In our recent podcast, “Fashion Friday: The Struggle of Japanese Apparel and Footwear Brands”, we highlighted new emerging retailing concepts such as ZOZOARIGATO by Zozo Inc, one of the largest online retailers in the apparel and footwear market in Japan.
ZOZOARIGATO is a paid membership retailing service where members get two options to use 10% of the money they have spent on purchases through the platform. They can either use it as a discount on the purchase, in which case Zozo Inc is covers the discounted amount, or they can donate it to a social activity organisation such as Japanese Red Cross or Doctors without Borders. Arigato means thank you in Japanese.
Less than six months after starting the service, Zozo Inc announced that it would end the ZOZOARIGATO service by the end of May 2019, along with scaling down other newly introduced concepts such as the remotely controlled self-measuring system ZOZOSUIT.
So, what led to the short life of ZOZOARIGATO? There seems to be two main reasons. The first one is a lack of consensus between Zozo Inc (“the platformer”) and the brands that opened stores on the ZOZOTOWN platform (“the players”) before the lauch of ZOZOARIGATO.
The platformer underestimated how much the players would dislike their products to always have discounted prices. Zozo Inc may have thought that it would not be a problem, because they would be the ones paying for the discounts. Membership discounts are common and consumers would be happy. However, the players wanted to control the discounts themselves and also prioritise their own e-commerce sites, through which they can achieve better margins.
The second reason is the lack of understanding among consumers. Many thought the platform was a mere membership discount service rather than an ethical donation programme. While Zozo Inc admitted the service was not well received by some of the brands, a greater problem is that the “ethical” concept is not yet familiar amongst Japanese consumers. The service was not fully associated with donations, sustainability and an ethical mindset.
Withdrawing ZOZOARIGATO could make Zozo Inc look less like an innovative player. It is time for Zozo Inc to pivot. The company is seeking other opportunities and collaborations in order to not be seen just as a discounter, but as a cool, innovative, growth-driving platform for brands while it continues to be a leading apparel and footwear online retailer in Japan. Zozo Inc emphasised in its company report that it would generate value outside of the discounts and grow the business together with the brands on the platform.
Emerging concepts struggle to gain momentum in Japan
Although the above-mentioned concepts introduced by Zozo Inc were innovative, they were new to the industry and consumers in Japan. This created confusion in terms of understanding the true intentions of the company.
The responsibility partially lies with Zozo Inc, more time and effort were necessary to explain the concept. However, the overall process also highlighted the conservative nature of the apparel and footwear market in Japan, where such new services arise, but the momentum quickly weakens due to a lack of acceptance.
Japan is a mature market in which many established manufacturers exist and have a strong presence and influence in the direction of the industry. It is difficult for disrupters and new concepts to maintain their presence. Moving forward in order for new concepts to take root in the country, it will be important to first reach a consensus within the industry, and to then approach consumers gradually and from various touchpoints to help them gain a better understanding of the new concept.