Yahoo! Japan Corporation
) is aggressively pursuing the Japanese online shopping space for
revenue growth. However, one of the key challenges plaguing Yahoo!
Japan is its inability to ramp up store and product offerings, and
compete with incumbents Amazon and Rakuten. Recently, the company
removed listing fees for online retail outlets on its shopping
site. The company also announced that the monthly store tenant fee
for YAFUOKU!, Japan's largest auction site, will be
release Yahoo Japan
, October 7 2013)) In addition to these fee revisions, Yahoo!
JAPAN also plans to stimulate growth in online buyers by
introducing a 'free of charge' campaign for YAFUOKU!, which lets a
buyer bid for high-priced items without paying a premium membership
The fee cuts seem to have worked as registrations for new stores
surged. The company said that it received around 10,000
applications from outlets and 16,000 from individuals so far.
Before the announcement, Yahoo! Japan site had around 20,000 stores
that paid an initial fee of ¥21,000 (£134, $215) and a monthly fee
of ¥25,000. However, the market reacted negatively to the
announcement, and the stock price declined by 44%. We believe that
this strategy is a step in the right direction as Yahoo! Japan can
now challenge the online shopping industry incumbents and gain
market share. In this article, we will discuss Yahoo! Japan's
strategy for its online shopping and auction business.
See our complete analysis of Yahoo! JAPAN
Fee Cuts To Have Marginal Impact On Stock
While some may argue that Yahoo! Japan's revenues will suffer
due to the loss of listing revenue stream, we believe that this
move will positively impact the company's revenue in the long term.
Based on 20,000 stores listed on Yahoo! Japan, the company
generates close to JPY 6 billion per year from store listing.
Additionally, according to Trefis estimates, the company generates
close to JPY 40 billion from membership fees. Assuming that
revenues from these two streams were to decline by 80%, this will
only impact our stock price estimate by 5%. You can adjust the
following driver to study the impact of lower membership and
information listing fee on the Trefs price estimate.
Online Store Revenues Can Improve
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 driver for
Yahoo! Japan going ahead. According to e-marketer, Japan's business
to consumer (B2C) e-commerce sales can grow from $127 billion in
2012 to $144 billion in 2016.
However, Yahoo! Japan's online shopping division continues to
lag due to intense competition from incumbents such as Amazon and
Rakuten that list more products on their sites. In order to compete
in this space, Yahoo! Japan needs to add more products and
services. The only way Yahoo! Japan can compete is by forging
strong partnerships with brick and mortar companies as well as
third-party vendors, and encourage them into listing with it. By
scraping the listing fee, it has managed to engage these sellers
and get them on-board its shopping web portal.
Listed sellers are important for Yahoo! Japan's shopping
division because as the listings grow, more users are likely to
find and buy products on its site. Currently, Yahoo! Japan's
sites have the highest unique visitor count in Japan at 60 million,
which accounts for 50% of the total population and 70% of digital
buyers in Japan. The company can leverage this user base to
grow its online sales, which will also increase transaction value
across Yahoo! Japan's websites. 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 due to more listings, our stock
price estimate would increase by 12%.
We have not made any changes to our model as we await guidance
from Yahoo! Japan's management in the upcoming earnings
announcement. We currently have a $14 price estimate for
Yahoo! Japan, which is around 35% above the current market
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