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Writer's pictureYasuhiro Takayama

Navigating Challenges and Opportunities: Mercari's Dual Journey in Japan and the US

Mercari, a name synonymous with Japan's thriving online marketplace sector, recently announced a record-high net profit of 13.4 billion yen for the fiscal year ending June 2024, marking a 3% increase from the previous year. This milestone underscores the robust performance of Mercari's domestic operations, which have secured two consecutive years of profitability for the first time since its IPO in 2018. Despite its local success, Mercari faces formidable challenges in the U.S. market, a venture it embarked upon a decade ago as a strategic move to tap into the expansive global market.



Domestic Success: Surpassing One Trillion Yen in Transactions


Mercari's domestic operations continue to flourish, with sales revenue reaching 187.4 billion yen—a 9% increase year on year—and core operating profit growing by 13% to 18.8 billion yen. The gross merchandise volume of its marketplace business in Japan exceeded one trillion yen for the first time, a testament to the platform's enduring popularity and the increasing acceptance of cross-border transactions. Looking ahead, Mercari forecasts a core operating profit for the upcoming fiscal year to rise between 17% and 33%, indicating sustained domestic growth.



The American Struggle: Strategic Adjustments Amid Challenges


Contrasting with its domestic triumphs, Mercari's U.S. operations continue to grapple with significant hurdles. Although the adjusted operating loss narrowed to $17 million from $48 million the previous year, the gross merchandise volume fell by 10% to $913 million, marking the third consecutive year of decline. Mercari's initial foray into the U.S. market in September 2014 was driven by the vast growth potential beyond Japan. Over the years, the company executed strategic initiatives, including partnerships with industry leaders and innovative delivery solutions. However, these efforts have yet to yield lasting momentum.



Market Dynamics: Facing New Rivalry and Economic Shifts


Post-pandemic economic realities have shifted consumer spending priorities in the U.S., leading to a decline in transactions for non-essential items—Mercari's primary focus. Furthermore, competitive pressures from platforms like Temu, which offer new goods at lower prices than second-hand items, have intensified. Mercari’s recent policy changes, such as the short-lived no-questions-asked return policy, faced consumer backlash, highlighting ongoing adaptation challenges in the U.S. market.



Future Plans: Strategic Refocus and Cross-Border Innovations


To counteract these challenges and reignite growth, Mercari has introduced "Mercari Cross-Border," allowing U.S. users to purchase listed items from Japan at appealing prices due to favorable exchange rates. This initiative, alongside a targeted rebranding effort aimed at environmentally conscious Gen Z consumers, exemplifies Mercari’s strategy to reach breakeven in its U.S. operations by fiscal year 2025.


Despite calls from market analysts for a strategic withdrawal from the U.S., Mercari remains committed to leveraging its innovative platform and strategic initiatives to reclaim growth in this challenging market. The evolving U.S. regulatory landscape concerning Chinese e-commerce could present Mercari with new competitive advantages.


As Mercari navigates its path to turn around U.S. operations, it epitomizes both the challenges and opportunities inherent in international expansion. For businesses looking to enter or grow in the Japanese market, lessons from Mercari’s journey offer invaluable insights.


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