Bargain Hunting On Auction Sites

Back to Contents of Issue: May 2000

by Gail Nakada

SHIBUYA PARTY GIRLS IN 10-inch platforms, stockbrokers, university students, housewives, hobbyists, crafters, and collectors are going online in Japan looking for one of the hardest things to find in this country: a bargain. Japanese consumers have always been on the lowest end of the retailing food chain, krill for the corporate predators swimming above. Pricing controls are strictly (though unofficially) enforced with threats to shut down supply chains of retailers who discount too much. By the time the manufacturer, sub-contractors, several layers of distributors, and the retailer add their margins to the final price, consumers are unfailingly -- well, let's just say it rhymes with "mewed."

While the bubble economy floated along, Japanese were willing to pay top prices, convincing themselves that good quality had to be expensive. After six years of recession, that illusion is becoming difficult to maintain. Workers worry whether they will receive a bonus, not how they will spend it. "With the economy the way it is, people who never thought of buying second-hand things before are more open to the idea," says Merle Okawara, the Hawaiian-born president of eBay Japan. Okawara believes auctions can take advantage of market opportunities that just weren't there before.

Japanese traditionally have had an aversion to used goods. According to superstition, some of the previous owners' karma could be left in the object. If the owner had bad luck, so will the buyer. Attitudes have changed partly because of the recession, but, more to the point, because Japanese consumers are becoming increasingly sophisticated shoppers. "So many Japanese have traveled and continue to travel abroad," says Okawara. "Overseas they see the same items for a third of the price they pay at home. They've also seen flea markets and garage sales. There are lots of alternatives in other countries, and they want those opportunities here, too."

Which is where eBay comes in. The company -- started because the founder's girlfriend wanted a place to buy Pez dispensers online -- kick-started the whole e-auction boom, and it now controls 70 percent of the market. Last year eBay generated net revenues of $224.7 million, with a net income of $10.8 million. The company has 7.7 million registered users clicking through 4 million items listed for sale in 4,320 categories. Already 17,000 Japanese users access the US site.

eBay Japan ( went live at the end of February. Yahoo Japan Auction, which hit the market last September, is currently the domestic leader. Rakuten Ichiba Super Auction (http://www.rakuten and Bidders ( stand in second and third place, with a host of smaller companies crowding behind. Revenues are still small compared to the US. Yahoo lists 35,000 new items every day and has an average of 300,000 goods. Its daily turnover is ¥130 million, and closing rates for auctions are around 80 percent.

Online auctions can provide Japanese with more than just enhanced shopping opportunities. They create a path for small, independent retailers to move online. Okawara says one of the reasons she took the job of CEO was in hopes of encouraging this. "As a woman and a foreigner, it was very difficult for me when I started out in business here in the 60s with my company JC Foods Ltd. I thought eBay would be a good vehicle for entrepreneurs who didn't have the connections to reach a large audience, especially for women."

A true picture of Japan's online auction user has yet to emerge -- so far the market leaders have been too busy just trying to develop the market -- but sellers are still mostly individuals. Yahoo Auction senior producer Hidetsugu Tonomura believes that may change. "There seem to be some small merchants [coming online]," he says. "More should come in when we can provide better tools for bigger merchants with batch loading tools and an auction booth."

At this time the most popular categories, new and used, are computers, automobiles, sporting goods, trading cards, and women's designer fashion goods (Gucci, Vuitton, et cetera). Yahoo's top auction item category this spring is digital cameras, which are also a sure draw at Rakuten, along with the PlayStation2 and Sony Vaio PCs. "Online auction services have hit the button for Japanese people," says Yahoo's Tonomura. "Whether the goods are brand new or used doesn't matter to them. What matters is what value the items can bring into their lives." And what could be more personally enriching than owning John Travolta's white suit from the film Saturday Night Fever? That little number was one of the kick-off events for eBay Japan's launch, with the highest bid at press time ¥1,098,000, proving not everyone counts bargains by the number of zeros in the price.

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