The Factors Driving Yahoo! Japan’s e-Commerce Growth

YAHOY: Yahoo Japan Corp ADR logo
Yahoo Japan Corp ADR

Over the last few years, Yahoo! Japan (OTC:YAHOY) has emerged as the third biggest e-commerce player in Japan. Its e-commerce revenues have swelled from JPY98 billion ($881 million) to over JPY482 billion ($4.82 billion) in 2016. The company was able to achieve this growth due to strategic acquisitions of companies such as ASKUL, as well as mobile growth. Considering the pace of growth in Japan’s e-commerce market as a whole, we expect Yahoo! Japan’s e-commerce business to continue to grow in the coming years. Below we discuss the factors that we expect to drive that growth.

See our complete analysis of Yahoo! Japan here

Yahoo! Japan e-Commerce Sites To Attract More Users

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The e-commerce market in Japan still has substantial scope for growth, with the number of shoppers expected to  increase to 89 million by 2021, according to eshopworld. This provides a growth opportunity for Yahoo! Japan, in addition to transaction growth on its site. The company removed listing and tenant fees for its websites in fiscal 2014 to stimulate growth and grow the number of listed sellers and items on its properties. As a result of this strategy, as well as overall market growth, the number of sellers has swelled from 134,000 in Q2 FY15 to over 600,000 in Q2 FY18. With this increase, the number of products listed on the company’s shopping site swelled to over 290 million. We expect that this broad selection, coupled with secular growth, should translate into growth in both users and volumes for the company.

Revenues At Shopping & Auctions Set To Grow

We estimate that Yahoo! Japan’s eCommerce business is the second biggest contributor to its value, at around 15%. The division generated total revenues of approximately JPY482 billion ($4.82 billion) in 2016, and we expect total revenues from the division to increase slowly throughout our forecast period.

While Yahoo! Japan faces competition in this division from Japanese e-commerce giant Rakuten, we expect that the company will be able to capitalize on the increase in online spending by consumers and the growing popularity of its smartphone platform. According to research by the Ministry of Economy, Trade and Industry, e-commerce sales in 2016 accounted for 2.8% of the total GDP for both the business to business (B2B) and business to consumer (B2C) segments. Yahoo! Japan has emerged as the third biggest player in the B2C e-commerce space, with a market share of 8.9%. According to eshopworld, B2C e-commerce is expected to grow to $112 billion by 2021. This growth should translate to an increase in transaction volumes on both Yahoo! Auctions and Shopping.

We currently have a $9 price estimate for Yahoo! Japan, which is in line with the current market price.

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