It is now time to start the Q&A session for the full year financial results briefing briefing for institutional investors. My name is Kobayashi.I will be the moderator today for this Q&A session. We continue to have Kotaro Sawada, Koji Yanagisawa, and there's also going to be Director and COO Fuminori Hirose to answer your questions. If you'd like to ask questions, please raise your hand. When we appoint you, please unmute and tell us your company name and your name before asking your question. Kazahaya-san, go ahead.
Hello, this is Kazahaya from Credit Suisse. I have three questions. One, in your new plan, you had you have GMV of ZOZOTOWN and Yahoo! Shopping combined, and the gross rate was 17.2%. May I ask why you came to this percentage? What is the breakdown like, and how you see your business environment? That's my first question.
Kazahaya-san , thank you very much for asking questions every time. I would like to answer that. First of all, for Yahoo! Shopping, we reflected their policy, and as I have explained in the briefing session, it is set at 0% right now. Then for ZOZO. Yahoo! left behind a little bit and we have been able to offset that with ZOZOTOWN this year. We wanted to bring it back to the normal speed of growth with ZOZOTOWN. Then when you look at the external market, yes, there is the issue of price hikes. There are other uncertainty around it. For ZOZOTOWN, it is a little bit conservative, in all honesty.
There is a follow-on question. Yahoo! Shopping to be flat, 0%. Last year you said that you basically transplanted whatever figure that they had. Whatever Z Holdings had. Is that what you did for this year as well?
For details, it is probably better that you ask questions to Z Holdings directly to be more accurate. What we know is that they are going to aim for healthy growth rather than to force it to grow. As a policy, that is what we have heard from them. We also make our own effort. That is how we came to this figure.
I would like to ask another follow-up question. Normally you usually aim for about 10% growth, Yahoo! Shopping and ZOZOTOWN combined. Is it accurate for me to think that you are not intending to grow double digit this year? Did that mindset change a little bit?
Double digit growth, at least for this fiscal year, it could be a bit difficult, and that is why we came up with this forecast. Of course, it is a bit conservative, as I mentioned. Then for this fourth quarter, actually February and March were better months. Keeping that into account, we could have been less conservative, but there was a timing issue and then we decided to just settle for this figure.
I see. I do have another question about the cosmetics. It is JPY 9.1 billion. May I ask how you budgetize this?
Okay, so I want to let Hirose walk you through the cosmetics business.
Okay. We aim to do JPY 13 billion with the cosmetics category. As Sawada mentioned earlier in the briefing session, there are some elements that we are behind compared to other sites, and what we need to do is to inject originality of ZOZO to aim for JPY 13 billion.
I see. Thank you. My third question is this. The sales promotion rate exceeded 3.5%. What sort of budget do you have for sales promotion this year? This is my third question. Thank you.
Yanagisawa will answer that.
For this fiscal year, we are planning to do 4% against GMV .
I understand. Thank you. This is an improvement element?
What do you mean?
About the profitability?
Yes, you are right.
Kazahaya-san, thank you very much for your questions. Kawano-san, please go ahead and ask your questions.
Do you hear me okay?
Yes.
Hello, this is Kawano from Goldman Sachs. I have two questions. It was a part of your presentation, Sawada-san. I found that quite interesting. I was taking photos of it too. So you mentioned that you wanted to capture broader segments, and you talked about each generation. Even after you went into Yahoo! Shopping, I do not think that the breakdown of the active members changed so much in terms of the portfolio.
May I ask, where do you see the most potential? Is it more potential that you find in the dormant users? Or is it people that have never experienced your service? Then, I believe that before you talked about understanding how to drive the efficiency of your promotions. So how do you plan to do segment analysis? I know that that is a big question, but you are aiming to do JPY 800 billion. So please tell me about that.
Okay. I will answer that. The breakdown for each year, we explain that every year. We only give you the breakdown usually of just the ZOZOTOWN. People that buy from Yahoo! Shopping, we have never disclosed who are the buyers. But this time around, we wanted to give you different metrics. So that is why we also disclose the numbers for Yahoo! Shopping as well, in terms of our segment. We are the strongest in the 20s and 30s. When it comes to the older generations, by going into Yahoo! Shopping, we have been able to successfully acquire the older segments. We continue to be on Yahoo! Shopping. So we continue to try to acquire the older segment.
We also discovered that there is room for us to grow within the older segment for ZOZOTOWN as well. We have not actively engaged with them, with ZOZOTOWN. But when it comes to how to think of the services and promotions, I feel like there are many things that we can do for the older segments as well. Let us turn to the young ones. We are talking about later teens. These are high school students and college students. So they do not have that much disposable income. That is how we see the segment. So we did not really focus on that segment specifically before. But last year, from around spring of last year, we started to conduct different initiatives for them. The impression that we are getting so far is that when we do something, when we engage with them, we get reaction.
For the young audience as well, we also want to conduct promotions and other initiatives to attract that segment as well. Okay. So 40s and up. When you think about the older segment, Yahoo! Shopping decided not to do aggressive promotions as much.
Do you think that you can aim to acquire that segment with Yahoo! Shopping ZOZOTOWN?
I think so. Then there is the specific characteristics of online shopping. So if you are an older person, they may feel a little bit shy, a little bit embarrassed to go to physical store because they feel like that store does not really suit their age. But actually, these stores carry many products that are perfectly suitable for them. So when it comes to online shopping, many different sorts of products get chosen by a very wide age group. So we can use that as a way to sell.
I understand. Thank you. My second question is about this year's forecast and plan. Your OPM is going to go down by 0.1 point. You talked about advertising expenses. What are the things that will move to bring you to the 0.1 point decrease?
I do not know if that will be answered by Yanagisawa, or maybe your nickname is Yana. Yanagisawa, who is a really famous singer from Japan who is dressed like he is dressed today. The 0.1 point difference comes from. I am sorry, I do not have the figures with me today, so it is quite difficult for me to give you a really detailed explanation of that. Hirose, do you have that? The 0.1 point difference is quite difficult to answer that.
I would like to jump in. When you look at the plan, there is the advertising expenses. Advertising ad growth, and the growth rate of the advertising business is going to be higher than GMV growth. Therefore, the gross profit is going to be higher this year than last year, but the costs will also increase as well.
Therefore, we believe that our OPM will come down by 0.1 point. If you combine these two, then I believe that there are three factors to this. One, you pay attention to this quite a lot. About the recruitment, there were system replacements that started last year. We are actively hiring more engineers, so the cost for that is going to be greater this year. Also, there are expenses related to the logistics centers. It is a JPY 1.3 billion increase in terms of rent, and then there is a depreciation cost. If you look at the diagram, it is going to be about JPY 1.2 billion or JPY 1.3 billion increase. We are also going to be impacted by inflation, and there are smaller cost increases here and there. Therefore, the SG&A rate is going to be a little bit higher.
I understand. Thank you.
Any other questions, please raise your hand if you do have questions. Okumura-san, go ahead. Is that you, Okumura-san?
Hello, Okumura from Okasan Securities.
Nice to meet you. Hello.
I do have two questions. One, Yahoo! Shopping GMV guidance. Another question was asked about this earlier. There are assumptions from other companies that made the briefing already. It seems like it could even go down by 1% or so, but you said that it is going to be flat. Are you saying that Yahoo! Shopping performance may not be as good, but there is going to be preferential initiatives that will take place for you? Could you talk about the holding's promotion policy?
Okay. I will explain that. Yahoo! Shopping overall performance, I am repeating myself. I do not think we are in the position to answer that. I believe that they will do their performance briefing tomorrow. I hope that you participate in that briefing session. That said, there is ZOZOTOWN Yahoo! Shopping. For this, comparatively speaking within Yahoo! Shopping, this has been doing quite well, and that is thanks to the fact that we have a very wide breadth of merchandise, and we have unique features. We have uniqueness to it. Considering these into the calculation, we decided to make it flat for the forecast.
I understand. My second question is about the cosmetics inventory situation. Now we no longer have to wear masks, and COVID is going to become type five disease. Do you have enough inventory? Do you have a sense of how much inventory you have in terms of the cosmetics category?
Thank you. Hirose will answer that.
Sure. The inventory situation of cosmetics, we do have abundant level of inventory. Basically, we are not going to face situations where we have nothing to sell.
So when it comes to affinity with apparel category, are you seeing any changes of the trend when it comes to the combination of the purchase?
We are taking on promotions to encourage people to buy both apparel and cosmetics. Also for ZOZOCOSME, makeup sells a lot. In that sense as well, there is a good affinity with apparel category.
Thank you.
Thank you. Kanamori-san go ahead.
Hello, this is Kanamori from SMBC Nikko Securities . I would like to ask three questions. First, SG&A, when I look at this past quarter, I feel like the bonus was paid out in the fourth quarter. Maybe you just paid that to your employees, but also to other staff as well. Did you pay a bonus to different types of your employees? If there is an increase of the salary that you are implementing, please let us know about that as well.
Yanagisawa will explain that.
In the fourth quarter, logistics related staffing costs, there is bonus that went to the logistics part, and that is a one-off expense, but I do not know the figure.
What about a salary increase? Has that been included in your plan? Is it happening? I am so sorry for the logistics centers. Well, and also your normal employees as well.
For the employees, there was a revision of our HR system, and just partially some of our employees experienced increase in salary, so that has been incorporated into it. Then when it comes to more generic increase of salary in general, that is, we have incorporated just a generic element to this, but we are not forecasting significantly. This new logistics center that is going to be launched , there is automation.
I thought that maybe you could drive efficiency when it comes to staffing expense. Are you incorporating that into it?
Yes. But it is an add-on, so you are not reducing the staffing costs, but maybe the ratio may just change if it goes well. Yes.
My second question is about the promotion expenses. It used to be 3.5%, and for this new year, for this ongoing year, it is going to be 4.0%. Is this because you are actively engaging in more promotional expenses this particular year? Or is it more accurate for me to understand that you are increasing the trend?
I will answer that. We are not thinking of doing something special and significant. I believe that in general it will be in the range of 3.5%-4.0%.
Okay, thank you. My last question is about page 27 of the deck. It is about the bar chart on how to broaden the segments that you acquire. As you go older, it seems that you see more dormant customers. When you think about the usage rate, is this the trend that you normally see? Or would you say that older people become dormant because you have more brands catering to the needs and the wants of the youngsters? Do you have to review the portfolio of the brands that you have in order to please the older generations more?
We are going back in time to do this analysis. I think it is quite natural to see more dormant customers as you go up in age.
Okay, what you are saying is that the brand mix, you are not saying that the brand mix is better for certain age segments.
No, that is not the case.
Okay. I would like to ask questions. Hello, from [audio distortion]. My name is Simi. I have two questions. One is about the situation of the last one mile. Yamato Transport delivery cost increase. Have you received requests for the increase of that? Any updates on that? That is my first question.
Sure. I will answer that. In conclusion, so far, there is nothing that we can share with you at the moment that we have received as a request from them. A new fiscal year started, and it is not just limited to the last one mile, but when it comes to delivery and materials related to delivery there could be new requests coming to us. If we have an opportunity to share these news, we would like to do so in the future.
Thank you. Second question is about the average retail price. The spring and summer items are seeing increases of price. I wanted to ask about your policy toward sales. You mentioned that the ratio of the discount for the marked-down products has come down as demand has normalized. Would you say that the discount rate coming from the brands will come back again, or will the state remain the same? How do you see that?
Hirose will answer that.
There are many brands that focus more on selling their merchandise at original prices. The markdown ratio is tending to decrease now. We are seeing changes in the percentage of markdown during the sales period.
Thank you. Got it. Thank you. That will be all from my side.
Thank you. Morata-san, the floor is yours.
Hello? Do you hear me?
Yes.
My name is Morata from JP Morgan. Thank you very much for your detailed explanation. I do have two questions. Two additional questions. First is just for me to confirm your forecast for FY 2023. GMV growth. If you compare that to net sales growth, I feel like net sales is going to grow more than GMV growth. I guess that is coming from the advertising business. Are there any other factors that I should keep in mind? Why is the net sales growth better than the growth of GMV?
Kobayashi will answer that.
There are different factors behind this. A big one is that last year in August, the shipping fee, that shipping revenue that we get from the customers, it changed from JPY 210 to JPY 250, and that is going to impact us full year. That push-up effect is going to be quite significant. As Sawada mentioned during his presentation, ZOZOFIT, we expect to see a certain level of sales from that as well. That is not really consign the business. For consignment, GMV. There is for consignment, that is GMV. Then there is also net sales. That is why net sales growth is expected to be higher than GMV growth.
I understand. Thank you. The second question. I apologize for asking the same question. For the promotion ratio against GMV, it is going to be in the range of 3.5%-4%, you said. As you mentioned during the briefing session, in order for you to aim for JPY 100 billion with ZOZOTOWN, you are going to focus on acquiring new users, and you are also focusing on raising the frequency of purchases.
That means you are going to try to reach to those who are not using ZOZOTOWN right now, and then you have to find ways to retain them as well. Sales promotion in order to raise GMV. I mean, normally speaking, I feel like that needs to go up, the sales promotion ratio. In the medium term, it is already 4.0%. Do you think that you can sustain this level when you aim for JPY 800 billion? May I ask why you think that that is possible?
I will answer that. Looking at where we are right now, and then the cost it requires for us to acquire one customer, of course, it is going to require us more sales promotion expenses to continue to acquire new customers. As we have mentioned, we are going to narrow down our segment, our target segment, and that is something that we have not really done so much of in the past. What we would like to do is to really focus on doing a better allocation of the sales promotion expenses.
Another thing is that we are not going to rely solely on sales promotion expenses. We want to implement new services, not meaning we are going to launch a new service that is different from ZOZOTOWN, but within ZOZOTOWN, we need to really devise new ideas and think of what sort of services, new services that we can offer within ZOZOTOWN.
There is deferred payment that we have been offering for quite some time already. That was just one additional payment method that we introduced, and then that helped to actually increase the number of young customers for us. It has been working positively for us. That sort of mindset. What we would like to do is to offer new services that we have not really offered yet. I believe that that is the way to increase or GMV. Thank you for that question.
It is already past our finish time, so please go ahead. Ask your question.
It is David Gibson from MST. Two questions. You said the target was 15 million active users and JPY 800 billion GMV in the midterm. When is that? Is that in two years? Is it three years? That is my first question. The second, you talked about the guidance for next fiscal year for 3/24. Could you talk about your expectations? Just an image of the average order value. Do you think it is similar trends to Q4 or how do you think that might change? Thank you.
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[Non-English content] Thank you.
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