How is Mercari different from eBay

Mercari: Japan's start-up star is about to make a big leap

Serial founder Yamada immodestly names Amazon, Google and Facebook as role models for his latest success. "Mercari will go to countries around the world and let people do cross-border transactions," he promised on Tuesday. And Yamada doesn't stop at words, instead investing abroad from the start.

Mercari has been courting customers in the USA since 2014. Because Yamada believes that with a breakthrough in Amazon's homeland, it will be able to attract global attention. That hasn't worked out yet. Although the app was downloaded 37 million times on smartphones in America, Mercari lags behind top dogs like Ebay, Craigslist and Poshmark.

But instead of giving up, Yamada is attacking all the more. Last year Yamada hired John Lagerling, a former vice president of Facebook, and invested heavily in advertising. In addition, Mercari is already trying its hand at the UK. Europe is next to target Yamada.

Selling in the age of smartphones

His recipe is the same as in his home country Japan: Yamada promises to revolutionize online trading in used goods through radical simplification and optimization for smartphones. More precisely, he wants to make selling a short process.

Take a picture of the goods with the mobile phone, set the sales price and the conditions with a few clicks - three minutes should be enough to put the goods online. Mercari also makes shipping easier and processes payment. To do this, the company grabs ten percent of the sales price.

In Japan in particular, the digital flea market has become a hit, despite existing competition. The app has already been downloaded at home more than 75 million times. More than ten million Japanese have even sold all kinds of goods via the app, from fashion and wooden sticks for popsicles to colorful toilet paper for children.

“It's easier than with other providers,” says a housewife in Tokyo, explaining the appeal of the new app. She is particularly fond of the option of keeping name or address anonymous. The result: Mercari is still not making a profit because of the investments in growth. But driven by the home market, revenues are expected to increase by around half to 230 million euros in the end of March.

A business idea becomes a national hope

In his homeland, Yamada has already become a national hope. Because it shows that the island kingdom can still produce global entrepreneurs. The self-confidence of Japan AG has so far suffered from the fact that the high-tech nation and the second largest economy in Asia is only a developing country in the unicorn ranking.

Market researcher CB Insights counted 220 unicorns worldwide at the end of 2017. 75 have been sighted in Asia. But while China is home to about 60 and India about ten of these mythical creatures, which are no longer so rare, Mercari was Japan's only specimen for a long time. Meanwhile, after a large investment by the car maker Toyota, the value of Preferred Networks, a developer of artificial intelligence, is estimated at two billion dollars. But the company is not yet publicly traded.

The government now wants to wipe out this gap. At the beginning of June, Japanese Prime Minister Shinzo Abe promised in his latest growth strategy that Japan would also become a breeding station for globally successful startups. 20 new unicorns are to be trotting through the world by 2023. However, that is an ambitious goal. Because for that the founders would have to change their thinking.

It is true that the number of start-ups has also increased in Japan. But only a few founders attacked globally, explains Martin Schulz, an economist at the Fujitsu Research Institute in Tokyo. “One reason is that many founders are middle-aged employees of large corporations.” They see a niche that Japan's giants neglect - and stay in it. "Second, even young reasons are often satisfied relatively early on at the level of small businesses," says Schulz.

In contrast to the USA, in the second phase they do not rely on expanding globally through external capital. But it is uncertain whether this change will succeed. Because Japan's economy is like a start-up trap. Unlike China's economy, Japan is not big enough for companies to grow into giants at home and then attack globally. At the same time, the domestic market, with a population of more than 120 million, is large enough to ensure that start-ups can make a modest livelihood at home.

Serial founder Yamada has been trying his luck for a long time

Yamada is one of the few Japanese who thinks differently. In the late 1990s, during the global dot-com bubble, he became infected with startup fever. First he worked at the online mall Rakuten, whose founder Hiroshi Mikitani is still trying to expand globally today. In 2001, at the age of 23, he founded his own company, Unoh, which developed and sold new businesses.

At first he focused on internet services such as online subscription to magazines. In 2009 Unoh got involved in the development of online games - with success. Unoh's urban construction simulator “Machitsuku!” Became a big hit with five million users. In 2010, Yamada was swallowed by US gaming giant Zynga.

But the Japanese only lasted two years in its management. In 2012 he got out and traveled around the world in search of new ideas. In 2013 he founded Mercari at home, always with the world and new businesses in mind. He is now using his platform to expand into financial services and bike sharing.

However, the hurdles are high. That seems to be dawning on investors too. By Friday, Mercari's share price had dropped to 4,550 yen, around a quarter below its peak. Now Yamada has to show that he can build on the startup tradition of the car and electronics age in the new age of networking. In the last century dozens of founders have built companies like Toyota, Honda, Panasonic and Sony from garage companies to global corporations.