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BASE Inc (4477 JP — US$234 million) is an e-commerce technology company based in Tokyo, Japan.
The software helps small merchants open stores online and manage their operations. BASE is often likened to “Shopify of Japan” due to similarities in their product offerings. However, investors have become skeptical about BASE, with the stock now trading at just 0.8x EV/Sales — a massive discount to Shopify’s 13.3x.
The company was set up by young programmer Yuta Tsuruoka in 2012. His mother told him she wanted to open an online shop but lacked technical knowledge. After helping his mother to set up her store, Yuta standardized the product and opened it up to the public.
Today, BASE has four constituent parts:
- Online store business: The company empowers individuals and small businesses to open online stores. They operate with individual websites, which connect to BASE’s system with regard to orders, inventory, payment, customer messaging, etc.
- Payments: BASE’s product “PAY.JP” acts as a settlement agent between merchants and payment methods such as Visa, Mastercard, JCE, Amazon Pay, PayPal, etc.
- Authentication: The company has an authentication feature called PAY ID, which helps customers buy products quickly without re-entering their payment information over and over again. In other words, quick and seamless check-out. Pay ID also runs a popular shopping app with over 1 million downloads showcasing all products sold through BASE’s online stores.
- Factoring: Since 2018, BASE has also offered merchants a financing service called YELL BANK, where it acquires receivables from merchants at a discount — similar to Shopify Capital and Square Capital overseas.
During COVID-19, BASE enjoyed incredible growth as millions of retailers sought to shift their businesses online. However, that growth quickly reversed, and the share price declined 90% from its peak.
During the slump, Yuta decided to change BASE’s pricing structure. In the past, BASE had offered merchants to set up shops for free but then charged 6.6% on all transactions going through the system, plus a modest charge of 40 yen. This pricing caused customers to shift to Shopify to enjoy their lower take rate.
And so in 2022, BASE introduced a new Growth Plan, where merchants would pay a monthly fee and transaction fees of only 2.9% per month. Predictably, BASE’s take rate dropped — from 8.1% in early 2021 to just 6.0% at the end of 2023.
With the new pricing structure, BASE is in a much better position. The take rate has now bottomed out. It’s much more competitive than in the past, and its market share is stable, if not growing. BASE’s product is still somewhat behind Shopify regarding multi-channel integration and cross-border e-commerce, but it’s catching up.
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