Behind flashy IPO of Japan's Mercari lies a thriving thrift economy
18/06/2018 08:08
By Sam Nussey and Stanley White
TOKYO, June 18 (Reuters) - When flea market app Mercari
4385.T makes its market debut on Tuesday, it will mark the
appearance of one of Japan's rarest beasts: a tech unicorn.
In most countries, a billion-dollar IPO might suggest the
return of an equity boom. But in Japan, it sheds light on a
"thrift economy" for second-hand items, which is thriving even
as the Bank of Japan tries to stoke inflation.
Mercari's app allows users to buy and sell from each other,
swiping and tapping their way through items as diverse as
designer clothes and toilet paper tubes.
It has been downloaded 60 million times as Japanese
shoppers, faced with weak wage growth and armed with
smartphones, have shed their inhibitions about used goods.
"The deflationary mindset is alive and well," said Marcel
Thieliant, senior Japan economist at Capital Economics, citing
data showing that households expect incomes to keep falling in
the year ahead.
Mercari joins a series of Japanese companies that have made
their name by playing the counter-cyclical game. Uniqlo parent
Fast Retailing Co Ltd 9983.T and home furnishings chain Nitori
Holdings Co Ltd 9843.T , both known for affordable pricing,
have seen years of expansion.
Mercari, however, reduces costs further by allowing
consumers to deal directly with each other, cutting out shops
altogether.
That's bad news for the country's retailers, who have been
hammered by decades of weak consumption and falling prices
despite the central bank's aggressive efforts.
Jun Shimada, a senior executive at major Japanese fashion
company Bay Crew's Group, said the rise of Mercari could end up
to be a bigger threat to retailers than internet retailers like
Amazon AMAZN.O . Second-hand clothing, except for rarer items
sold as vintage, used to carry a stigma, he said.
"Young people in particular no longer have any resistance to
buying items that do not fall into the vintage category," he
said.
One woman who bought an Italian leather handbag at one of
Bay Crew's stores turned to Mercari after having second
thoughts, uploading Instagram-style shots with her smartphone.
"I made this impulse purchase because I fell in love with
the bluish-green colour of the leather, but ended up carrying it
less than 10 times because it didn't match any of my clothes,"
she said, trying to resell it for around 10,000 yen ($90.56).
Other online businesses are following in Mercari's steps,
with Rakuten Inc's 4755.T Rakuma app and Start Today Co Ltd's
3092.T Zozoused offering used-goods services. And in February
eBay Inc EBAY.O announced it was buying Giosis Pte Ltd's
Japanese operations, including the online shopping platform
Qoo10. urn:newsml:reuters.com:*:nL4N1QH72Z
Economists say that in theory, sellers and buyers on such
sites can spend the money they save. But users are also more
likely to think twice about buying items at full price, pushing
down the prices of new goods.
Consumers "can use the internet to compare the prices of
goods and services nationwide or even globally," Bank of Japan
Governor Haruhiko Kuroda told reporters on Friday, adding that
"recently some people say this is a reason why prices of goods
and services are not rising that much."
The BOJ has been aiming for 2 percent consumer inflation,
but has struggled to achieve that despite five years of massive
stimulus.
Core consumer inflation peaked at a 1 percent annual
increase in February but has since slowed to a 0.7 percent
annual increase in April, raising concern among economists
inside and outside the central bank that inflationary pressure
is waning.
In an effort to understand what is behind the weak numbers,
the BOJ is likely to scrutinise several factors, including
whether online shopping is driving down prices, according to
sources familiar with the central bank's thinking. urn:newsml:reuters.com:*:nL4N1TD5RS
The bank is likely to reveal its findings at a policy
meeting in July, when it issues fresh quarterly forecasts on
growth and inflation.
It said in a quarterly report in April that "changes in
distribution and deregulation have intensified competition for
highly-commoditised goods and services."
But Kentaro Arita, senior economist at Mizuho Research
Institute, said that in the long run, Mercari would be a
positive contributor to the economy. He said the company would
foster innovation and efficiency, forcing retailers to raise
their game.
"Mercari and companies like it force bricks-and-mortar
retailers to focus more on strengthening their brand and
offering something unique to distinguish themselves," said
Arita, who said he uses Mercari.
($1 = 110.8200 yen)
(Reporting by Sam Nussey, Stanley White
and Leika Kihara; Editing by Gerry Doyle)
((sam.nussey@thomsonreuters.com; +81364411596; Reuters
Messaging: sam.nussey.thomsonreuters.com@reuters.net))