New York – Japanese
online fashion retailer Zozo Inc. said it expects its profit to recover in
the current fiscal year, after booking its first-ever annual earnings fall.
The earnings report left the industry debating the finances of the company
running Zozotown online mall.
To date, Zozo has managed to capture almost half of Japan’s online sales
of mid- to high-end clothes by setting up a website catering to
fashion-forward, higher-income customers, highlights Reuters.
But it failed to anticipate some transformation pitfalls. For example,
the retailer launched a made-to-measure service using a bodysuit that
allowed users to upload measurements online. Many ordered the bodysuit yet
never used it to buy clothes. Zozo had to bear the huge cost of
distributing the suits without seeing returns, struggling as well to cope
with orders. As a result, some customers had to wait several months for
delivery.
The failure of the bodysuit triggers Zozo’s exit from Europe and the
U.S.
“We started this with the belief that it’s not good enough to have just
three sizes of S, M or L. But as you know, it did not go as we had hoped,”
CEO Yusaku Maezawa told analysts. In November, Zozo said it would wind up
the Zozosuit project.
Disagreements with some of the fashion brands stocked on the Zozotown
website also contributed to the company’s first-ever annual drop in
earnings.
The company also announced the closure its European and US operations,
writing off at least 2.7 billion yen (18.7 million pounds). Suza Burger,
chief executive of Zozo Germany, said in a statement that her time at the
company had been an “exciting journey for me and my entire team.” “We were
overwhelmed with the enthusiasm and support we have received by our
customers and media for the concept of Zozo,” she said, as reported the
BBC.
Additionally, the fashion retailer is discontinuing its service in Asia
Pacific and the Middle East.
Zozo’s operating profit for 2018-19 fell 21.5 percent from the previous
year, to 25.7 billion yen (178 million pounds). On the upside, the fashion
group expects its profits to recover in 2019-20. The company argued during
the presentation of its financial results that Japanese consumers were just
beginning to buy clothes online, what will help lift sales It forecast a
24.7 percent rise in operating profit to 32 billion yen for the current
financial year.
Shares of Zozo have nearly halved in the past year on fears that its
popularity may be waning, and that its cash position looked weak.
Photo: Zozo’s bodysuit. Credits: Zozo Inc.
