TOKYO: When flea market app Mercari makes its market debut on June 19, 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 and home furnishings chain Nitori Holdings Co Ltd, 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. 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 (RM361).
Other online businesses are following in Mercari's steps, with Rakuten Inc's Rakuma app and Start Today Co Ltd's Zozoused offering used-goods services. And in February eBay Inc announced it was buying Giosis Pte Ltd's Japanese operations, including the online shopping platform Qoo10.
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% consumer inflation, but has struggled to achieve that despite five years of massive stimulus.
Core consumer inflation peaked at a 1% annual increase in February but has since slowed to a 0.7% 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.
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. — Reuters