Mercari 2025: How Leadership Shakeup, Japan Updates Could Shape US Marketplace Future
2024 has been a tumultuous year for Mercari with big changes planned in 2025, could recent updates to their Japan business provide hints at what's on the roadmap for the US marketplace in the coming year?
Mercari US saw a surge in growth during the pandemic ecommerce boom, but has been unable to maintain that growth post-pandemic, which led the company to take drastic measures earlier this year with a fee structure shake up that shifted fees from the seller side of the marketplace to buyers.
The company faced pushback from buyers who experienced massive sticker shock when seeing additional fees tacked on at checkout, with some making unflattering comparisons to airline fees or worse yet - buying tickets from Ticketmaster!
Buyers were particularly taken aback because the fees were variable and at times exceeded the 10% fee which had previously been applied on the seller side, raising serious concerns about transparency that forced Mercari to promise to put a cap on buyer fees and test different ways of showing buyer fees before checkout to try to stem the tide of abandoned carts.
Unfortunately, the fee structure shakeup proved disastrous to Mercari's US performance, leading to a mass layoff of ~45% staff in June with US CEO John Lagerling admitting the change had increased the number of listings on the site, but had "not delivered the short-term results that we had hoped for on the buyer/ GMV side."
Liz Morton
Since then, Mercari has faced increasing shareholder pressure to address the continued underperformance of their US marketplace, culminating in the announcement that Lagerling will be resigning at the end of the year with founder/CEO Shintaro Yamada stepping in to lead both Japan and US operations going forward and changes that will return some of the fee burden back to sellers early 2025.
Liz Morton
With new leadership on the way, US sellers are wondering what else might be in store for the new year and recent announcements from the Japan side of the business could offer some interesting insights.
Strengthening Safety, Security, and Customer Service
A November press release detailed steps Mercari Japan is taking to strengthen safety, security and customer service, including enhancing user identity verification and combating counterfeits on the platform (translation by Google).
Details of the strengthened structure and compensation policy
Strengthening customer support systems
- More involvement and early resolution of difficult issues between customers
- Thorough confirmation of transaction history and past usage
- Newly opened product collection center
- – Product collection of counterfeit goods and counterfeit goods
- – Comparison and investigation of product images and descriptions against actual products
Expansion of compensation for customers
- Compensation for customers who use the service correctly
- Collecting and visually inspecting actual products
- Responses to identity verification (eKYC, etc. ) and fraudulent receipt of compensation through systems
Exclusion of unauthorized users
- Expanding identity verification requirements
- Strengthening cooperation with relevant authorities and police
- Thorough monitoring of transactions suspected of fraudulent activity
- Construction of AI systems to detect fraudulent activities (planned)
- Enhancement of account reporting function (planned)
Again, it's important to note the above only refers to Mercari Japan.
However, fraud, counterfeits, and customer service have all been perennial topics for US buyers and sellers as well - and if Mercari successfully develops and deploys AI systems to detect fraud activities, enhances account reporting functions and becomes more involved in dispute resolution in Japan, it won't be surprising if some of those initiatives eventually make their way to the US marketplace as well.
Business Partnerships
Another press release this week reveals Mercari Japan is partnering with Zero Co., Ltd to strengthen used car sales on the platform by offering a service that will handle paperwork, car inspection, and delivery (translation by Google).
Mercari, Inc...is pleased to announce that it has entered into a business partnership with Zero Co., Ltd...in December 2024 with the aim of strengthening used car transactions on Mercari.
Through this business partnership, starting today, in certain areas, Mercari will begin offering "Automatic Car Trading," in which a specialist company (Zero) will handle paperwork, car inspection, and delivery on your behalf...
..."Automatic Car Trading" is a service where a specialist company handles the troublesome procedures involved in buying and selling a car, such as changing the ownership of the vehicle. It also provides comprehensive support from vehicle inspection to pick-up and delivery.
The purchased car will be delivered after a professional inspector has comprehensively evaluated the condition of the car to see if there are any discrepancies between the information entered by the seller and the actual condition, and if there are any abnormal noises in the engine, so you can use it safely and securely...
Some sellers have speculated Mercari might eventually look to close or sell off the US business if performance does not improve in 2025, citing the company's withdrawal from the UK market in 2018 as a precedent.
While Mercari has not publicly discussed the idea of selling the US marketplace, they did tell investors in September that entering into a partnership of some kind with another company is a possibility they may be willing to consider.
If the deal with Zero is an example of the kind of partnerships Mercari might have in mind, they may be looking for US companies that offer complementary services that can add value to their existing marketplace offerings - but who could fit that bill and see mutual benefit from such an agreement?
One intriguing possibility could be a potential partnership with a company like OfferUp, which has significant crossover with Mercari on the types of items being sold on the site, but offers a greater focus on selling and buying within localized community areas.
Interestingly, Mercari recently abruptly shut down their Local option that leveraged a partnership with Uber to provide delivery in many cities across the country - possibly indicating the company is looking for other partners or ways to provide better solutions to enhance and grow localized buying and selling.
Liz Morton
Conversely, OfferUp acquired rival marketplace LetGo in 2020 to bolster their local offering with LetGo's classifieds business while increasing available inventory and enhancing capabilities for sellers to ship items to anywhere in the country, which was still a relatively new offering for OfferUp at the time - and a partnership with Mercari could potentially help OfferUp expand that part of their business even further in 2025.
OfferUp has also shown themselves to be open to mutually beneficial strategic partnerships like allowing SonicJobs to access OfferUp’s growing local jobs marketplace, the exclusive partnership with Apartment List for rental listings, or their recent deal with Thumbtack to connect consumers with home repair and maintenance businesses in their local communities.
And just last week, OfferUp announced they are laying off 22% of their workforce, specifically calling out the cuts were being made to free up cash and resources for plans to expand into other areas of business in 2025.
Taylor Soper
CEO Tod Dunlap's memo to employees read, in part:
We’ve talked over the last several months about our ongoing transition from a C2C local items marketplace to a comprehensive mobile platform for classifieds and local connection. We’ve tested a few steps into this evolved concept for OfferUp, and the results are very encouraging...
...I really want to lean in on these opportunities to evolve OfferUp. To do so, we need to ensure (1) that we will have sufficient resources for the investment, and (2) that we can do so responsibly and profitably.
While 2023 was a great year for OfferUp and we saw revenue growth and our first year of EBITDA profitability, in 2024, the macroeconomic impact on some of our legacy revenue lines, particularly the impact of programmatic ad rates, has caused us to slip slightly back into the red. While we still have plenty of cash on our balance sheet, it’s important in these times to remain profitable.
It’s also important to invest in spreading our story to more users, and I want to put more resources toward user growth and brand awareness. However, I want to invest prudently and profitably, and the restructured organization will allow us to do so.
To be clear, neither Mercari nor OfferUp have made any public statements indicating a partnership between the two companies is even under consideration - but it's an interesting hypothetical to explore and could make sense from a business perspective for both sides.
Unfortunately, much damage has been done to buyer and seller trust over the course of 2024 and a new fee structure, new leadership, and potential strategic partnerships may not be enough to turn the tide.
What other companies would make a good partner for Mercari and what are your predictions for where the US marketplace is headed in 2025? Let us know in the comments below!
