Yahoo Japan has decided to waive the store opening fees for its EC (e-commerce) website. The aim is to weaken the momentum of Rakuten and Amazon, who are ahead in the game. Yahoo Japan has finally begun its counterattack with determination.
In April 2012, when former president of Yahoo Japan, Masahiro Inoue, handed over the CEO baton to Manabu Miyasaki, Miyasaki introduced the concept of "lightning-speed management" and successively implemented measures such as M&A (mergers and acquisitions), partnerships, and service upgrades. Miyasaki's first report card - the consolidated settlement report for the 2012 fiscal year - showed a double-digit growth for the first time in six years, demonstrating his managerial talent.
However, Masayoshi Son, CEO of SoftBank and chairman of Yahoo Japan, was troubled by the stagnant EC business at Yahoo Japan. Yahoo Japan’s consolidated sales from April to June 2013 reached 92.3 billion yen, an increase of 19.0% compared to the same period last year. However, the transaction volume of its EC business was only 411.2 billion yen, growing just 3.7% compared to the previous year. Especially in the fiercely competitive online shopping sector against rivals like Rakuten, it actually decreased by 1.5% compared to the previous year.
Masayoshi Son consulted Jack Ma, chairman of Alibaba who created a total circulation amount of about 15 trillion yen with Taobao and Tmall, urging the management of Yahoo Japan to reform the EC business.
The question before Yahoo Japan's management was whether to focus on immediate sales or change their strategy? Their answer was a drastic move, betting everything on becoming the leader in the EC domain: a decisive battle.
On October 7th, Yahoo Japan announced that starting from October, it would waive the store opening fees for its EC commercial website “Yahoo! Shopping” and auction site “Yahoo! oku.” Besides the initial fee (21,000 yen) and monthly fee (25,000 yen), Yahoo! Shopping also waives usage fees (sales handling fees) equivalent to 1.7-6.0% of sales. Yahoo! oku not only waives the monthly store opening fee of 18,900 yen but also exempts individual merchants from the original product display system usage fee of 10.5 yen per item (excluding some categories).
The effect of waiving store opening fees has already been validated by Livedoor. In June 2004, Livedoor, which started late, waived the store opening fees for its EC commercial site “Livedoor Department Store,” significantly increasing the number of franchise stores and catching up with leaders Rakuten and Yahoo Japan.
Yahoo Japan has now chosen this method. Despite the expectation that a series of free measures will be the main reason for a revenue reduction of tens of billions of yen per quarter, the company still plans to compensate for the lost revenue through increased advertising income brought by more merchants.
Attacking while holding onto the "money box"
At first glance, it seems that Yahoo Japan has adopted a free strategy that abandons all sources of revenue from EC, but the company has not abandoned the "money box" - the 5% successful bid handling fee - of Yahoo! oku. Yahoo Japan's strategy is to increase revenue by expanding the total circulation amount in its auction business, where no other competitors can come close, while delivering a heavy blow to competitors Rakuten and Amazon in its online shopping business through fee waivers.
Currently, the Japanese EC market has entered a phase of comprehensive strength competition. In addition to store opening fees and handling fees, the competition also includes improvements in logistics networks such as same-day delivery and free shipping, as well as points policies to attract customers. Under these circumstances, Yahoo Japan's decision this time is indeed a "decisive battle." It subtly shows that the company has realized that without reversing the market share through such resolute measures, there will be no future prospects.
Besides the sudden wave of EC fee waivers initiated by Yahoo Japan, the chat application "LINE," which has 230 million members worldwide, also plans to enter the EC market within 2013. For a long time, the Japanese EC market has been dominated by two strong players, Rakuten and Amazon Japan. The second act of Yahoo Japan's attempt to disrupt this dominance has finally begun.
Via: Nikkei Business Weekly, Reporters: Takashi Hara, Takeshi Shiraishi