What does Yahoo’s recent acquisition signify

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Some people may have found it surprising when Yahoo announced that they were purchasing one of the country’s largest online fashion retailers ZOZOTOWN on November 12th, 2019. According to Nihon Keizai Shimbun, Yahoo is planning to acquire 50.1% of ZOZOTOWN’s assets, which is equivalent of ¥400.7 billion, making it Yahoo’s subsidiary company. It is understandable that the founder and the principal shareholder of ZOZOTOWN, Yusaku Maezawa, announced his resignation from the company after the merging of nation’s two major businesses came into effect.

Now the questions is:

What made them agree on the consolidation? What are they hoping to acquire from each other?

Firstly, from Yahoo’s perspective, the acquisition of a large online fashion business like ZOZOTOWN signifies the expansion of electronic commerce of the company. As reported by App Ape, Yahoo is popular among people in their 50’s and 60’s whereas ZOZOTOWN is popular among those in their 20’s and 30’s.

It is apparent that Yahoo wants to increase the number of young users by merging with ZOZOTOWN. As a matter of fact, according to itmedia.com, Yahoo also wants to capture the young consumers because they want to include ZOZOTOWN on their newly launched PayPay mall. This ensures people of all age groups utilize Yahoo’s new online service as soon as it is launched. In addition, by incorporating a large online fashion retailer into their business, Yahoo can strategically increase assortment of brands in display, which highly likely contributes to increased profits in their management. Accordingly, Yahoo strives to win the competition against similar e-commerce (EC) enterprises operated by other major businesses in the country such as Amazon and Rakuten.

On the other hand, from ZOZOTOWN’s perspective, the consolidation with Yahoo is beneficial because the number of purchasers of their products will likely increase significantly in the process. Since Yahoo and PayPay are both subsidiaries of the Softbank group, which is one of the major information and communication services in Japan, it is safe to say that ZOZOTOWN can expect to gain many users under the control of such services. This is also supported by comparing the number of installs obtained by App Ape. It explains that the number of installs of Yahoo among android users is slightly higher than those of ZOZOTOWN’s by approximately 200 users. Consequently, by being part of Yahoo’s PayPay mall, ZOZOTOWN can expand EC, leading to a increase in number of consumers and assurance of the future survival of the business in Japan.

The future of Yahoo: What’s next?

Following Yahoo’s announcement regarding acquiring one of the country’s largest online fashion retailers, they also indicated that they are planning to integrate management with one of Japan’s largest messenger apps, Line. In reality, both Yahoo and Line have trouble managing their operations in the midst of high level of competitions against other major businesses in the world. According to toyokeizai net, Yahoo has been lagging in the area of EC because they initially started off their business as a platform on personal computers. Additionally, toyokeizai net reports that Yahoo’s internet services, including EC, currently stands No. 3 in Japan, but they are eager to achieve No. 1 position by integrating management with other businesses that have strong online market shares. As a matter of fact, Line is the best answer to achieving this goal because App Ape indicates that Line possesses far greater number of MAUs compared to Yahoo on their respective mobile services.

Meanwhile, toyokeizai net states that Line is suffering greatly from the burden of advance investment because they have been focusing intently on mobile payment and AI-related services in order to expand their operation. Such diversification of marketing strategy consequently led the company into deficit. As a result, the management integration with the mammoth company like Yahoo appears to be beneficial as they will be able to receive financial aid from them.

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