Buying and Selling by Smartphone: Mercari App Shakes Up Japan’s Consumer Spending

Selling for Anyone

Mercari is a rapidly expanding presence in the Japanese consumer landscape. Four years after its launch in February 2013, this peer-to-peer app for buying and selling goods by smartphone has topped 50 million downloads in Japan and 25 million overseas, and monthly sales on the platform have climbed over ¥10 billion. Why has Mercari grown so quickly? Is it large enough to influence the Japanese distribution industry as a whole? And is its growth really welcome?

Consumer-to-consumer marketplace and auction sites emerged in the same period as business-to-consumer online shopping did. Before the advent of the Internet, individuals generally sold unwanted items at used goods stores and pawnshops. Although these outlets were generally reliable, there was a limit to what one could sell, and brokers pocketed a considerable cut.

It was inevitable that services would seek to link sellers directly with buyers. The US pioneer eBay was launched in 1995, and its competitor, Yahoo Auctions, started a Japanese site in 1999 that remains popular to this day. In a matter of a few years, these became mainstream platforms for individuals buying and selling items. Initially the sites connected members of the public, but they later added the option to buy from dealers and companies, developing into a significant section of the consumer market.

So what sets Mercari apart from its rivals? Its fee-based business model is essentially the same as standard auction sites. When a sale is complete, 10% of the price goes to Mercari. The big difference is that transactions can be completed entirely by smartphone, meaning that there is a very low barrier to entry. This has been a prominent aspect of the company’s marketing from the start.

Putting an item up for sale on traditional auction sites is surprisingly troublesome. One major obstacle is the need for a computer rather than a mobile device. For best results, users need to take attractive photos and create well-organized pages to impress potential buyers. But not everyone is able to do this. The similarity to corporate shopping sites is off-putting for sellers lacking in skills or confidence.

In Japan, especially, the need for a computer is a sticking point. There are many people—particularly women and younger users—who only own a mobile phone.

Allowing users to buy and sell by smartphone has been key to Mercari’s success. They can take a quick snapshot, fill in a brief description on the app, and immediately begin the selling process. It takes just a few minutes. Buyers need only tap a button to make their purchase. Mercari handles payment and can also assist with shipping.

There is no requirement for identification when listing items for sale. Although the platform recommends that minors get permission from their parents or guardians, there is no age limit. The basis of Mercari’s business model really is to allow anyone as a seller.

The ease of placing items in the market has led to a rapid rise in the number of offerings. This in turn has attracted a burgeoning user base, making it easier to find purchasers for the items on sale. This virtuous cycle has made Mercari a bustling marketplace that hosts hundreds of thousands of transactions every day, meaning booming business for the operating company.

A Major Threat to Existing Players

Mercari is used by average people rather than professional merchants, so its prices tend to be low. While pro retailers make every effort to earn as much as possible on each sale, amateurs are content to receive a little compensation for their unwanted stuff. Items for a few hundred yen are rare on Yahoo Auctions, with its higher technological barriers to entry, but common on Mercari. The emphasis on simplicity is the secret of the app’s success.

It is now disrupting consumer activity in the fashion business. Many inexpensive used items exchange hands via Mercari, and the range of products available is not that different from what can be found in bricks-and-mortar stores. Speedy transactions allow users to accumulate money within the app, which they can then spend on purchases without eating into offline savings.

For competitors that have built their businesses on low prices and ease of use, the platform represents a major threat. While consumers are not going to swear off new items entirely, a large amount of fashion spending has been redirected to Mercari. This is why Start Today, the operator of online fashion retail giant Zozotown, launched its own marketplace app, Zozo Furima, in December 2015 in a bid to catch up with its booming rival. However, disappointing sales led it to discontinue the app in June 2017.

Growing Pains

While Mercari has revolutionized peer-to-peer sales, it has also faced criticism, particularly regarding a variety of ethical issues.

The ease of listing means that goods may be low quality or even illegal. Brand-name items are popular sellers on Mercari, but it is difficult for buyers to establish their authenticity from photographs taken on smartphones. Transactions involving fake goods regularly occur, leaving buyers with a disappointing experience.

There are also headaches for sellers. Often buyers complain that items are not shipped or packed properly, wielding negative feedback as punishment. This is an issue for auction sites as well, and could be regarded as an inevitable part of peer-to-peer sales. Yet the low barrier to entry in Mercari means that the low-quality transactions are particularly noticeable.

A further problem is the sale of inappropriate goods. Until around the start of 2017, it was possible to buy cash itself through the app, as well as items like receipts and IC cards charged with e-money. These were used as a money-laundering channel and as a way to evade credit card cashing limits when people had an urgent need for ready money. Shady brokers exploited the opportunity Mercari offered to target low-income users. And among the more curious items, completed school assignments have also gone on sale, letting young users spend their way out of the chore of homework.

Mercari has moved to address these problems as they have arisen, banning the listing of troublesome items. It has developed Maisonz, a specialized app for pricier brand-name items, which automatically assesses the authenticity of goods through advanced image recognition technology. It also conducts regular sweeps for fakes and provides compensation to disgruntled buyers.

Even so, the ease of use and rapid turnover will continue to make the app attractive to exploitative operators, potentially reducing its room for growth. As a company, meanwhile, Mercari must constantly grow the value of transactions on its platform if it is to continue its expansion. This is why it is focusing its efforts on brand goods. At the same time, it should see cleaning up its unruly marketplace as an urgent concern.