Lyst Sold to Zozo for $154M - Fashion Marketplace Deal

Fashion Startup Lyst Acquired by Zozo for $154 Million

The cyclical nature of fashion extends to its associated businesses, as evidenced by the recent acquisition of Lyst. This high-end fashion marketplace, previously valued at $700 million, has been purchased by Zozo, a Japan-based fashion and e-commerce company, for a considerably lower sum of $154 million.

Zozo's Existing Portfolio and Notable Founder

Zozo’s holdings encompass several fashion brands, including Wear by Zozo, Zozotown, and the innovative Zozosuit. The company also gained notoriety through its founder, Yusaku Maezawa, whose tweet promising a substantial cash giveaway became the “most retweeted tweet” at the time.

Lyst will continue operations as a separate entity under Zozo’s ownership, with its current CEO, Emma McFerran, remaining in her position.

A Reflection of Current E-commerce Challenges

The significant difference between Lyst’s previous valuation and its acquisition price underscores the current uncertainties within the e-commerce sector. Lyst is currently navigating challenges originating from multiple sources.

Firstly, increased U.S. tariffs are creating ambiguity regarding the future of international trade, particularly impacting smaller businesses that cater to American consumers. Approximately one-third of Lyst’s revenue is generated from sales within the United States.

Competitive Pressures and Shifting Investor Focus

Secondly, even prior to the tariff concerns, Lyst faced intense competition in the online fashion market. This competition extends beyond specialized retailers to include large-scale platforms such as Amazon and Temu.

Thirdly, investor attention has heavily favored companies focused on artificial intelligence. This trend has placed pressure on businesses outside of the AI realm to demonstrate comparable growth and integrate AI into their strategies.

AI Integration as a Key Strategy

Lyst and Zozo acknowledge this shift, emphasizing their commitment to “Transforming the Future of Fashion Discovery through AI and Technology” in their joint announcement. While this ambition is highlighted, specific implementation details remain undisclosed.

Expanding Zozo's International Reach

This acquisition provides Zozo with a presence in the U.K. market and expands its international operations. Lyst currently serves customers in 190 countries, with 30% of its business originating in the U.S., 24% in the U.K., and 34% in Europe.

Lyst's Marketplace Model and Brand Portfolio

Lyst operates a marketplace model, aggregating a wide range of fashion brands. The platform features products from approximately 27,000 brands, encompassing both established designers and retailers. Notable names include Prada, Gucci, Bottega Veneta, Valentino, Miu Miu, Coach, Michael Kors, Hugo Boss, Selfridges, Harvey Nichols, and Harrods.

Growth and Subsequent Market Correction

The company experienced significant growth during the peak of the COVID-19 pandemic and the subsequent e-commerce surge. A $85 million funding round in May 2021 resulted in a valuation of around $700 million, led by Fidelity with participation from Accel, Balderton, and Molten (formerly Draper Esprit). At that time, the funding was even characterized as a pre-IPO round.

However, the anticipated IPO window closed shortly thereafter, and the gains seen by e-commerce companies during the pandemic diminished as consumer behavior normalized. Investor interest then shifted towards artificial intelligence.

Ongoing Difficulties in the Fashion E-commerce Sector

The fashion e-commerce market continues to present challenges.

Lyst reports 160 million “annual unique users,” which includes both active shoppers and those simply browsing. The effectiveness of the company’s conversion strategy remains unclear. In 2022, Lyst reduced its workforce by 25%. Similar struggles have been experienced by Farfetch, another prominent player in the high-fashion e-commerce space.

Recent Financial Performance

Lyst recorded revenue of £50.1 million ($64 million) for the year ending March 31, 2024, consistent with the previous year’s revenue of £50 million, according to filings with Companies House in December 2024.

While the company continued to report a net loss, it significantly reduced it from £23.7 million to £510,000 over the year. An operating profit before taxes of £443,000 was also achieved. A spokesperson indicated that Lyst’s last audited accounts showed $1 million in EBITDA.

Looking Ahead

“This is an exciting moment for Lyst, and a win-win for our fashion ecosystem of shoppers and partners as we move forward as part of ZOZO Group,” stated McFerran.

The success of this venture will depend on whether integrating with Zozo’s economies of scale can revitalize Lyst’s performance.