It is time, so we would like to begin ZOZO's FY 2022 Second Quarter Consolidated Business Results Explanation Introduction. In order to avoid the spread of COVID-19, we are conducting this session online. This briefing session will be held until 5:30 P.M. From 5:45 P.M., we have a different Zoom link available for a Q&A session. I would like to now introduce the presenters today. President and CEO, Kotaro Sawada.
Thank you very much.
Executive Vice President and CFO, Koji Yanagisawa.
Hello. Thank you.
Director and COO, Masahiro Ito.
Hello.
We have three presenters today. Now I would like to pass the floor to CFO Yanagisawa.
I am the Executive Vice President and CFO, Yanagisawa. I will take you through the FY 2022 second quarter results. Today's presentation material has been uploaded to our IR site already, so please take a look. I would like to jump right in. Here are the results for this quarter. With respect to the second quarter, the gross merchandise value was up by 16.3% year-on-year, landing at JPY 185.6 billion. The OP was up by 50.2% year-on-year, landing at JPY 19.9 billion, and the OPM was 10.7% up by 2.4 points year-on-year. We have achieved 47.9% of our annual GMV target and 50.4% of the OP target, so we are on track in terms of our annual target.
We have achieved the highest half-term OP in our history. This is on page seven of the presentation material. This is the consolidated business results by quarter. For the second quarter, the spread of COVID-19 acted as a tailwind, and our GMV landed at +13.1% year-on-year. Although the growth has settled down somewhat in comparison to the first quarter, digital shift is still working in our favor and has had a stronger impact than the decline in demand in fashion.
With respect to the OP, the gross margin has increased due to the growth of GMV. In last fiscal year, we actively implemented discount campaigns, and there were some one-off high expenses. Year-on-year, the OP has increased significantly to 73.4%. Since products in the second quarter tend to be lower in price due to seasonality, it is usually challenging to be profitable during this period, but the OPM this quarter was 10.5%. Next, I will share with you details of our performance. This is page eight of the presentation material. Here is the increase/decrease analysis for the OP in the second quarter.
The OP increased by JPY 6.7 billion from JPY 13.2 billion last year same quarter to JPY 19.9 billion. The OP increased by JPY 8.9 billion due to increase in consignment shop commissions attributed to increase in sales. Gross profit from ad business contributed to JPY 0.58 billion. Other sales and decrease in PB valuation loss added to JPY 1.43 billion. Reduction of promotional expenses contributed to JPY 0.57 billion. JPY 0.58 billion was added due to decrease in other expenses. OP has decreased due to JPY 1.15 billion due to increase in fixed costs for logistics centers and employees and JPY 4.26 billion in variable costs which fluctuate depending on sales. Here is the balance sheet on page 11. There is no ordering permission on this page.
On page 10, you will find our cash flow. With respect to the cash flow from investing activities, we acquired shares for yutori this quarter, and we have increased the number of logistics centers. yutori has been consolidated as of August this quarter. Cash flow from financial activities has increased due to repayment of short-term borrowings. This is page 16, the gross merchandise value shift. Please refer to the earnings summary with respect to the GMV breakdown for each business. With that, COVID has proven to be a tailwind, and our B2B business has contributed more to the overall GMV, [audio distortion] Presentation material. Here is a breakdown of the SG&A. The ratio of the SG&A against the GMV in the second quarter was 23.4%, coming down 1.1% year-on-year. Reasons why this percentage has decreased.
There are basically three key reasons. One is that from April 2020, we ended the 1% point reward. The point related expenses went down by 0.9% because of this. The growth of GMV and the calculation of leases for some of the logistics centers contributed to a decrease of 0.3%. We also have one-off expenses the previous year, and other expenses contributed to a 0.8% improvement. The SG&A has increased, however, due to shipping fees increase. Shipping fees increased by 0.5% due to the decrease in average order value. Also, we began to pay commissions on sales for the PayPay Mall, and there are one-off expenses related to the PGA golf tournament, which was held last weekend, so the ZOZO CHAMPIONSHIP.
Part of those expenses were recorded in the second quarter. The advertising expenses, promotional expenses increased by 0.4%. We have more employees as well, so payroll has increased by 0.1%. Operating profit and operating profit margin I already covered earlier. Last year we had ZOZO ARIGATO and other discount campaigns. We aggressively implemented these discount campaigns, and as a result, the gross margin this year has improved. This is page 24. I would like to, from here, introduce the KPIs for ZOZOTOWN. The annual buyers increased by 140,000 this quarter, landing at 8.8 million. Active members was 7.43 million, increased by 210,000. The number of guest buyers decreased by 60,000, ending up at 1.37 million.
With the digital shift, we have been able to acquire new active members. Having said that, we have seen a decrease in guest buyers. This is due to the in-house services we have been offering to members over the last couple of years. This is the number of shops. As of the end of second quarter, we have 1,404. There were 56 shops that were added as of the end of first quarter. The key brands include pop-up shop for Italian high-end jewelry, Bvlgari, Marni, a luxury brand, American outdoor brand, L.L.Bean, and any SiS from Onward Holdings, which has rejoined, as well as 11 other shops as well.
On page 30, this is the average retail price. This has come down by 3.8% year-on-year, landing at JPY 3,381 . The ARP has continued to come down, but not as drastically. Average order value impacted by the ARP decrease, AOV was down by 2.1% year-on-year. As I mentioned, this has been impacted by the decrease in ARP. Sorry, this was a brief introduction, but this concludes my explanation of the FY 2022 second quarter results. In terms of the forecast on page 33, we have not made any major changes to this plan.
That's it from myself. Thank you very much. Next, our President and CEO, Sawada, would like to present.
Good afternoon. I'm Sawada, the President of ZOZO. I would like to supplement some information about our performance. First of all, in the first quarter, after the first quarter, we had a briefing session, and I believe I showed you this slide at that time, and explained how the digital shift is occurring, and that's becoming a tailwind for us. However, we've been impacted slightly by the sluggish demand for fashion. I think that was covered last time. In the second quarter, you may be quite interested in what's happening in respect to this. As Yanagisawa mentioned earlier, digital shift has been continuing.
We have a couple of graphs to introduce to you today. First of all, this graph is the number of new daily changes in the new users or new buyers on ZOZO. This is basically the daily shifts in the number of new buyers. As you can see in April and May, during the state of emergency, it was quite irregular. It grew significantly, but after June, the red line graph is for this year, and yellow is last year. We have actually surpassed 2019 by 110%-120%. Digital shift. In other words, people have realized that buying clothes online, fashion online is okay, but so many people are visiting our website. This is another graph.
So many people are coming to our website, and when we look at their repeat rate, we have on the Y-axis, total amount of purchases by a new user, and on the X-axis, elapsed days from the first purchase. Once a customer buys, how often do they repeat purchase, basically? If they bought something on May 1st and then made another purchase on June 1st for JPY 30,000. If their first purchase was JPY 5,000 and the second purchase was JPY 30,000, then it would be marked as JPY 8,000. As you can see from this graph, the red line graph is for 2020, and you can see that the consumers are behaving quite similarly. They come to our site, they like our site, and they continue to purchase on our site.
For the last year, we have been exploring how we recommend what products, when do we recommend to our customers. Once customers purchase on our website, they're quite satisfied, and it actually leads to second and third purchases. Having said that, in terms of recognition, the great user experience usability, we need to make sure that more people are aware of the high usability. That will help us gain more fans. During the second half of the year, we would like to undertake some promotions to enhance our awareness. Maybe TV commercials would be one way of enhancing our awareness and recognition. We're working on a strategy to help us improve our awareness. That was some supplementary information about our performance. There are a couple of more new topics that I would like to introduce to you today.
First, the YOUR BRAND PROJECT. We have announced this in the spring, and how we will be working with influencers to launch brands and sell those brands on ZOZOTOWN. This is a new way to manufacture and sell clothing or fashion. There is another strategy. PB and MSP, those kind of businesses, has enabled us to learn a lot about manufacturing, and we are working with many brands. We can apply the learnings to the YOUR BRAND PROJECT as well. That is another significant reason why we are undertaking this project. Many influencers have collaborated with us, and so we have 23 influencers who are working with us already. Just last week, we introduced or launched nine brands. The remaining brands, we have started sales today, actually.
In terms of the nine brands, I would like to introduce how they are performing at the moment. In a nutshell, they are doing great. They sold out quite quickly. Instantly, basically. It used to happen a lot in ZOZOTOWN. Not so much recently. We are all excited because these items are selling instantly. We cannot really talk about the actual sales, but here is some of the indication in terms of the number one sales brand. The sales is six times. We have a lot of new shops that have joined our platform, and when we take the average sales within the first five days, this YOUR BRAND PROJECT is doing 6x more than the average sales during the first five days for other brands. When a new shop opens, they have about 40- 50 SKUs.
If we look at the sales per SKU, for the YOUR BRAND PROJECT, we only have about eight SKUs, but there is a lot of ideas from the influencers that go into each SKU. We do not have that many SKUs. However, if we look at the sales by SKU, they are doing 200x the sales than usual SKUs. It is doing very well already. This is not something that is going to be temporary. This is going to be a business that we are going to undertake going forward as well. The second half of the year, as well as next fiscal year, we will be making efforts to continue this project.
Next, I would like to introduce synergies with Z Holdings. First is the PayPay payment. We introduced PayPay payment, and of course, we are doing promotions as well. PayPay payment has the number one share in terms of all mobile payments. They have already 33 million users. This new payment service is actually helping us to get new users as well. We hope to focus our efforts in this area as well from now on. Also another area is cross-shopping. This will show users the store inventory as well. They can buy something and go to the store to pick up. We actually call it cross-shopping. This is available for some brands on ZOZOTOWN's PayPay Mall.
Right now, we are going to launch it in November. We want to also direct traffic to ZOZOTOWN as well, but we would like to expand this effort as well. We are thankful for the brands that are cooperating with us, so we hope that this cooperation will continue. The ZOZO CHAMPIONSHIP was held last week. Unfortunately, we weren't able to organize this in Japan this year, but it was very exciting in the U.S. There was a lot of excitement around this tournament, and as you may know, Patrick Cantlay won the championship. We did also do a lot of charitable activities, so donating part of the proceeds from the official items, as well as donating some proceeds from the autograph items as well. We did try to contribute in our own way.
Next. This is the last topic from myself. We are trying to promote ZOZO Work Style. Amid COVID-19, we have been discussing what kind of work style we should be promoting. I think many are interested in this area. This is the work style that we decided to promote. The current offices will be shrinking gradually, and employees will be coming to the office two days a week.
Of course, we need to translate new ideas and give it shape. We need to be first movers. In order to remain a first mover, it's important to also speak to each other face-to-face. We can't really say everything can go online, but everybody doesn't have to come in every day. We decided two days a week would be the right balance for us. At the same time, in January 2021, in West Chiba, a new office will be complete. We want to blend into the local community as well and create a new corporate culture and help invigorate the area. It's a little bit further from Tokyo, from Makuhari, but it is a very great area.
If you have an opportunity, please come visit us. We do have customer centers and logistics centers, and it's hard to promote remote work for those centers. We want to make working in these centers enjoyable. We're just discussing various initiatives we can implement to make sure that employees are having fun working in the logistics centers and customer centers.
Next, our Director and COO, Masahiro Ito, will talk about some of the technologies we have in the pipeline.
Hello, this is Ito, the COO. I would like to talk about the ZOZOSUIT today. I think it's been a while since you heard us talk about ZOZOSUIT, but since we released the ZOZOSUIT in 2018, we have continued to develop this technology. We wanted to make sure to alleviate concerns about not knowing the size and therefore not being able to shop online.
Today, we would like to introduce the ZOZOSUIT 2. We have created a short clip, so please take a look. ZOZOSUIT 2 has 50x more markers than before, and it is using a new image processing algorithm to improve the accuracy of measurements. If you use ZOZOSUIT 2, you could even buy underwear, which is hard to purchase online because you do not know what size, and you can use it for dieting and to improve your healthcare posture, sports, and even games. Of course, for fashion as well. ZOZO's measurement technology, we want to provide to more people and services as well. We are looking for partners. Please contact us.
ZOZOSUIT 2 is a measurement technology which we are introducing at this time. We are not going to be thinking about distributing these suits and developing a service based on this, but it is a very great technology and we want to use it for fashion, and we want to think about how we would be utilizing the new technology. We also want to work with different industries to see if we can do something innovatively new. I would like to take you through some of the key features of ZOZOSUIT 2. It is a measurement technology, and that means accuracy is key. The accuracy for the ZOZOSUIT 2 is close to even a laser scanner. If you took a mannequin, measured it with a laser scanner, and used the ZOZOSUIT, the average difference was only 3.7 mm.
Using ZOZOSUIT 2, you can actually get the same level of accuracy as laser scanners, even at home. The reason why this is possible is because of the markers. You remember the white markers on the black suit, which is quite iconic, and we only had about 400 markers for the ZOZOSUIT 1, and we have 50x more, basically 20,000 markers. Every area is very covered. There are no gaps. It enables us to measure very accurately, and the accuracy is 50x better. ZOZOSUIT, it can be used to measure at home, and a couple million people have measured their bodies.
Of course, some homes may be darker, there may be some shadows, and so there are a lot of different reasons for the accuracy being lower. We wanted to improve the marker recognition. The white markers in the past were quite big, but the smaller black dots were only about 2 mm. If you lose one black dot, the computer cannot see that marker. We actually have 6 mm, it is 3x bigger, but 6 mm markers all over the suit so the computer can recognize the marker even better with the new suit. The marker recognition has improved significantly.
Of course, we have a dramatic improvement in the algorithm. We have many people try on the ZOZOSUIT, the first version, and we use the data and analyze the data to come up with a superior algorithm. The dramatic improvement in algorithm has led to the improvement in accuracy. We would like to look for partners to do something quite interesting regardless of what your industry might be. Actually, we still have a couple hundred people using ZOZOSUIT to measure their body, and they are actually using it to go on a diet or for healthcare. There is that kind of potential demand.
Of course, with apparel, we would like to work with apparel brands, and we want to use it on ZOZOTOWN as well, but it would probably be a good fit for AR/VR, healthcare, and fitness. Next. ZOZOMAT. We launched the ZOZOMAT on February 27th this year, so people can buy shoes that better fit them using ZOZOMAT. We had already 300,000 people who took measurements. Once you took a measurement, we only had in February about 100 models that would be recommended based on your measurements, and this is a new announcement, but as of today, we have 1,173 models that can be recommended based on your measurements. We have been able to dramatically increase the number of models quite recently.
You have a lot to choose from, and we will continue to add more models to the lineup. What effect has it provided? With respect to ZOZOMAT, you know what sizes fit you better. That should mean that the return rate due to the wrong size should go down. We have seen the return rate decrease by 36.9% in comparison to other return rates. A lower return rate means customers are happier. New users, we have actually acquired about 130,000 people. We saw that many people were purchasing shoes for the first time online. It is a gradual increase, but we are seeing more and more people who are purchasing shoes for the very first time using ZOZOMAT. We hope that this will become a new standard for buying shoes online. These are some of the feedback that we received from Twitter.
On the far right, upper right. "I bought a pair of shoes and realized that ZOZOTOWN recommended the great, perfect size." Many people said that the ZOZOMAT recommended a different size than what they usually buy. It turned out that the recommended size was the perfect size for them. With respect to the ZOZOMAT as well, we are looking for partners, manufacturers, any companies who are in the sports industry. I do not know, maybe it can be an idea. If there is a company out there that wants to work together with us with the ZOZOMAT, please feel free to reach out to us. We look forward to being contacted by you. We will continue to develop these technologies that can be used by our partners as well.
We want to collaborate with other partners and launch a new business. As you can see in the background picture, we are planning something new, which we will introduce quite soon. Please look forward to what we have in store. Thank you very much.
That is it for the FY 2022 second quarter business results announcement. Thank you very much for joining us today.