Japan has long been one of the world’s most reliable markets for luxury brand Louis Vuitton, with only New York matching Tokyo in number of stores.
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 accessories that might normally be out of their price range.
Over the past year, Eri Fujii, in her mid-30s, has become a regular user of the bag-sharing app Laxus. Using the app, members can rent trendy bags for a fixed monthly price of ¥6,800 ($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,” said Shoji Kodama, founder and chief executive officer.
“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 high fees mainly for occasional use. But Kodama’s main target of 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 a bag in Laxus’ collection is about ¥300,000. 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 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 from 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, has since offered five of her bags for loan on Laxus X, which has made a collection of over 3,000 bags available 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 longtime 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 and has made over ¥81,000, 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 fund to buy, store and lend bags last year, but Laxus turned it down as some 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 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.