The resale of Hermes bags, brand-name jewelry and other luxury items is a thriving industry in Japan, with one critical bottleneck: Building inventory is tough.
Sou Inc. offers a solution: pawnshops dedicated only to buying up secondhand merchandise. Business has been so good for founder Shinsuke Sakimoto — who posted profit of ¥1.14 billion ($11 million) on sales of ¥22.7 billion for the year ending August — that he’s taken the company public.
Shares of Sou opened for trading in Tokyo on Thursday at ¥4,100 a share, 24 percent higher than the IPO price of ¥3,300, before closing at ¥3,900.
The national resale market for luxury brand goods is worth almost ¥200 billion, according to a government report. Yahoo Japan Corp.’s auction website is dominant, but there’s plenty of competition. Mercari Inc. became Japan’s first startup unicorn with a marketplace app, and even eBay Inc. is returning to the market. With plenty of demand for secondhand goods, Tokyo-based Sou has focused on making it easier for people to part with their expensive bags, watches and jewelry.
“We are specialists in purchasing other items; we do not sell them,” Sakimoto, 35, said in an interview. “Other companies will open stores to sell the items they buy as an exit. We are B-to-B, so we use auctions to say ‘bye-bye’ to the items in a short amount of time.”
The company, named after the Chinese character for “thought,” has a network of 57 stores across the country. They’re stylish, attractive locations where people can sell their used luxury goods in a relaxed atmosphere. Sou is planning to open more stores, funded in part with the sale of ¥4.9 billion worth of shares. The company, which is trading on the TSE’s Mothers section, has a market cap of about ¥24.5 billion. SMBC Nikko Securities is the underwriter of the IPO.
Sou doesn’t rely on much technology or smartphone apps. It has a bare-bones website. The company’s growth, according to Sakimoto, comes from its “ability to round up customers, to purchase the goods, and then sell them off quickly.” For the fiscal year ending in August, the company expects sales to increase 31 percent from the year-ago period.
Still, Sou will be wading into a crowded market where consumers will have their choice among websites, smartphone apps and Japan’s already built-out network of pawnshops for how they want to sell their items.
Sakimoto says it’s impossible to know when an item will see less or more demand. So once Sou buys used brand-name goods from customers, it auctions them off to other businesses four times a month.
The next stop could be another city in Asia. Sou is also considering a location overseas, and has previously held auctions in Hong Kong to sell diamonds.