Jan 3, 2018
TOKYO - Louis Vuitton has the largest number of stores in Tokyo along with New York among major global cities as Japan has been a reliable market for one of the world's most famous luxury brands and other fashion trademarks.
But smartphone apps have caused an evolution in the industry, with many consumers increasingly inclined to borrow luxury items, and companies have met the demand, renting out their products to give customers access to products that might normally be out of their price range.
Over the past year, Eri Fujii, a woman in her mid-30s, has become a big fan of the bag sharing service app Laxus. Using the app, members can rent trendy bags for a fixed monthly price of 6,800 yen ($60). Fujii's current favorite is a Louis Vuitton tote.
"I really love it, but I swap bags once a month to avoid becoming emotionally attached," said Fujii, a businesswoman who operates a posh juice cafe and a yoga school in Tokyo.
Fujii said she loves Laxus' all-you-can-use offering that allows her to choose from a lineup of over 22,000 luxury bags. It means that rather than owning just a few, she has her pick of the bunch.
"Once you use a luxury brand bag, you definitely recognize how good it is. I can't go back to cheap bags," she said.
Laxus Technologies Inc. launched its app in February 2015.
"Drastic price reductions triggered a paradigm shift in fashion as happened in Japan's mobile market over the past two decades," Shoji Kodama, the founding chief executive officer, said in a recent interview with Kyodo News.
"Women weren't able to enjoy fashion fully, but now a shopper does not have to spend several hundreds of thousands of yen on a single bag purchase. We can change their mindset," he said. The apps' most popular brands are Louis Vuitton, Prada, Fendi, Chanel and Gucci.
Some small businesses, such as dress rental services, have offered luxury brand bag rental services with relatively higher fees mainly for occasional use, but Kodama's main target, everyday users, was a "totally vacant slice" of the market. "One Laxus user invited 67 people to join our service via word of mouth or social media," he said, helping it grow exponentially.
The average price of Laxus's bag collections is about 300,000 yen. The venture company counts the value of bag rental transactions through the app based on the market price of each bag when it is borrowed. The accumulated value topped 10 billion yen over the past two years, and it is still sharply rising, Kodama said, despite slowing growth in the country's brand bag import market.
According to the latest report by Yano Research Institute, the value of imported bags and small leather items in Japan is estimated to drop 0.4 percent year-on-year in 2016, the first decline since the aftermath of the 2008 global financial crisis.
"Japan's middle-class started falling out of love with luxuries in the wake of the financial crisis," Chiharu Kinoshita, senior researcher at the organization, said in an email.
"Decline in luxury brand bag purchases...stemmed from the weaker yen and was prompted by Abenomics and subsequent price bumps by luxury brands as well as Japan's sales tax hike (from 5 percent to 8 percent) in 2014," Kinoshita said.
Japan was said to be the world's only mass luxury market, but the trend is in decline. The luxury brand goods sector now gets its traction from wealthy individuals spending on the back of stock market gains and shopping sprees by inbound tourists, according to a spokeswoman at the Japan Department Stores Association.
Komehyo Co., the country's largest seller of second-hand luxury brand goods, shifted its strategy from expansion to profitability in the business year to March 2017, amid a decline in the market.
Bain & Company Inc., a U.S. consulting firm, predicted in its latest review of the global luxury brand market that companies must refocus amid a lower growth environment by catering to the needs of millennials.
In the meantime, Laxus is moving to expand its existing customer base made up of mainly 24 to 50-year-olds by growing Laxus X, a consumer-to-consumer rental service app released in early 2016.
Mika Suzuki, 47, made a profit for the first time a year ago through Laxus when she rented out a bag from her own collection. The freelance computer-aided design operator who lives in Kawasaki, west of Tokyo, has since offered five of her bags for loan on Laxus X, which has made available a collection of over 3,000 bags for its users.
"The vast majority of women on the street carry relatively reasonably priced brands such as Coach. I pinpointed that demand," said Suzuki, a long time lover of brand-name bags.
Among her five bags available for rent, two Coach bags and a Louis Vuitton bag have been borrowed for around 300 days each. "People would be reluctant to buy the two Coach bags as they are vividly colored and lack versatility," she said.
She purchased the five items for around 100,000 yen and has made over 81,000 yen, giving her a much higher annual return than she might get through other investments.
Another benefit is that Laxus X provides maintenance and storage of bags instead of owners having to do it themselves, she said.
Insurance for damage to bags, quality and authenticity, using over 30 appraisers, is also assured and included in the monthly fee.
"Currently, about 14,000 people borrow bags through Laxus X, while 6,000 people are offering a total of 16,000 bags for loan," said Kodama.
A global investment bank offered a 10 billion yen fund to buy, store and lend bags last year, but Laxus turned it down the offer as some of its shareholders opposed it.
Laxus is preparing to expand its global footprint in response to interest from prospective investors and business partners but is waiting for the green light from a number of shareholders.
In just one week, the Japanese firm received positive responses from over 100 New Yorkers willing to join the service and pay a 200,000 yen deposit as well as a fixed monthly fee of $100. Laxus sent a dozen staff to the U.S. city in October to prepare to launch the product.
"New York is an ideal place to launch our service," said Kodama. "The city has a number of luxury brand flagship stores with very high recognition. Americans are not reluctant to rent things from others, just as they happily use Uber and Airbnb."
Laxus is also eyeing expansion to London, Paris, Hong Kong and Singapore.
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