This startup lets people buy clothes and get fashion advice through text messaging

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This article is part of Tech in Asia’s partnership with Disrupting Japan where we publish the revised transcripts from the show’s podcast interviews with Japanese entrepreneurs. This is heavily revised from the original transcripts. For the full interview, go here.

Tsubasa Koseki is the CEO and founder of Facy, a fashion marketplace based on text messaging. Consumers with questions about fashion can ask for advice, and stores respond to those questions. I know that messaging is already widely used in the fashion ecommerce industry, but Facy has quite a unique approach.

Koseki shares the story and some insights on Japanese startups.

nTell us about your backgroundn

I studied internet technology at Todai (University of Tokyo), so I wanted to launch a financial service using that knowledge when I went to work for Mitsubishi. However, in most Japanese companies, the best way to success is through business development or marketing. Then, I worked as a relationship manager for Suzuki. When I turned 30, I decided to quit my job and launch our service.

nHow does Facy provide offline-to-online service?n

Users can ask about their fashion needs on our platform, like on Quora. For example, I’m looking for a pair of sneakers that’s appropriate for the office. The shops may reply to the post by uploading their items. Users may ask additional questions, and if all is good, they can buy or reserve the item.

In terms of the business model, we take 20 percent from the sale and handle shipping and payment. We’re collaborating with Yamato, a big logistics service in Japan, to deliver items to customers.

We have about 500,000 users. But what’s interesting is that most users don’t post questions and just read the conversations, which are public, to find the right item.

Our users are 50 percent male and 50 percent female, aged between 25 and 35. They have jobs and cash to buy fashion items, but they don’t have much time to shop.

Our main client stores are in Japan, many of which are middle-priced brands, which are strong in the country.

nHow did you onboard stores and users?n

I reached out to the shops by myself first. Then, we used content marketing to get more customers. We were creating fashion-related articles on the interactions between shops and users, then we provided those articles to the press. We also launch seasonal campaigns to bring in more customers.

nWhat interesting trend do you see in fashion retailing?n

In this era, people have smartphones, which they largely use for messaging every day. So, the industry has moved from giant showcase stores like in the 1960s to today’s ecommerce websites, messaging, and simple interfaces.

nWhat mistake do you think most fashion startups make?n

There’s a big information gap between users and sellers, and many fashion startups fail because of this. Their businesses are not designed based on their users’ fashion needs.

nWhat’s the one thing you would want to change in Japan?n

I’d like to increase the capital available to startups. In Japan, there is a huge money market, but the capital for startups is not as big as in the US and China.

nWhere is the biggest need now for that money?n

IPO. Most startups in Japan decide to IPO way too early, and it’s not good for startups. They may have a big resource to expand their service, especially in Asia, but such a financial environment is not good. Some VCs also think their portfolio companies should expand into Asia after doing an IPO. But the financing environment isn’t a big program for startups in Japan.

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Almost all fashion markets are dominated by major brands, and large companies are unlikely to experiment with unproven labor-intensive sales methods. Mid-sized companies in mid-market brands, however, are more likely to take financial and brand risks.

But as chatbots and AI improve, the advantage will once again return to the large companies. Scrappy, mid-sized fashioned brands and even tiny niche brands should have a few years to really develop and thrive in this kind of platform.

The other thing that Tsubasa pointed out is something that is really holding Japanese startups back: the undue focus on IPOs. Tsubasa and I both know a number of founders who were growing fast and could have easily raised another round of private funding to accelerate growth. But because of pressure from early investors, they were all but forced to do an IPO.

Why would this be bad for a startup? Well, IPOs are hard. They consume a lot of the company’s time and financial resources, and they require a great deal of preparation and formal procedures. Everything about the IPO process slows down a startup, and being a public company usually greatly limits the flexibility and risk-taking of that company.

Japanese investors need to be more flexible with their portfolio companies. A Japanese IPO might provide a safe medium-term gain, but there is a handful of Japanese startups that can potentially become multibillion-dollar global players.