Yahoo! Japan Bolsters Shopping Division With Venture Republic Acquisition

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Yahoo! Japan Corporation ( YAHOY ) recently announced that it acquired Venture Republic's comparison shopping business. While the company has not disclosed the financial details of the transaction, this deal will bolster Yahoo! Japan's online shopping division.

Currently, Venture Republic operates price comparison sites and commerce oriented portals such as Travel.jp, Hotel.jp, and Coneco.net. However, Venture Republic will be splitting its properties into two groups: Osenikku, which will handle Coneco.net, and the remaining Venture Republic that will handle Travel.jp and Hotel.jp. According to Venture Republic's CEO Kei Shibata, Yahoo! Japan will acquire the newly formed Osenikku group to accelerate its online shopping business.

In its earnings call last month, Yahoo! Japan stated that it is aggressively pursuing the Japanese online shopping space. This acquisition aims to capture a bigger chunk of the online shopping market by enhancing user experience for Yahoo! Japan's e-commerce customers and providing user-generated product reviews on consumer products. In this article we will discuss Yahoo! Japan's strategy for its shopping division and how this acquisition fits into its overall strategy.

See our complete analysis of Yahoo! JAPAN here

Strategy To Boost Revenues At Shopping Websites

According to our estimates, online shopping and auction contributes 15% to Yahoo! Japan's total value. The transaction value at Yahoo! Japan's shopping division has failed to gain traction in recent years. However, with more Japanese purchasing goods online, online shopping can be a key revenue revenue driver for Yahoo! Japan going ahead. According to e-marketer, Japan's e-commerce sales grew from $113 billion in 2011 to $128 billion in 2012. Overall, e-commerce sales are expected to grow over 50% in Japan, and we expect Yahoo! Japan to benefit from this growth.

Yahoo! Japan's shopping division continues to lag in the face of intense competition from incumbents such as Amazon and Rakuten. Yahoo! Japan plans to acquire more customers for its shopping division by expanding its product portfolio. It also plans to strengthen its footprint in the Japanese online shopping segment by increasing the number of stock keeping units and distribution channels. Moreover, it is aggressively pursuing daily necessities of online shopping domain through its website LOHACO. However, its growth strategy increasingly hinges on securing repeat business from customers by enhancing their user experience.

Acquisition To Improve Customer Experience

Venture Republic's Osenikku group operates coneco.net, which compares a wide range of products. Currently, it has over 30 product categories that range from hi-tech gadgets to daily necessities and stationary. With the acquisition, Yahoo Japan aims to provide a better user experience to its e-commerce customers by equipping them with information on pricing and product review.

Osenikku To Bolster Revenues

Since Coneco.net also provides information on where the product can be bought, Yahoo! Japan can forge stronger ties with the listed brick and mortar companies and entice them to list on Yahoo! Japan's e-commerce portals. As listings across Yahoo! Japan's properties grow, we expect more users to buy products from Yahoo! Japan. This will translate into an increase in transaction value across Yahoo! Japan's shopping division. Currently, we estimate transaction value from shopping to increase slowly from JPY300 billion in 2012 to JPY 400 billion by the end of our forecast period. However, if the transaction value at the shopping division were to double by the end of our forecast period, our stock price estimate can increase by 5%.

We currently have a $15 price estimate for Yahoo! Japan , which is around 15% below the current market price.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: AMZN , EBAY , YAHOY , YHOO

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