The Next Generation Marketplace App
Can Mercari Carve Out a Place for Itself in the American Market?
by IGNITION Staff
Mercari Inc’s resale shopping app, Mercari, has become incredibly popular in Japan since its release is 2013 and is now planning to release the app in the US. But can Mercari be as successful in the states? In April, serial entrepreneur and Mercari CEO Shintaro Yamada established a company helmed by fellow entrepreneur Ryo Ishizuka aimed at entering the US market. How does Ishizuka view this new market, and what strategy has he got planned out?
An Overseas Expansion Was Planned from the Start
Within Japan, Mercari has surpassed the 4 million-download mark. Hundreds of Thousands of items are listed every day, and monthly transactions add up to over a billion yen ($10 million USD). These figures have made Mercari Japan’s biggest C2C marketplace service.
Although it is yet to start monetizing in Japan, Mercari is determined to enter the American market. But why has Mercari chosen this moment to expand abroad?
“From the time the company was founded, I planned for the service to go global. I founded this company in February 2013. A month later Ishizuka e-mailed me, saying he was leaving his company (at RockYou, a cross-platform advertising network for games). After talking with him, we both discovered that we wanted to start a business in the US. In that case we thought, ‘Why not work together?’ Ishizuka joined the company, and we set our sights on releasing Mercari into the US. In April 2014, we opened an office there.”
When thinking in terms of market scale, entering the US market makes perfect sense. Yahoo! Japan Auction has posted gross transaction of 70 billion yen ($700 million USD) per month, whereas eBay has recorded 300 billion yen ($3 billion USD) in the US alone. With regards to C2C markets, the American market is five times larger than any other in the world.
How did Mercari Get Started?
Yamada started up a business as soon as he graduated from university. He founded Unoh, a social gaming company that was later bought out by the social gaming company Zynga. He went on to join Zynga Japan as its General Manager, but after a year and a half, he resigned in January 2012. After travelling the world for six months, he founded Mercari.
Why did Yamada, whose company Unoh centered its business on social gaming and photo sharing services, decide to create a C2C marketplace app specifically adapted for smartphones?
“I had a previous experience working in e-commerce and was interested in transaction services. I thought that if I was going to make another service, I wanted to make one for the smartphone platform. That’s how I came up with the idea to create a mobile resale shopping application. In Japan, many other marketplace apps had already been released, and quite a few of them had a sizeable user base. So I thought that there was definitely a market for it.”
Mercari was released following other similar apps, such as Mainichi Furima (Daily Flea Market) and Fril, both firmly established apps in Japan. Even though Mercari was a latecomer to the market, Yamada states that rather than trying to chip away at the other applications’ customer bases, he felt there was still a lot of potential for growth and development.
“This goes for the C2C market as well, but I thought a resale shopping app itself is something that is still in the early growth stages. In April 2014, Japan raised its consumption tax. I thought that leading up to the tax hike, an increasing number of consumers would choose to do their buying in the C2C market, as those transactions aren’t taxed. In addition, Japan has an extensive LTE network in place, and most mobile users own cutting edge smartphones. With C2C, penetration is important: if you can’t gather a large number of users, the service doesn’t have a leg to stand on. In this age where smartphone ownership is becoming commonplace, you’re not stealing shares from other companies. If anything, by providing an application that’s easy for anybody to use, there is great potential for the market itself to expand.”
Can Mercari Make It Overseas?
Of course the US also has existing marketplace applications. Poshmark is a good example of one, and there are plenty of other apps. However, these apps specialize in categories like women’s fashion, baby goods, electronic gadgets and the like.
Mercari doesn’t focus on one type of product — it allows users to buy and sell anything. Sites like eBay and Craigslist also offer users products across various categories, but where Mercari is different is that it has chosen to focus on the mobile web user market.
Compared with other services, Mercari’s strengths can be described in three words: easy, instant, and safe.
1. Easy
With Mercari’s intuitive mobile interface, you can buy and sell in seconds. Because Mercari has been optimized for mobile use, it’s easy to use, even for people who don’t have much tech knowledge. In addition, Mercari has optimized user experience across multiple mobile platforms to make it easy to use no matter what device the user may be on.
2. Instant
Mercari is the easiest way for people to purchase goods, in a few simple steps. You can instantly list and buy items. Since items are displayed in a timeline, with newer items shown at the top of the page, many items are bought instantly. “The statistics show that in Japan, many of the items listed are sold within an hour of being put up for sale,” Ishizuka says. Therefore transactions are carried out very speedily.
3. Safe
Mercari handles the payment process end-to-end, notifying you when your item is shipped — and covering the cost if you don’t receive your item. By holding onto the payment due until the transaction is completed, Mercari can reduce the incidence of sellers sending goods different from what has been advertised, or cases of sellers taking the money without sending the item out. This prevents the scams traditionally associated with online marketplace services.
A seller first lists an item onto Mercari. When a buyer purchases an item, the payment is routed temporarily to Mercari. The company then sends a message to the seller saying payment has been received, and directs them to ship the item out. Once the seller has sent the item and the delivery has been received by the buyer, the buyer then confirms that with Mercari. All this is done internally through the application.
Ishizuka, who is working to create a next-generation marketplace after eBay and Craigslist, is quoted as saying that just as Mercari had no intention of fighting with similar application providers in Japan, he and his team are aiming at developing a new C2C market in the US.
Currently Mercari is undergoing development and system maintenance in preparation for its introduction to the American market. “To fully understand the market we’re planning to enter, it’s vital to have an office here on the ground, and to employ locally. Right now, aside from myself, there are two other local employees.” Yamada follows up on Ishizuka’s comment.
“Currently development is centered in Japan, but we’ll eventually have to move our operations out to the US. So we are building a full stack product team in the US now, actively looking to hire engineers and designers. Ishizuka is following up on his connections to find the talent we need. We feel that employing 100% locally is paramount to our US operations.”
Achieving a Balance between the Product-Out Concept and User Input
Another issue associated with Japanese applications is that even if the design and English usage don’t appear strange to a Japanese user, native speakers will feel that something is off. Unusual design and English usage could decrease the level of trust in the service. At Mercari, the highest of attention is paid to these details.
“Companies like Toyota and Sony were successful in entering the global market because they made good products. Based on that, I think that ultimately the product-out strategy is the way to go. However, strange wording creates a sense of disconnect for the user, and that is something we’re keeping in mind as we continue with development. We think it’s necessary to toe that line between pushing a product that we think will be good for the user, and creating a service that local users can put their trust in. In the end, that balance is what’s important.”
In the beginning, Mercari plans to focus on sure-selling categories such as ladies fashion items and accessories. They also plan to put emphasis on baby items, followed by more expensive electronic gadgets. Mercari’s future growth strategy in Japan will also focus on these three areas.
No Plans to Bail Out of the Overseas Market
Mercari remains cautious in setting target goals or hard numbers to achieve in the US market. While they will use the data they have from when the app was released in Japan to some extent, it will only be used as a measure of whether the app is a success or failure.
“We’re hoping that the retention and download numbers are about the same as we got in Japan. We believe we’ll know if the app is popular with the users in the first month or so,” says Ishizuka.
And if Mercari doesn’t gain the numbers that it’s hoping for? Is there a point at which they will back out of the market? Yamada says, “We have been determined to deliver a worldwide service from the moment we conceived Mercari. We’ll do whatever it takes to make it a success in the US. We aren’t thinking of exiting the market if we fail. After all, we’ve hired local employees, and we’re thinking of the long term. We feel that there is wonderful potential for Japanese mobile applications right now, seeing as mobile devices have penetrated quite deeply across Japanese society. With the advent of this mobile society, even people who don’t normally use computers outside of work now carry one around with them constantly. This is a great time for Japan to create globally oriented mobile services.”
(translation: Nelson Babin-Coy)
Originally published at ignition.co
