanese speakers living overseas register items to sell through Laso, and the latter handles payments. To avoid complications and make ordering simple, all prices include delivery and consumption tax. Like Buyma, Laso has proven extremely popular with Japanese looking to source brands not sold in Japan, as well as arbitrage the difference in Japanese and home country retail prices. It claims to have imported more than 200,000 items from 2,000 brands in 50 countries since launch.

Other CtoC sites within Japan focus instead on auctioning used clothes. Popular sites include Fril and Cyber Agent’s Mainichi Frima service – both only accessible through smartphone apps – and Zozotown which has its own auction service called Zozo Used – it expects sales of ¥2 billion ($20 million) this year.

Fashion e-commerce is clearly a hot area of investment for both developers and VC funds, but new mobile fashion apps are not the only online fashion businesses to benefit. The established players in PC-based fashion commerce have been snapped up in recent months by the biggest online operators. Stylife, an online fashion store with sales of ¥6.3 billion ($64 million) in FY2011, was acquired by Rakuten this Spring, following an initial investment in May last year. It will be integrated into Rakuten and become the base of the portal’s push into direct fashion sales to compete with Amazon and Zozotown.

A similar fashion store, Magaseek, was sold by Itochu Shoji to NTT Docomo in February. Magaseek initially offered consumers easy access to product seen in fashion magazines by arranging with magazine publishers to print QR codes that linked to Magaseek. More recently it has morphed into a general fashion portal with an emphasis on mobile sales and claims 1.6 million users and sales of ¥10 billion ($102 million) in FY2011. NTT Docomo will use Magaseek to create a powerful fashion category for its recently relaunched mobile shopping portal Dshopping, which also includes other recent NTT Docomo acquisitions like Oaklawn Marketing and food shopping site, Radishboya.

Last but not least, Fashionwalker was acquired by World in 2010 from Branding. World merged this into a new venture called Fashion Co Lab in 2011. As well as Fashionwalker and Girls Shopping, Fashion Co Lab sets up and operates e-commerce sites for other brands (such as Snidel) and also sells World’s brands overseas through sites such as Style Village in Taiwan.

The fast pace of development in mobile shopping in Japan makes it hard to keep track of apps, let alone work out which ones are going to be winners. What is clear though is the rapid proliferation of new digital windows through which brands and retailers can display their ranges to consumers.

JapanConsuming is a leading provider of intelligence on Japanese retail and consumer markets.