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122% Sales Growth & Profitable 
The Japanese $SHOP $SQ and $ETSY merged into one platform
A smart website builder and payment tools for businesses and consumers
Can it fight GLOBAL competition? 
Can it outgrow its DOMESTIC market?Here is a thread
Base Inc $4477.T was founded in 2012 in Japan It went public on the Tokyo Stock Exchange in 2019
It is an e-commerce website builder and shopping app that branched out into digital payments in 2015
It went public on the Tokyo Stock Exchange in 2019It is an e-commerce website builder and shopping app that branched out into digital payments in 2015
Base has 5 products:
Online shop builder for businesses
Online shopping app for consumers
Fundraising platform
Online payments service
QR-code powered payment service
Online shop builder for businesses Online shopping app for consumers Fundraising platform Online payments service QR-code powered payment service
“BASE” 
Online shop builder for businessesThis is a Shopify alternative that enables anyone to build its online shop
Creating a web shop is easy as merchants can choose from existing templates, modify these and then integrate with a wide range of extensions
Products can then also be accessed through Base’s Shopping app which counts 7m users and 1.2m shops
Setting up a Base-powered website is free (no set up costs or monthly charges)
The online payment function has been created in-house and is called “Base Easy Payment”
Base takes a commission (6.6% of transaction value + $ 0.39) on each item sold 3.6% of transaction value + 3% of service fee + 40 YEN ($ 0.39) as settlement fee https://www.smartkarma.com/home/daily-briefs/brief-japan-base-inc-ipo-excellent-customer-retention-justifies-high-promo-costs-and-more/
Base seeks to serve SMBs and believes its “zero fixed costs” approach better serves its customers“[…] our shops can do so easily without initial cost, monthly cost. When actual products and services are sold, we are also able to receive revenue in the form of commission.”
“We believe that this allows us to maintain a fair relationship with the users” - Q3 2020 Report
https://contents.xj-storage.jp/xcontents/AS08546/edb55ac2/24e1/4b1e/b55c/a1556dccee10/20201114132918424s.pdf
https://contents.xj-storage.jp/xcontents/AS08546/edb55ac2/24e1/4b1e/b55c/a1556dccee10/20201114132918424s.pdf
“BASE APP” Online shopping app for consumersThis the smartphone app that regroups the products of all of Base’s merchants, it offers:
· Fashion items
· Interior Accessories
· Handmade accessories
· Entertainment / Hobby
· Cosmetics
· Home Appliance
· Smartphone
· Sports / Leisure
· Food / Beverages (including agricultural products and fresh foods)
· Smartphone
· Sports / Leisure
· Food / Beverages (including agricultural products and fresh foods)
How does it work?· BASE staff selects products from 1 million stores
· Special features are updated weekly, including seasonal items and popular products
· Users can pay for products with Base’s “PAY ID” or use any other payment method
“YELL Bank” Fundraising platformBase seeks to increase the number of SMBs that create their own website and start selling using Base’s tools
It therefor created its own fundraising platform for Base online shops
Using store data, it forecasts the future sales and funding requirement of a shop It then provides the required funds to the shop and takes the future sales as a collateral
Rates go from 1 to 15% depending on the volume lent and seller’s profile
“ http://PAY.JP ” Online payments serviceEnables developers to quickly add payment solutions to their website and start accepting payments
It support credit card payments, works with Apple Pay and Pay ID (Base’s “digital wallet”)
In short, it competes with PayPal, Stripe but also with the recently launched Amazon Pay
http://PAY.JP is not to best known solution according to the http://ITReview.jp quadrant for online payments
http://PAY.JP is not to best known solution according to the http://ITReview.jp quadrant for online payments
And it lags its peers in terms of ratings and number of reviews according to http://ITReview.jp
PayPal has 3.8 stars / 5 and scores 46 reviews
AmazonPay has 3.6 stars / 5 and scores 27 reviews
PayPal has 3.8 stars / 5 and scores 46 reviews AmazonPay has 3.6 stars / 5 and scores 27 reviews
“PAY ID” QR-code powered payment service
This is Base’s digital wallet solution: consumers sign up once by entering their personal details and credit card (Visa or Mastercard) They can then use the service to pay for items both online and offline
Base Inc can thus best be understood as a mix of Shopify and Stripe / Square
It enables entrepreneurs to easily build their online web shop
It has developed / acquired a suit of digital payments solution for businesses and consumers
It enables entrepreneurs to easily build their online web shop It has developed / acquired a suit of digital payments solution for businesses and consumers
It provides financing solutions to Base businesses It’s strong focus on SMBs ensures that lots of its merchants proposes arts and crafts - similar to $ETSY
What about the market?
According to Statista, eCommerce sales in Japan reached $ 105B in 2020, an 18.8% increase YoY
These are set to reach $ 143B by 2025, for a CAGR of 6.5%
User penetration is at 77% and expected to reach 91% by 2025 https://www.statista.com/outlook/243/121/ecommerce/japan
According to Statista, eCommerce sales in Japan reached $ 105B in 2020, an 18.8% increase YoY These are set to reach $ 143B by 2025, for a CAGR of 6.5% User penetration is at 77% and expected to reach 91% by 2025 https://www.statista.com/outlook/243/121/ecommerce/japan
eMarketer reports that eCommerce penetration* in Japan stood at 8.7% in 2019 Versus 22.2% for South Korea, 11% for the US and 35% for China* Note: eCommerce penetration is the share of retail eCommerce sales as percentage of total retail sales
So the market is slightly growing and there is room left for further eCommerce expansion
How is Base doing in this market?
Can it capture the market on its own?
Or should it be worry of the Shopify, BigCommerce and Wix of this world?
How is Base doing in this market? Can it capture the market on its own? Or should it be worry of the Shopify, BigCommerce and Wix of this world?
This is what JP Morgan has to say
“In Japan, domestic brands have the advantage of serving a single-language nation.”
Foreign Policy (the magazine) reports that 30% of Japanese speak English (versus 60% for Germany) https://foreignpolicy.com/2020/05/26/japan-doesnt-want-to-become-another-casualty-of-english/
“In Japan, domestic brands have the advantage of serving a single-language nation.”
Foreign Policy (the magazine) reports that 30% of Japanese speak English (versus 60% for Germany) https://foreignpolicy.com/2020/05/26/japan-doesnt-want-to-become-another-casualty-of-english/
JP Morgan further argues
“Investing in and offering Japanese language-enabled e-commerce platforms is essential in order to reach Japanese online shoppers.”
“Investing in and offering Japanese language-enabled e-commerce platforms is essential in order to reach Japanese online shoppers.”
This is driven by consumer preferences
“International merchants should also be aware that e-commerce web page layout and design for Japanese sites can look different to ecommerce site designs preferred in the U.S. and Europe.”
“International merchants should also be aware that e-commerce web page layout and design for Japanese sites can look different to ecommerce site designs preferred in the U.S. and Europe.”
Here is the full report https://www.jpmorgan.com/europe/merchant-services/insights/reports/japan
https://www.jpmorgan.com/europe/merchant-services/insights/reports/japan
How does that apply to Base?
Here are the number of website visits according to Similarweb
Base got 10.25m visits in November 2020 with an average visit duration of 3:30 minutes
Here are the number of website visits according to Similarweb
Base got 10.25m visits in November 2020 with an average visit duration of 3:30 minutes
http://Stores.jp got 7.9m visits in November 2020 with an average visit duration of 2:33 minutes $SHOP got 379k visits in November 2020 with an average visit duration of 0:59 minutes
But that doesn’t mean Shopify is nowhere
Since April 2020, Shopify merchants can start selling on Rakuten (one of Japan’s leading eCommerce website)
“[…] making it possible for Shopify merchants to easily add Rakuten Ichiba as a new sales channel and expand their market”
Since April 2020, Shopify merchants can start selling on Rakuten (one of Japan’s leading eCommerce website)
“[…] making it possible for Shopify merchants to easily add Rakuten Ichiba as a new sales channel and expand their market”
Last stop Japan demographics
· 65 and older now make 28.4% of the Japanese population
· People aged 15 to 64 make up 59.5% of the population, or 75m people
Due to ageing population, the IMF forecasts that Japan’s GDP could take a 25% hit over the next 4 decades
Japan demographics· 65 and older now make 28.4% of the Japanese population
· People aged 15 to 64 make up 59.5% of the population, or 75m people
Due to ageing population, the IMF forecasts that Japan’s GDP could take a 25% hit over the next 4 decades
Financials Check Net sales grew 122% YoY in Q3 ’20 to YEN 2.3B In the BASE business (online shops), number of new shops opened increased 107% while GMV increased by 125% YoY In the PAY business ( http://PAY.JP and PAY ID), GMV increased by 49% YoY
Gross profit grew 129% YoY to YEN 1.4B, representing gross margins of 61% SG&A expenses grew by only 14% YoY and operating profit reached YEN 534m versus a loss of YEN 144m a year earlier Current assets stood at YEN 14.6B versus YEN 10.9B in current liabilities
THE BOTTOM LINE Headroom for further eCommerce penetration as eCommerce sales as percentage of total sales are still low in Japan versus neighbouring countries
Base is the leading website builder in Japan, a market with domestic preferences which naturally raise barriers to entry for international competitors It is expanding its reach and customer retention by becoming the “shopping supper-app” with internal payment solutions
Base’s payment solutions are not leading the market in terms of quality and user experience, it may thus be replaced by more focussed players such as Stripe and PayPal Weak demographic prospects may offset the eCommerce penetration gains in the long run
International potential might be limited as international competition already strongly established abroad, it might have a hard time expanding abroad
Global players are not standing still and making inroads in the Japanese market, as exemplified by Amazon’s successful entry into eCommerce and now digital payments and Shopify’s deal with Rakuten
We have started a starter stake in Base Inc $4477.T We believe Base is well placed to stay the leading website builder in Japan all while expanding its financing and shopping features
Strong barriers to entry slow down the rise of global players, giving Base an upper-hand This translates into outstanding financials (growth, gross margins and operating margins)
We will cut of Base’s lead in website builder evaporates or if it fails to grow its shopping app / financing facilities
$RKT is on our watchlist To Be Reviewed SOON
Disclaimer - This is not investment advice in any form and investors are responsible for conducting their own research before investing.
Sources
✑ Investor presentation
✑ Company website
✑ Tech In Asia
✑ Statista
✑ IT Review Japan
Sources
✑ Investor presentation
✑ Company website
✑ Tech In Asia
✑ Statista
✑ IT Review Japan
✑ Store Leads
✑ JP Morgan
✑ Foreign Policy
✑ Nikkei Asia
✑ Japanese Statistics Bureau
✑ JP Morgan
✑ Foreign Policy
✑ Nikkei Asia
✑ Japanese Statistics Bureau
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