IPO

Tech Unicorn To Bring Billions In Japan, Illuminating A Culture Of Thrift

One of the biggest initial public offerings (IPOs) in Japan may herald a sea change across a number of fronts: in payments, how the Japanese population views budgeting and how marketplaces are evolving in that country.

As reported by Reuters, Mercari is set to bow on the public markets in Japan, and while observers of the stock market are watchful of a billion-dollar price tag — which means, of course, unicorn status — the enthusiasm underpins a business model of a different sort.

Welcome to the thrift economy and to a marketplace that is emerging in a way that anticipates a shift in how and when and why people buy … well, pretty much anything.

Simply put, Mercari’s mobile app offers up a peer-to-peer marketplace, where tangible goods change hands directly and where people buy everything, from flashy items such as designer clothes to items as mundane as toilet paper tubes, to name two examples offered by the newswire. The app has been downloaded 71 million times — a popularity that presages widespread use.

The obvious allure of a flea market app is one that ties into price, of course, and low ones. But at the same time, the macro environment is one that may offer that app a tailwind. In Japan, wages are falling, inflation is on the rise and deflation waits in the wings.

Where there is deflation, and where there is tech, the flea market economy will thrive, it seems. The direct sales model does two things, rendered through an online marketplace: Cuts out the middleman and also displaces the traditional retail model. The displacement was underscored by Jun Shimada, as quoted in Reuters, who serves as a senior executive with fashion retailer Bay Crew’s Group. He cautioned that Mercari could be an existential threat even larger than that posed by Amazon.

The sea change here, among several, is that thrift shopping — focused on used goods — no longer is a shunned activity. Further evidence mounts as, for one example among several, Rakuten has debuted its Rakuma app, also focused on used items.

The ripple effect will hit retail: As shoppers shift to used items, traditional firms will have to lower prices to compete. The internet gives some tailwind to lower prices, as comparison shopping means that people can simply take their business elsewhere should prices prove more appetizing, and switching costs are low to nonexistent.

The impact is such that the Central Bank of Japan has recognized the impact tech is having on shopping. The pressure on pricing, as noted above, may be, in part, responsible for the headwinds seen in getting to a 2 percent inflationary target (which has been in place for a while).

One online marketplace. Lots of eyes watching.

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