netprice.com Ltd.
3328 TSE Mothers
Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

19-Aug-13
Important disclosuresand disclaimers appear
at the back of thisdocument.

FISCO Ltd. Analyst
Yuzuru Sato

■Building the incubation businesses into the next
main source of profit
netprice.com engages in various electronic commerce (e-commerce)businesses, such as online shopping and trading in used brand goods. It iscurrently strengthening its pure incubation business of investing in andnurturing Internet venture businesses both in Japan and overseas.
The current fiscal year, ending in September 2013, i.e., FY9/13, is the final
year of transition of the group’s business structure from a primary reliancefor profit on the business of gathering (online shopping) to other e-commercebusinesses and to incubation businesses. netprice.com is now the leading
company in Japan in trading used brand goods and in sending goods purchasedon Internet shopping sites in Japanese to people living overseas. These twobusinesses are expected to lead profit growth for the company from FY9/14.
As new businesses, the company is developing services for smartphones,
and in April 2013, it set up a Beenos department to specialize in the incubation
business. In 2012, netprice.com invested in two young e-commerce businesses
in Indonesia, and in 2013 so far, it has invested in three promising e-commercebusinesses, one in India and two in Turkey. E-commerce is projected toproliferate in these emerging growth countries, so netprice.com should be able
to exit from these investments profitably in coming years. Hereafter, thecompany plans to invest in other young but strong e-commerce businesses inemerging growth countries with the aim of earning as much profit from its
incubation businesses as it does from its e-commerce businesses.
In the third quarter of FY9/13, i.e., in Q3 FY9/13, the company suffered an
operating loss, for the first time in three quarters, because its e-commercebusinesses faltered temporarily. However, the company earned a large nonoperating profit from the sale of investment securities. Thus, it earned arecurring profit of \128mn. The company expects its e-commerce businesses
to recover in Q4 FY9/13, so it foresees a recurring profit of \64–184mn for
FY9/13, the first such profit in three years.

■Check Points
・The company is building up its Beenos department, which specializes in the
incubation business・The company projects recurring and net profits for FY9/13
・The company may pay a dividend after its profits recover sufficiently

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19-Aug-13

netprice.com Ltd.

Consolidated Sales and Recurring Profit (\mn),
FY9/09-FY9/13E
Sales (Left axis)
14,000Recurring Profit (Right Axis)
400

13,14012,16512,000300

10,7909,949

249

10,00010,502
200
184

8,000

100
0

14

6,000

-100

4,000

-130

-200

2,000

-300
-300

0
FY9/09FY9/10-400

FY9/11

FY9/12

FY9/13E

Note: The forecasts shown for FY9/13 are the upper limits of the ranges projected by the company.

■Description of Businesses
E-commerce businesses and incubation businesses are main
divisionsnetprice.com ’ s undertakings can be broadly divided into e-commercebusinesses and incubation businesses. There are three main e-commercebusinesses, each conducted by a consolidated subsidiary: the gathering business(online shopping), the value cycle business (trading used brand goods via theInternet), and the cross-border business (operating a global online shopping site).
The incubation businesses include the business of forwarding goods to people
living abroad and new businesses, and these incubation businesses are
conducted by six consolidated subsidiaries. Brief descriptions of thesebusinesses follow.

Sales Composition by Business, FY9/10-FY9/12
100%

7.8

90%
80%

4.2

3.2

5.7

7.1

17.9
27.1

70%

34.2

Incubation Businesses

60%

Cross-Border Business

50%

Value Cycle Business

40%

Gathering Business

74.4
63.1

30%

55.5

20%
10%
0%
FY9/10FY9/11

FY9/12

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19-Aug-13

netprice.com Ltd.

■Description of Businesses

Sales weighting has declined as other businesses have grown
Gathering Business
Consolidated subsidiary netprice, Ltd. operates the netprice online shoppingsite. Gathering is a method of selling goods via online shopping sites whereby
the prices of the goods decline in stages as the number of prospective buyers
increases above a set level. netprice, Ltd. is promoting the diffusion of gathering
as one style of selling via the Internet. Gathering was the company’s original
business, so it still provided 55.5% of total consolidated sales in FY9/12, but thesales weighting of this business has declined as other businesses have grown.
netprice, Ltd.’s chibi-gyaza (small gathering) service allows customers to use
the netprice online shopping site from mobile devices, such as cell phones andsmartphones, through various applications. The netprice online shopping site has
more than 2.2 million registered users and about 2,500 suppliers. In cooperation
with manufacturers, netprice, Ltd. has developed original goods for sale on its
shopping site, and these original goods now supply about 7% of the total sales
made on the site. netprice, Ltd. basically assumes no inventory risk for these
original goods.
As detailed in the pie charts below, at the end of FY9/12, women made up
78.2% of the netprice online shopping site membership, people in their 30’s and40’s comprised more than 70% of the membership, and the site offered a wide
range of goods for sale, including brand goods, clothing, healthcare goods,
miscellaneous goods for home and garden use, and cosmetics.

Famous netprice Online Shopping Site, which uses the Gathering Technique

Source: Company website

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19-Aug-13

netprice.com Ltd.

■Description of Businesses

Composition of netprice Membership by Genderat the End of FY9/12
Male

Female
21.8%

78.2%

Source: Company

Composition of netprice Membership by Ageat the End of FY9/12
10's
40's

20's
50's
3.8%

30's
Above 60

0.7%
7.9%

13.3%

36.9%

37.3%

Source: Company

Breakdown of netprice Sales by Genre of Goods
at the End of FY9/12

1.5%

6.2%
Brand goods

17.8%

7.6%
10.2%
19.2%
10.3%
13.9%

Miscellaneous goods for home andgarden use
Home electronics, including
audiovisual equipment
Clothing
Cosmetics and perfume

15.0%

Hobby items

Source: Company
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19-Aug-13

netprice.com Ltd.

■Description of Businesses

Brandear auction site for trading used brand goods supplies
more than 30% of total consolidated sales
Value Cycle Business
Consolidated subsidiary Defactostandard, Ltd. operates the Brandear auction
site for trading used brand goods through the Internet. netprice.com calls this its
value cycle business. In FY9/12, this business supplied 34.2% of netprice.com’s
consolidated sales. At the end of FY9/12, more than 500,000 people had used
this service, which offered 5,700 items ranging from clothing to handbags andcell phones. Thus, Defactostandard, Ltd. is the largest company in Japan offering
to buy and sell used brand goods through the Internet. Items purchased fromusers through the website are not only offered in its own auction site, but alsooffered in other auction sites, including YahooAuc! (formerly Yahoo! Auction),
the largest auction site in Japan, Rakuten Auction, and overseas acution sites,such as eBay. Defactostandard. Ltd. charges no fees for appraising goods for
sale, for picking up and delivering these goods, and for payment. It handles awide variety of goods quickly, making it popular. The company received theYahoo! Best Auction Award four years in a row, from 2009 through 2012.

Brandear Site for Trading Used Brand Goods

Source: Company website

Flow of Purchases and Sales Using the Brandear Site

Source: Company website

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19-Aug-13

netprice.com Ltd.

■Description of Businesses

Generates second largest transaction value in the company
Cross-Border Business
Consolidated subsidiary Shop Airlines, Ltd. develops the “sekaimon” global
online shopping site, which is also the Japanese-language site authorized byeBay Inc., the largest auction site in the world. The “ sekaimon” site enables
bidding, payment, international delivery and customer support in Japanese.
Originally, it offered goods made in the US and the UK, but in March 2013, it
started offering goods made in Germany, and in July 2013, it started presenting
goods made in Austria. Hereafter, it plans to offer goods made in other leading
European countries, including Italy and France. Shop Airlines, Ltd. contracts with
the Yamato Transport group to handle its warehouses and transportationcompanies in the US, the UK, the Netherlands, and Germany.
Commission income comprises the sales of the cross-border business, sothese sales amounted to only 7.1% of total consolidated sales at netprice.com in
FY9/12. However, the business handled \4,556mn of transactions in FY9/13,
second only to the \5,524mn of transactions handled by the gathering business.

Sekaimon Japanese Auction Site Authorized by eBay

Source: Company website

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19-Aug-13

netprice.com Ltd.

■Description of Businesses

tenso.com site for forwarding goods to overseas residents is
top user of Japan Post Express Mail Service
Incubation Businesses
Incubation businesses include tenso.com, Inc., which forwards goods tooverseas residents, other new businesses, and investing in and developing
promising young e-commerce businesses. tenso.com serves residents of foreigncountries, including students studying abroad. If these people purchase an itemon an e-commerce site in Japan and the operator of the site does not ship goods
overseas, tenso.com will ship the good for a fee of \490-3,980, depending on theweight of the good. About half the company’s customers are Japanese and theother half are non-Japanese. tenso.com, Inc. offers its service through thetenso.com website.
A person desiring to use tenso.com, Inc. ’ s service first registers as amember of the site and provides as a virtual address the address of tenso.com,
Inc.’s warehouse. If the user can find the good he or she purchased through an
e-commerce site, he or she designates the address of tenso.com, Inc. ’ swarehouse as a shipping address. When this item arrives at tenso.com, Inc.’swarehouse, it is forwarded to the overseas address of the customer. tenso.com,
Inc. forwards goods to 84 countries using the Express Mail Service (EMS) of
Japan Post and claims to be the largest customer for this service.
In FY9/12, netprice.com added three other consolidated subsidiaries as
incubation businesses, and in FY9/13, it added two more. All of the venturebusinesses invested in and developed are involved with the Internet in Japan andoverseas.

Consolidated Subsidiaries and Affiliates Accounted for by the Equity Method
Consolidated subsidiaries

Business description

Business

netprice, Ltd.

GatheringOperates Internet shopping sites netprice and chibi-gather

Defactostandard Ltd.

Value cycle

Operates the Brandear site for trading used brand goods via the Internet（Consumer to Business to Consumer, C2B2C）

Cross-border

Operates the sekaimon global shopping site in cooperation with eBay Inc., the operatorof the world’s largest online auction site

Shop Airlines, Ltd.
Shop Airlines America,Inc
Shop Airlines Europe B.V.
tenso.com, Inc.

Forwards goods purchased on e-commerce sites in Japan to customers overseas as anagencymonosense, Ltd.

Offers support services, such as product planning and promotion, for goods licensed bycelebrities.

crec, Inc.

Incubation

Markets and promotes sales via smartphones

FORii, Inc.

Plans, produces and sells smartphone content

Beenos Partners, Inc.

Invests in US startup companies

Beenos Asia, Pte

Based in Singapore, this subsidiary oversees investments inSoutheast Asian markets

Equity-accounted Affiliates
Moshimo Co., Ltd.

Engages in drop shipping (provides sales systems for operating Internet shops)

Open Network Lab, Inc.

Invests in and develops Internet venture businesses

Source: Company website

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19-Aug-13

netprice.com Ltd.

■Growth Strategy
Growth to be led by e-commerce businesses other thangathering and by incubation businesses
FY9/13 is the final year of change in netprice.com’s business structure froma primary reliance on the gathering business to a reliance on other businesses.
As shown in the bar charts below, the gathering business supplied most of thecompany ’ s sales and operating profit in FY9/08-FY9/10, but over the past
three fiscal years, sales from this business have declined, and in the past two
fiscal years, the business has been unprofitable. Probably, the decline of thisbusiness reflects the rapid growth of leading online marketplace companies, suchas Amazon.com, Rakuten (4755), and Yahoo! Japan (4689).
From FY9/14, netprice.com plans to maintain the gathering business at ascale allowing stable profits while relying on e-commerce businesses other than
the gathering business and on incubation businesses for growth.

Breakdown of Sales (\mn) from Gathering Business andfrom Other Businesses, FY9/07-FY9/12
Gathering Business

Other Businesses

14,00012,000

1,707
1,338

1,987
3,076

10,000

3,957
8,000
6,000

4,425
11,54910,680

11,153
9,089

4,000

6,833

2,000

5,524

0
FY9/07

FY9/08FY9/09FY9/10FY9/11

FY9/12

Breakdown of Operating Profit (\mn) from Gathering
Business and from Other Businesses, FY9/07-FY9/12
Gathering Business

500

Other Businesses

400
300
436

200
100

429

77

16

268

119

0
-177

-100
-200

-151
-351

-430

-269

-300
-41

-400
-500
FY9/07

FY9/08FY9/09FY9/10FY9/11

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FY9/128

19-Aug-13

netprice.com Ltd.

■Growth Strategy

Brandear site may grow briskly in coming years
Other e-commerce businesses
The value cycle business of trading used brand goods on the Internet
undertaken by Defactostandard, Ltd. displays notable growth potential. The
Brandear site operated by this business is the largest such site in Japan. The
online market for used brand goods in Japan remains much smaller than the realmarket for these goods. Japan ’ s Ministry of the Environment estimates that
the Japanese total market for used brand goods was approximately \170bn inthe government ’ s fiscal 2012, which ended in March 2013. In FY9/12, thevalue cycle business reported sales of \3,405mn. Thus, this business probably
held a share of less than 10% of the Japanese virtual market for used brandgoods. However, the number of transactions in used brand goods via the Internet
has been increasing in recent years, and Japan’s population of internet users is
growing. Thus, the value cycle business should be able to grow briskly in coming
years.

Beenos department established to specialize in incubation
business
Incubation businesses
tenso.com, Inc. has few competitors in the Japanese market for agency
forwarding of goods overseas. This market is still small, which may explain thepaucity of competitors, but the global demand for Japanese goods is likely togrow accompanying the globalization of markets and yen depreciation.
tenso.com, Inc. already forwards goods to 84 countries and intends to takeadvantage of its market leadership to expand.
In the pure incubation business of investing in and developing small
businesses, netprice.com has already invested in about 40 venture companies inJapan and overseas. In June 2007, Aucfan Co., Ltd. was established as a spinoff
of Defactostandard, Ltd. In April 2013, Aucfan Co. Ltd. (3674) listed its shareson the Mothers Market of the Tokyo Stock Exchange, and netprice.com recordeda large non-operating gain on the sale of Aucfan shares. From FY9/14, othercompanies nurtured by netprice.com may list their shares if stock market
conditions are favorable, providing further investment gains.
netprice.com plans to develop its incubation businesses until they supply
roughly the same profit as its e-commerce businesses. Toward this end, in April
2013, the company established a Beenos department to specialize in the pureincubation business of investing in and developing venture businesses. The name
Beenos derives from the English word “ bee ” and the Japanese words for“ nest of ” . The name suggests the nest of a honey bee. Just as honey bees
support the growth of plants by spreading the pollen of their flowers, the Beenos
department aims to support the growth of venture businesses by building a
network of information and human resources. In July 2013, the Beenos
department set up an investment program and an inception program. The
investment program invests in companies involved in Internet services in Japanand overseas, using the expertise of specialists in technology, design,
information analysis, management, and other relevant fields. The inception
program establishes new businesses in cooperation with promising entrepreneurs
using the experience of people who have successfully set up a company. The
Beenos department is pursuing a strategy of directly investing in, nurturing, andsupporting startup businesses and businesses aiming to accelerate their growth,
thereby activating and expediting the process of business formation andultimately contributing to the profits of netprice.com.

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19-Aug-13

netprice.com Ltd.
Services Provided by the Beenos Team
Service Description

Service■Growth Strategy

Advisory

Abundantly experienced managers recommend ways to resolve problems in founding acompany or developing a businessNetwork

Provide access to a global network of entrepreneurs who have invested in startup companies
in Japan, Indonesia, Turkey, India, and North America

Workshops

To raise the knowhow of companies participating in a Beenos program, convene periodic
workshops on such topics as search engine optimization, data analysis, the testing of ideas
and designs, and the use of human resources

Data analysis

Instruct about and provide support for data analysis and the setting of key performanceindicators

CEO coaching

Periodically convene management coaching or consulting sessions for guest CEOs

Prototype development

Define a minimum viable product, hold hearings to obtain the opinions of product users,
support the development of product prototypes

DesignImprove the design of a service to accelerate its growth

Source: Company website

The scale and type of investment pursued by the incubation business varies
by region. In Japan, the business normally takes a majority stake in a venturebusiness, with the aim of eventually exiting from the investment profitably whenthe venture business makes an initial public offering or when the venturebusiness is acquired by another company. In the US, the business takes aminority stake in a venture business, aiming to exit the investment when it isbought out by another investor or when the venture business makes an initialpublic offering. Other important objectives of investing in US venture businesses
are to build a network of entrepreneurs engaged in Internet businesses and toobtain information about Internet technology, centered on mobile
communications, and about trends in the market for such technology, becausechanges in this technology and these market trends in the US tend to leadsimilar technological and market changes in Japan by 9-12 months. In newly
developing countries, the business takes a minority stake in a venture business,
intending to exit the investment in the medium term by selling to anotherinvestor. The market for initial public offerings is usually too immature in newly
developing countries to permit a profitable exit through such an offering. The
incubation business invests \100-200mn per year in venture businesses. Whenthe ownership stake of the business exceeds a certain level, the businessforwards directors to the venture company to support its long-term growth.
A major strength of netprice.com ’ s incubation business is that it has
knowledge about all the functions needed to build a business, from constructing
a business model and setting key performance indicators to structuring thecompany, testing the usability of its products, and raising funds. Another mainstrength of the incubation business is the network of key personnel developed
over the years by netprice.com and its affiliate, Open Network Lab, because sucha network is one of the most important needs of an entrepreneur about to start
up a new business.

Investing aggressively in e-commerce platform businesses
Investment in newly developing countries
netprice.com plans to aggressively invest in venture businesses engaged in ecommerce businesses in newly developing countries. In January 2012, it set up a
joint venture in Indonesia, PT MIDTRANS, which offers an online transaction
settlement service. In April 2012, it invested in Tokopedia, the largest online
marketplace company in Indonesia. In March 2013, it invested in ShopClues, thelargest online marketplace company in India. In May 2013, it took a stake in
Akakce, the operator of the largest price-comparison site in Turkey. In June
2013, it invested in iyzi Payments, which provides an online transaction
settlement service in Turkey. All the companies in newly developing countries
invested in by the incubation business are engaged in some platform of ecommerce, such as providers of online marketplaces, providers of online fundsettlement services, and operators of price comparison sites. As the e-commercemarkets in newly developing countries grow, such companies tend to gain
dominant market positions and develop large profit growth potential.
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netprice.com Ltd.

■Growth Strategy

Tokopedia now undertakes about \300mn of transactions per month and is
growing rapidly, so it is expected to facilitate \100bn of transactions per month
five years from now. In India, the Internet penetration rate is less than 10%, but
the country has a population of about 1.2 billion people and it is expected toeventually match China ’ s current Internet penetration rate. Turkey has apopulation of about 75.6 billion people, an Internet penetration rate of 47%, andan e-commerce market that is expanding rapidly. netprice.com is the firstJapanese company to invest in a Turkish company involved in e-commerce, andnetprice.com plans to build long-term relationships with more Turkish companies
engaged in Internet business.

Venture Companies in Newly Developing Countries
Invested In by netprice.com
Company

Date of investment

Business description
Provides an online settlement service for companies engaged in Indonesia’s
e-commerce market
Largest operator of an online consumer-to-consumer marketplace in Indonesia(C2C)

PT MIDTRANS

January 2012

PT Tokopedia

April 2012

ShopClues

March 2013

Operates an online business-to-consumer marketplace in India (B2C)

akakceMay 2013

Operates the largest price comparison site in Turkey

iyzi Payments

June 2013

Provides a comprehensive online settlement service in Turkey

Source: Company website

netprice.com considers Vietnam to be the next most promising newly
developing country for initial investment, as the country has a population of
about 89 million people, an Internet penetration rate of 38% and an e-commercemarket that is likely to grow strongly in coming years. If companies in other
newly developing countries present attractive prospects, netprice.com is likely toinvest in them.

Services Provided by the Beenos Team

Source: Company

As part of its growth strategy, netprice.com intends to strengthen its pureincubation business. In particular, it aims for expertise in this business in newly
developing countries. Over the long term, the e-commerce markets in newly
developing countries should grow with overall economic growth. An investment
strategy based on this prospect should eventually contribute to the company’s
profits.

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19-Aug-13

netprice.com Ltd.

■Business Trends
Gain on the sale of investment shares led to recurring and net
profits
Q1-3 FY9/13 Results
On July 25, 2013, netprice.com announced its consolidated results for Q1-3
FY9/13. As detailed in the table below, sales grew by 1.0% year-on-year (y-o-y)to \7,802mn, the company suffered an operating loss of \84mn, down from aloss of \149mn in Q1-3 FY9/12, but earned a recurring profit of \184mn, aftera recurring loss of \84mn in Q1-3 FY9/12, and a net profit of \84mn, after a
net loss of \203mn a year earlier. As noted, the operating loss shrank y-o-y in
Q1-3 FY9/13. Still, sales and operating profit were slightly lower than thecompany had projected in April 2013, when it announced its H1 results. The
company earned a non-operating gain of slightly more than \313mn on the saleof its shareholding in Aucfan Co., Ltd. in April, when Aucfan made an initialpublic offering. This gain supported the recurring and net profits.
In Q3 FY9/13, sales grew by 2.7% y-o-y, but SGA cost increased at a larger
rate, leading to an operating loss of \161mn. Profit deterioration was
pronounced in the e-commerce businesses, as detailed in the second table below.

Consolidated Results (\mn)
in Q1-3 FY9/12 and Q1-3 FY9/13
Q1-3 FY9/12

Q1-3 FY9/13

Sales

7,721

7,802

1.0

Gross profit

3,459

3,664

5.9

43.2

46.9

3,608

3,749

46.9

48.0

Gross profit margin
SGA cost
SGA cost ratio
Operating profit

-149

-84

-1.9

-1.1

Non-operating income

118

334

Non-operating expenses

53

65

Recurring profit

-84

184

-1.1

2.3

Operating profit margin

Recurring profit margin
Net profit
Net profit margin

Co. forecast (4/13)
of Q1-3 FY9/13
7,822～8,022

y-o-y

-203

84

-2.6

1.2

3.9
-

-53～6

-

-68～-6--146～-86

Quarterly Consolidated Results (\mn), Q1 FY9/12-Q3 FY9/13
FY9/12
Q1
Sales
y-o-y
Gross profit
Gross profit margin
SGA cost
SGA cost ratio
Operating profit

Q2

FY9/13
Q3

Q4

Q1

Q2

Q3

2,754

2,552

2,414

2,228

2,748

2,573

-12.5

-6.7

3.7

-13.6

-0.2

0.8

2,479
2.7

1,162

1,132

1,163

1,012

1,283

1,218

1,163

42.2

44.4

48.2

45.4

46.7

47.3

46.9

1,224

1,267

1,116

1,173

1,243

1,180

1,325

44.5

49.6

46.2

52.7

45.2

45.9

53.4

-62

-134

47

-161

39

37

-161

-2.3

-5.3

2

-7.2

1.4

1.4

-6.5

Non-operating income

74

38

6

130

21

1

361

Non-operating expenses

15

32

5

15

37

5

68

Recurring profit

-3

-128

47

-45

23

33

131

Operating profit margin

Recurring profit margin
Net profit
Net profit margin

-0.1

-5.1

2

-2.1

0.8

1.3

5.3

-39

-152

-11

-147

-11

-12

114

-1.4

-6

-0.5

-6.6

-0.4

-0.5

4.6

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netprice.com Ltd.

■Business Trends

Quarterly Consolidated Sales (\mn), Q1 FY9/12-Q3 FY9/13
FY9/12

FY9/13

Q1

Q2

Q3

Q4

Q1

Q2

Q3

E-commerce businesses

2,699

2,479

2,328

2,133

2,626

2,415

2,280

Gathering business

1,736

1,575

1,190

1,021

1,340

1,131

1,140

Value cycle business

767

718

960

959

1,089

1,115

988

Cross-border business

195

186

176

152

196

167

152
202

Incubation businesses

54

74

89

99

127

164

Eliminations and corporate costs

0

-2

-3

-3

-5

-5

-2

2,745

2,561

2,414

2,228

2,748

2,573

2,480

Total operating profit

Quarterly Consolidated Operating Profit (\mn), Q1 FY9/12-Q3 FY9/13
FY9/12
Q1

Q2

FY9/13
Q3

Q4

Q1

Q2

Q3

E-commerce businesses

-31

-122

91

-106

115

103

Gathering business

-75

-86

-39

-68

22

-3

-65
-33

Value cycle business

-22

-71

98

-24

61

102

-31

Cross-border business

66

35

33

-13

32

4

0
-12

0

-3

4

-12

-10

-4

Eliminations and corporate costs

-30

-8

-48

-41

-65

-61

-84

Total operating profit

-62

-134

47

-161

39

37

-161

Incubation businesses

Of the e-commerce businesses, the value cycle business saw the greatest y-oy profit deterioration in Q3 FY 9/13. Sales in this business increased by 3% y-oy. The business has planned to strengthen purchasing activities in Q3 and sales
activities in Q4, therefore, purchasing cost in Q3 was higher than previous
quarters. In May 2013, the business started airing a TV commercial, leading torecord-high purchases for a single quarter in Q3 FY9/13, but the cost of thisadvertising contributed to an operating loss of \31mn for the business,reversing an operating profit of \98mn in Q3 FY9/12. From mid-June, businesssales began to grow strongly, and the company expects this growth to continue
in Q4 FY9/13, enabling the business to return to profitability that quarter and in
FY9/13.
The company had projected a small operating profit for the gathering businessin Q3 FY9/13, but sales in this business declined by 4% y-o-y, continuing adownward trend, and the number of new customers for the business grew lessthan the company had forecast. Thus, the business suffered an operating loss of\33mn, slightly increased its operating loss of \3mn in Q2 FY9/13. However,the sales decline in this business is leveling off, reflecting increased sales
through smartphones, greater sales of original goods, and an increase in the rateof repeat sales. Because of an increase in the sales weighting of original goods,
the gross profit margin earned by the business on sales of goods rose by 1ppt
y-o-y in Q3 FY9/13 to 36.3%.

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13

19-Aug-13

netprice.com Ltd.

Quarterly Sales (\mn) by the Gathering Business,
Q1 FY9/10-Q3 FY9/13
3,000
2,500
2,000
1,500
1,000
500

Q2

FY
9/
10
FY
9/
Q3
10
FY
9/
Q4
10
FY
9/
Q1
10
FY
9
Q2 /1
1
FY
9/
Q3
11
FY
9
Q4 /11
FY
9
Q1 /1
1
FY
9/
Q2
12
FY
9
Q3 /1
2
FY
9/
Q4
12
FY
9/
Q1
12
FY
9/
Q2
13
FY
9/
Q3
13
FY
9/
13

0

Q1

■Business Trends

In the cross-border business, sales fell by 14% y-o-y in Q3 FY9/13 and thebusiness just broke even at the operating profit level, after earning an operating
profit of \33mn in Q3 FY9/12. The sales decline reflected the impact of a
weaker yen. About half of the users of the “sekaimon” site purchase goods
on auction sites and are very price sensitive. Between Q3 FY9/12 and Q3
FY9/13, the yen depreciated by more than 30% against the US dollar, whichmakes US dollar purchases more expensive in yen.
Sales by incubation businesses jumped by 127% y-o-y in Q3 FY9/13, but thesebusinesses suffered an aggregate operating loss of \12mn, after an operating
profit of \4mn in Q3 FY9/12. At the end of 2012, the tenso.com businessannounced its intention of purchasing goods as an agent, not just forwarding
them. Furthermore, this business benefits from yen depreciation, making
Japanese goods cheaper to residents of other countries, and from a lack ofcompetitors. Thus, the value of goods transacted by the business increased by
40% y-o-y in Q3 FY9/13, and the business contributed substantially to the sales
growth of the group and to its profits. The positive impact of yen depreciationon the sales and profits generated by tenso.com, Inc. essentially offsets thenegative impact of such depreciation on the sales and profits of the crossborder business. However, the heavy initial costs of establishing new subsidiaries
keep the incubation business slightly unprofitable.

Recurring and net profits projectedCompany Forecasts for FY 9/13
For FY9/13, the company forecasts consolidated sales of \10,302-10,502mn,
up 3.5-5.6% y-o-y, and an operating loss of \74-194mn, compared with anoperating loss of \310mn in FY9/12. However, the company projects a recurring
profit of \64-184mn, its first such profit in three fiscal years, and a net profitof \84mn, reversing a net loss of \45mn in FY9/12.
For Q4 FY9/13, the company projects that its e-commerce businesses breakeven thanks to gathering business and the value cycle and cross-borderbusinesses earn profits. However, the company expects its incubation businesses
to suffer a small operating loss, despite strong sales and profit growth attenso.com, Inc., because of the costs of establishing new businesses.

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14

19-Aug-13

netprice.com Ltd.

■Business Trends

The gathering business plans to improve its sales and profits by promoting
more sales via smartphones. In Q3 FY9/13, this business obtained almost 33%
of its orders from smartphones, and the business aims to raise this ratio to 40%
by the end of FY9/13. Orders from smartphone users will probably be a key tothe growth of this business.

Proportion of Gathering Business Sales Accounted
for by Smartphones, Q3, FY9/12-Q3 FY9/13
35.0%

32.4%
30.6%

30.0%
26.0%
25.0%

20.0%

22.5%
18.2%

15.0%

10.0%
Q3 FY9/12

Q4 FY9/12

Q1 FY9/13

Q2 FY9/13

Q3 FY9/13

The company expects its value cycle business to earn an operating profit in
Q4 FY9/13 as a result of taking a good balance on purchase and sales
activities. The company also foresees an operating profit for its cross-borderbusiness in Q4 FY9/13, as a result of several factors. The business isoverhauling its site to improve sales of fashion goods, which have been weaker
than sales of other types of goods. The business completed its push for greater
sales from smartphones in July 2013 and subsequently concentrated onincreasing sales promotions, expanding the number of its customer categories,
and attracting more new customers. Although sales and profits in the crossborder business are adversely affected by yen depreciation, this business
reported an operating profit of about \50mn or more per quarter. The company
hopes to quickly achieve its previous record-high operating profit in the crossborder business by increasing the number of its customers.
Among its incubation businesses, the company foresees very strong growth
for tenso.com, Inc. in Q4 FY9/13. For FY9/13, the company projects an 80% yo-y rise in sales at Tenso.com, Inc., making the business a new main source ofprofit. The company forecasts a continued strong rise in the number of orders
received by tesco.com, Inc. in FY9/14, and projects a monthly operating profit of\30-40mn from this business that fiscal year.
The subsidiaries that operate new businesses are also growing briskly.
monosense, Ltd., which plans goods licensed by celebrities, started selling official
goods from a girl idol group in June 2012, and has seen an increase in businessinquiries from other celebrities since then. For FY9/14, the subsidiary aims foran operating profit of \50-60mn.

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15

19-Aug-13

netprice.com Ltd.

■Business Trends

crec, Inc., which markets and promotes sales via smartphones, started its β
service through its online shopping magazine, recome, in July 2013. This service
uses its own algorithm to make lists of all the products viewed online by acustomer and all the online articles about such products and sends these lists to
its customers daily through the recome online shopping magazine. If a customer
purchases one of these goods from an online shopping site, crec, Inc. receives a
success fee for the purchase. In other words, the β service is a type of affiliate
service. Amazon.com is strong in such an affiliate service, but Amazon.com does
not present information as clearly as crec, Inc. does.
FORii, Inc., which plans, produces and sells smartphone content, has developed
a new application in the field of education and plans to start selling it in August
2013.
crec, Inc. and FORii, Inc. are still in the early stages of development, so they
are not expected to contribute profits for some time. However, if these new
businesses grow rapidly, they may contribute profits.

Breakdown of Consolidated Sales (\mn) by Business,
FY9/08-FY9/12
FY9/08FY9/09FY9/10FY9/11

E-commerce businesses

FY9/12

10,381

9,641

Gathering business

10,67911,153

9,089

6,833

5,524

Value cycle business

1,113

1,477

2,182

2,934

3,405

613

711

Cross-border business
Incubation businesses

452

318

-61

-58

-57

-43

-9

12,017

13,14012,165

10,7909,949

Eliminations and corporate costs
Total operating profit

Breakdown of Consolidated Operating Profit (\mn) by Business,
FY9/08-FY9/12
FY9/08FY9/09FY9/10FY9/11

E-commerce businesses

FY9/12-111-168

Gathering business

436

428

119

-350

-269

Value cycle business

20

8

67

90

-20

-178

-226

-214
149

121

Commerce incubation businesses
Cross-border business
Incubation businesses

-85

-12

Eliminations and corporate costs

-18

67

167

114

-129

Total operating profit

258

277

135

-82

-310

Note: In FY9/11, the commerce incubation business was divided into the cross-border business and incubation
businesses

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16

19-Aug-13

netprice.com Ltd.

■Shareholder Return Policy
The company may pay a dividend after its profits recover
sufficiently
netprice.com has not paid a dividend yet because it has concentrated onbuilding new businesses, accelerating the growth of existing businesses andresponding to rapid changes in its operating environment. However, management
has recently become more amenable to paying a dividend if the company ’ s
profits reach a level where the company can function effectively and still pay a
dividend.

Consolidated Income Statement (\mn), FY9/08-FY9/12
FY9/08Salesy-o-yGross profit
Gross profit margin
SGA cost
SGA cost ratio
Operating profit
y-o-yOperating profit margin
Non-operating income
Interest and dividends received
Other non-operating income
Non-operating expenses
Interest and dividends paid
Other non-operating expenses
Equity-in-earnings profit/loss
Recurring profit
y-o-y
Recurring profit margin
Extraordinary profit
Extraordinary loss
Pretax profit
y-o-yPretax profit margin
Corporate income taxes
Effective tax rate
Minority interest
Net profit
y-o-y
Net profit margin
Number of shares outstanding (Thousand)
EPS (\)DPS (\)BPS (\)

FY9/09FY9/10FY9/11

FY9/12

12,017
-9.3
4,700
39.1
4,441
37
258
2.2
36
7
29
105
3
102
-72
189
1.6
94
86
198
1.7
184
92.8
-10
24
0.2

13,140
9.3
5,105
38.9
4,828
36.7
277
7.3
2.1
48
4
43
76
4
71
2
249
31.5
1.9
368
364
253
27.9
1.9
197
77.9
-9
65
167.1
0.5

12,165
-7.4
4,878
40.1
4,743
39
135
-51.3
1.1
32
2
30
153
8
145
-77
14
-94.3
0.1
193
85
122
-51.7
1
103
84.4
-25
44
-32.3
0.4

10,790
-11.3
4,696
43.5
4,779
44.3
-82
-0.8
20
2
18
238
12
226
-100
-300
-2.8
406
117
-10
-0.1
103
-957.6
10
-125
-1.2

9,949
-7.8
4,471
44.9
4,782
48.1
-310
-3.1
249
1
248
68
12
56
-26
-130
-1.3
2
163
-291
-2.9
26
-8.9
34
-351
-3.5

110
221.0
0.0
37,969

111
589.9
0.0
38,782

111
399.2
0.0
39,291111-1,129.8
0.038,276111-3,159.1
0.0
34,686

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17

19-Aug-13

netprice.com Ltd.

■Medium-to-long-term
Growth Strategy

Consolidated Income Statement (\mn), FY9/08-FY9/12

Current assets
Cash and cash equivalents

FY9/08FY9/09FY9/10FY9/11

FY9/12

3,537

4,855

4,726

5,378

4,557

1,944

3,216

3,129

4,074

3,060

122

206

299

407

380

Tangible fixed assets

213

191

166

160

134

Intangible fixed assets

574

581

346

265

302

Investments, etc.

1,533

1,095

1,129

974

1,029

Total assets

5,858

6,724

6,369

6,778

6,024

Current liabilities

1,625

2,208

1,971

2,222

1,926

19

210

334

304

239

Inventories

Fixed liabilities

2,200

950

1,750

1,233

907

Total liabilities

3,270

4,627

3,977

2,527

2,166

Shareholders’ Equity

Interest-bearing debt

4,152

4,218

4,263

4,124

3,778

Stock

2,330

2,331

2,331

2,331

2,331

Additional paid-in capital

2,134

2,190

2,190

2,191

2,191

Retained earnings

-83

-18

25

-113

-464

Treasury shares

-285

-285

-285

-285

-222

Value of investment securities

10

-7

-9

-2

-14

Exchange rate translation adjustment

-1

7

18

22

-6

Minority interest

45

73

70

76

62

Total equity

4,213

4,305

4,363

4,251

3,857

Total liabilities & total equity

5,858

6,724

6,369

6,778

6,024

Current ratio (current assets ÷ current liabili

217.6%

219.8%

239.7%

242.0%

236.6%

Equity ratio (total equity ÷ total assets)

70.9%

62.7%

66.9%

60.8%

62.7%

Debt-to-equity ratio

53.0%

22.5%

41.0%

29.9%

24.0%

ROA (operating profit ÷ total assets)

4.4%

4.1%

2.1%

-1.2%

-5.2%

ROE (net profit÷ shareholders’ equity)

0.6%

1.6%

1.0%

-3.0%

-9.3%

Operating profit margin

2.2%

2.1%

1.1%

-0.8%

-3.1%

Important measures of business strength
Measures of financial stability（収益性）

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18

Disclaimer
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