TOKYO—The Japanese billionaire who bought the first ticket to fly around the moon on Elon Musk’s SpaceX vehicle is losing momentum back on Earth.
The business of selling fashion brands online may not be rocket science, but it is getting trickier for Japanese entrepreneur Yusaku Maezawa after years of rapid growth for his site, with big brands backing away and competition from the likes of Amazon.com Inc. rising.
Zozo Inc. made it to the top of Japan’s fashion e-commerce world by offering leading brands on its Zozotown site that previously were available only in elite department stores. But the chief executive, who became globally known when he paid $110.5 million for a Jean-Michel Basquiat painting of a black skull in 2017, acknowledged that his attempts to develop a Zozo house brand of clothing haven’t taken off.
The label is expected to lose more than $100 million in the year ending in March.
“It was an expensive learning experience,” Mr. Maezawa told analysts Thursday . “We launched new steps one after another, and they failed to produce significant effects.”
He said one of his most innovative ideas—offering customers a free “Zozosuit” to measure their bodies—hadn’t done much to boost sales.
The stretchy, form-fitting body suit covered in dots was supposed to take precise measurements at dozens of points so customers could order the correct size of Zozo’s house-brand clothing. Many customers complained that using the suit didn’t result in a particularly good fit and some call it a publicity stunt. The cost of making and delivering the Zozosuits free of charge weighed on Zozo’s profits.
Mr. Maezawa said in October he planned to phase out the Zozosuit in Japan, although it will still be offered to customers in Zozo’s relatively small overseas business.
The company said profit fell 16% in the nine months through December from the same period a year earlier, and downgraded its profit forecast for the full fiscal year ending in March. Profit for the year is now projected at about $160 million, below the previous year’s level for the first time since Zozo shares went public in 2007.
The company’s shares are trading at less than half their peak level last year.
The 43-year-old Mr. Maezawa, a former punk-rock drummer, founded Zozotown 20 years ago. It originally sold imported records and CDs and shifted into fashion. Mr. Maezawa amassed his fortune through the company, and has drawn publicity with his flashy personal life, dating famous actresses and offering provocative comments on Twitter.
His biggest publicity stunt came last September, when he appeared in the U.S. alongside Mr. Musk, the Tesla Inc. founder, and said he would travel on Mr. Musk’s vehicle on a journey around the moon in 2023.
Then on Jan. 5, Mr. Maezawa offered on Twitter to personally give away one million yen, or about $9,000, to 100 followers who shared the tweet, saying he wanted to thank customers for successful New Year’s sales. That tweet was shared more than 5 million times and became the world’s most retweeted post ever, according to a Twitter spokeswoman.
Late last year, Zozo started a membership program that would entitle members to get 10% off all purchases. Brands rebelled, fearing their merchandise would be tainted with a discount image.
“Constant discounts could damage the value of our brand,” said a spokesman at one of Japan’s biggest apparel makers, Onward Holdings Co. The company stopped sales of all of its clothing brands on Zozotown immediately after the membership discount service was announced.
Mr. Maezawa said 42 of the 1,255 shops selling their clothes on Zozotown pulled out because of the service. He said the company was looking at ways to improve and bring back the brands that left.
Jefferies Financial Group Inc. analyst Hiroko Sato said the membership program was badly timed because many brands were already looking to enhance their own e-commerce sites rather than working through middlemen such as Zozo.
In November, U.S. outdoor clothing company Patagonia left all online shopping malls in Japan, including Zozotown, as part of the company’s world-wide strategy to focus on its own online channel, a company spokesman said.
Meanwhile, Amazon is trying to lure more high-fashion customers in Japan, its fourth-largest market after the U.S., Germany and the U.K. Amazon has introduced a “Prime Wardrobe” service that allows customers to order multiple sizes at once, try them on at home and keep the items that fit best—addressing the same concern over fit that Mr. Maezawa tried to tackle with his Zozosuit.
“So far, Zozo has the advantage in Japan over Amazon because of its expertise in fashion and the high usability of its website and app,” said Rakuten Securities analyst Rika Matsumura. “However, Amazon could become a big threat to Zozo if Amazon comes up with technology that allows customers to buy clothes that fit perfectly without measuring their height and weight.”
An Amazon spokeswoman said the company was doing its best “to remove any barriers that will prevent customers from purchasing fashion items online.”
Write to Megumi Fujikawa at [email protected]
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