Mercari’s C2C marketplace allows anybody to easily buy and sell online, playing a decisive role in the secondary distribution market and circular economy. President Shintaro Yamada sat down with us in October 2020 to discuss the company’s ambitions, including creating new buying experiences for users through AI and infrastructure technology innovations, and new opportunities for manufacturers by leveraging its extensive database. The ultimate goal? To further strengthen Mercari's position in the United States and expand into new markets to become a truly global player.
In the post Covid-19 world, many people believe that the new normal will involve a change in the purchasing habits of the people; they say there will be a shift towards ecommerce. What is your view on the new normal?
Ecommerce is something that is continually growing year by year and Japan was a little slow to enter that field, but we saw during the COVID-19 pandemic that Japan was quickly able to catch up and stay in step with this global trend.
Japan as a population was slow to change because of its aging demographic, with more elderly citizens making up the population, but I believe that the COVID-19 pandemic was an opportune moment for Japan to be able to really accelerate its adoption of ecommerce practices.
So, I believe that Japan will continue to expand in an accelerated manner and Mercari will also be growing in an exponential way in future.
One of the very important trends that we are seeing in the Japanese market is the expansion of 5G. NTT Docomo just introduced 5G a few months ago and has plans to expand regionally over the coming years. How has the introduction of 5G affected your sector and what new opportunities has it brought?
Of course, the faster the speed of the Internet, the greater benefit it is for service providers that use online as their platform. And the fact that the introduction of 5G is going to be as accelerated on our mobile devices as it is in terms of landlines, mans that our ecommerce site will benefit from that kind of speed on mobile devices by taking advantage of smooth and high-quality videos and images.
During this period of pandemic, Japan has been able to accelerate its activities in the realm of ecommerce. Many years’ worth of growth has taken place in this single year and in that sense, moving forward, we are going to start seeing an acceleration in terms of the growth of the country due to the introduction of 5G, not only during times of pandemic, but as the new normal.
Japanese people and companies have had a bit of difficulty incorporating new technologies, especially when it comes to digitalization. What can Mercari do to improve the digitalization process, the use of ecommerce and ICT technologies?
Our C2C marketplace allows anybody to buy and sell on our online mobile platform in a simple manner. Through our service we have accumulated extensive data regarding the secondary distribution market. By utilizing this data, we believe that we can create new opportunities for manufacturers and distributors as well.
For example, by receiving catalogs from our manufacturers, we make it much easier for them to sell their products by utilizing our platform.
Although we cannot disclose individuals’ personal data, we can acquire sufficient information to let manufacturers get a better understanding of the life cycle of items and the customer journey of users, including the secondary distribution process. By doing so, Mercari and its partners will aim to engage customers in the primary distribution market and create new buying experiences and customer experiences, with corporate marketing, product planning, new solution development, and more.
We can support our partner companies’ process of monozukuri and expand their products through our platform and helping them utilize these technologies to not only improve their sales performance but on our site.
Furthermore, working with suppliers in this way, will also provide benefits for our customers as well, in terms of making the buying and selling process much easier and smoother with just one touch.
AI and big data can bring huge benefits to companies, but it comes with the potential risk of violating people’s privacy. Where do you draw the line when taking advantage of such powerful marketing tools to avoid being exposed to privacy-related lawsuits?
This is a critical issue, and we take it very seriously. Our platform is really about to what extent we are able to have users put their products on our site. And then have those products be sold.
We are not only interested in recommending products and services to potential buyers, but we are also actually on the side of sellers, and helping them to get their products out there to be sold on the site. We believe that there is a great need to enhance and strengthen the secondary distribution cycle and the secondary economy, which involves the redistribution of goods that may not necessarily be new, but still be in demand. I believe that this is something that is crucial for society and that we want to help stimulate.
How is your approach to gaining the trust of buyers of secondhand goods in the Japanese market applicable to other markets such as the Asian markets or the European markets?
That is an issue we are focusing on and that we need to strive to resolve. One thing to understand is that for the smooth functioning of our business, the payment and logistics processes involved are crucially important. We already do work in the US where there is a solid online payment system in place, and the logistics to support the process of ecommerce.
The way in which our platform works is that once the payment goes through, we hold that payment until we can confirm that the product is exactly what the seller is saying it is before dispatching it. This system prevents any scams from happening, but in countries and markets that may not be as stable or may not have such solid and reliable organizational processes involved in the logistical process, it is harder to ensure that kind of safety and security, so it becomes trickier to do business and expand in those regions.
We first started in the US, where there are more reliable payment and logistics processes to support a smooth overall transaction involving our services.
Moving forward, we are looking to expand into emerging countries as well, where there is great growth potential because we are starting to see an increase in platforms there that can support safe and secure ecommerce. There are also more logistics companies sprouting up in such countries to support the ecommerce process.
We are slowly looking to venture into those markets, particularly because our mission is to create a global marketplace where anyone can buy and sell through our internet platform. We will continue to have our work cut out for us and we will not stop until our goal is realized, which may take decades.
You decided to start your international expansion in the United States. Why did you choose these markets over nearer Asian markets which may have been a better natural fit for your company? Do you ever regret starting in these western markets that are already so competitive?
To reach our goal of really becoming a global firm, we believe it is truly important to succeed in the US, which is such a huge market. And we believe that if we succeed there, that means we have been recognized as being worthy of the title of “global company” and have received that seal of approval and quality. It is, in a sense, a shortcut to becoming a worldwide brand.
The US is made up of such a diverse range of people from such diverse cultures and backgrounds, that for us to be recognized there, would mean that we have a kind of universal appeal to many different cultures.
Historically, the larger corporations of Japan such as Toyota, first established themselves in the US before expanding and becoming a globally known brand. Same with Sony and Nintendo, they followed the same pattern. On top of this, the largest tech firms are all based in the US, which also supports our strategy of first consolidating our base in there.
Of course, competition is stiff, and it is a tough marketplace, competing with larger firms. However, over the past two to three years we have been publicly listed and we have put a large amount of investment into consolidating our position in the US and with our “three pillars” approach, we have been successful in doing that.
There seems to be something of a backlash against tech companies in the US at the moment. Their government has been initiating lawsuits against Google, involving the monopolization of advertising and search engines. And TikTok, a Chinese social network, has been accused as representing a threat to national security. Should the government be so aggressive against high tech companies in the US? And do you see this behavior as a threat or an opportunity?
Well, I believe that the two issues you mentioned should be considered separately. Firstly, this so-called crusade against the tech giants. We are not exactly in the same business as Google, but there are elements in which we overlap, and in that sense, there is an aspect of competition involved.
However, when you think about it, it is not about competing with them because clearly, they have a lot more power in terms of not just capital and financial strength, but also in human resources. Compared to other companies in the field, they are giants, and it is an unequal relationship with their competitors, so I believe that some restrictions would benefit the industry as a whole and is not the worst thing. But I am an entrepreneur and a businessman, thus, I am not generally a fan of governments meddling and placing too many restrictions on business. Instead, I am focusing my energies on how to expand our C2C marketplace, which is the main pillar of our business. In that area, Google is not directly involved with us.
With regards to the other issue, in China, it is a matter of national security. When national security is involved with politics between one country and the other, it is a whole different ballgame. It is a matter of different perspectives with regards to how to view society, how to govern society, historicity, ideology, all these things differ between the West and China. I am constantly thinking about how best to avoid this clash of civilizations, as it were. I believe that Japan is in between these two sides.
We should think about our role as providers of internet-based services. China has policies which prohibit foreign-based providers of such services from entering China, whereas China can enter other markets, and that is not a level playing field. It is important to establish an equal footing between competitors to make the business environment equitable and fair.
What are your main competitive advantages as a company? Why should a client choose Mercari over your competitors?
What is most important is the ease with which users can buy and sell. Sellers in particular should be able to showcase their products and be found by those who are looking for them, in the most convenient and smooth way possible, compared to our competitors like eBay, which has a large number of professional sellers.
The eBay environment makes it quite difficult for individuals to effortlessly put their products out there. There is a lot of pressure involved in getting the presentation right, due to the hierarchy of sellers that are in that environment, many of whom have vast experience and can easily outperform more novice sellers.
On the other hand, there is Craigslist, which is a very easy way to do direct selling, and it is easy to showcase and list products and get matches. However, when it comes to the exchange process where you have to figure out a way to meet in person to exchange the item, there are a lot of potential problems in that exchange process. Avoiding all these potential problems and creating a solid C2C platform, is our core strength as a company.
You mentioned that your aim is to become a global player. What would be your strategy when it comes to expansion into foreign markets?
First, our initial goal is to succeed in the US. If we can succeed there, we can expand steadily into other countries. This business is not simply about a specific piece of software or specific functionality, like a search engine or a game that can instantaneously expand into diverse markets with the minimum of changes having to be made. It involves the circulation of money and goods and as a result various market specific restrictions. Policies and licenses need to be addressed and adhered too. This requires a deep understanding of each locale in which we operate, so we have adopted a country-by-country expansion strategy, rather than trying instant expansion everywhere at once.
We are putting a lot of effort into strengthening our AI and infrastructure technologies to make it easier and even more convenient for our sellers to showcase their products and have their products effectively listed.
If, as a seller, you take a picture of your product, or a previous receipt or barcode for it, the system uses data recognition to input the data and provides suggestions. For example, about what price you should charge for the item you want to sell. Harnessing AI in this way, has a beneficial impact on both sellers and buyers. We are putting a lot of effort into making this a core competency and key competitive advantage of ours.
This technology had a hugely positive impact on the appraisal and evaluation of our platform, because when you are thinking about selling something, this technology really increases the number of sales that are completed as a result. It hugely reduces the amount of time sellers spend inputting data whilst giving them insight into the best way to present, price and sell the item.
The system was introduced three years ago, but it is not something that remains the same over time. We continued to steadily improve it over the years as the accumulation of data into the system has progressed.
What importance does the Chinese market represent and what ideas do you have in terms of growth into other countries?
We are still in the phase of considering several opportunities at the moment. I think the concept of a circular economy is something that will be readily welcomed across the world, and this represents an opportunity for us to grow there.
Another area that we are looking into, and have started to venture into, is circulating Japanese goods in the Asian markets. We have noticed that Japanese goods have great appeal and there is a high demand for Japanese goods from foreign buyers in Asia. We have partnered with one company to be able to export Japanese goods through our platform in these countries.
Therefore, we have started to venture into cross border transactions, and this kind of process gives us a good idea of where might be a good place to venture into, and where to partner with local buyers next.
What would you like Mercari to represent to people? And how would you like Mercari to have an impact to improve people’s lives in the future?
I do not think there are many international Japanese tech companies that are known on a global level. Of course, there are tech companies that are doing well domestically, and they are solely focused on succeeding in the domestic market, but I think there are not many that have already achieved clear success as globally recognized Japanese tech firms.
If we succeed, then I think it is a fairly good benchmark and a great opportunity for many more entrepreneurs and startups to see that venturing out and taking that bold challenge to dare to go overseas and expand, is actually possible and can bring much value.
It is possible to sustain a business and achieve a great level of success even when you focus on the Japanese market alone since Japan is such a large economic force. However, there is merit and value in striving to go beyond Japanese borders and succeeding globally. The more companies that try to succeed overseas, the more overseas Japanese successes you will see. We want to set an example of what is possible in that respect.
If we were to come back 10 years from now and have this interview all over again, what would you like to tell us? What dreams do you have for Mercari and what goals would you like to have completed by then?
I think that expanding worldwide is our main vision as a company. Ten years from now, we want to have expanded to more countries, not just visibly succeeding in the US and Europe, but in many other countries, as a respected internet tech firm.
We believe that our success should also really help to support the success of other Japanese tech firms. We want global awareness and brand appeal of Japanese tech firms as a whole to be enhanced, and the world to understand that the things Japanese tech firms are doing are quite interesting.
In terms of our business model centered around our C2C services, we are really contributing to the expansion of the circular economy, which I believe is something that needs to continue to be expanded and thrive.
We want to promote a cultural shift whereby everyone is not always in hot pursuit of new products, and they realize the value in used products and the sharing of goods. Particularly since the population of the world is now over 7 billion, with most of those people living in developing countries, it would be impossible for the human population to survive if everyone wanted to consume products at the same level as those who live in developed nations.
When we consider the fact that goods are finite, the extent to which we can value and make the best use of our finite resources will become really important.