[Laxus] SEQUEL: “User experience” improved by becoming a subsidiary by World

A series [SEQUEL] that tells the story of the startup introduced by pilot boat. This time, in October 2019, we will focus on Laxus Technologies Co., Ltd. (hereafter, Laxus), which announced the acquisition (consolidation) of apparel giant World Co., Ltd. (hereafter World). Interview with President Kodama. He talked about the progress of the business and the background behind choosing to become a subsidiary.

(Interview: November 2019)

Rent a bag at home and rent for a fixed price. Luxus subscription for luxury bags

World becomes major shareholder with 62.5%

Laxus operates Laxus (hereafter "Laxus" for the company and "Laxus" for the service), a luxury bag sharing and subscription service. Users pay a monthly fee of 6,800 yen (excluding tax) to borrow one bag and return the bag to borrow a new bag. The registered bags are only luxury brands such as Hermes, Louis Vuitton, Chanel.

Laxus also has LaxusX. This is a service that "rents" personal bags. You can lend a bag that is sleeping on your chest and borrow it by another user to earn extra money.

Luxus is also active in using data. For example, install IC tags on all bags to manage inventory. Since location information can also be acquired, for example, confirming that you have entered a Chanel store, and sending a push notification from the Laxus application that there is a Chanel bag on that night, it is also implemented (Luxus grasps The location information of the user who is doing it is only when entering the shop, not always knowing the location information).

Interview At present, 34,000 bags can be borrowed and paid members have exceeded 20,000. According to the disclosure materials accompanying the consolidation, the latest sales of Laxus were 750 million yen (FY2016), 1.1 billion yen (FY2017), 1.3 billion yen (FY2018), and operating income was -0.6 billion yen (FY2016). ), ▲ 200 million yen (FY2017), 5 million yen (FY2018). According to Kodama, operating profit of several tens of million yen was recorded in the first month of 2019.

On the other hand, World, which has brands such as TAKEO KIKUCH and UNTITLED, is a major apparel company founded in 1959. Although listed in 1993, it was delisted by the TOB in 2005 and relisted in 2018. In recent years, in addition to the manufacture and sale of fashion items, he has extended his tentacles to the technology field as well, including the high-end brand used select shop `` RAGTAG '' in 2018, a subscription-type rental service `` SUSTINA '', and the U.S. custom shirt manufacturer `` Original '' in 2019. Stitch ”and other operating companies are under its umbrella.

President of World Kamiyama (left) and President of Laxus Kodama. At press conference

Now, in October 2019, both companies announced that Laxus will become a subsidiary of World. Laxus originally accepted the investment from VC, with the ownership before the acquisition: 45.1% owned by President Kodama, followed by WiL of VC 29.7%, and other shareholders 25.2%. Of these, World will acquire a total of 62.5% of VC and a part of Kodama's interest by investing about 4.3 billion yen. The remaining 37.5%, the amount that can exercise the so-called veto, + α is a form that Kodama keeps holding. Simply guessing, the corporate value is about 7 billion yen.

Luxus will accept 10 billion yen from the world and invest in growth. Outside directors will be accepted from the world, but other board members, bases, service names and company names will remain the same.

The so-called Exit itself is not strange, since VC was originally invested, but at this time, why is the opponent a world and what is the impact on users?

From financing negotiations to acquisition negotiations

Kodama says that the deal was initially financed by Raksas (from VC). By the way, if you look at Laxus's registry, the last time it raised funds (in a pattern where the capital fluctuates) was March 2017. He has negotiated with multiple VCs and operating companies to raise funds, one of which was World.

According to the results, it is stated that it will invest 10 billion yen in addition to stock acquisition, so it seems that it was decided that it was better to make it a subsidiary as a world while proceeding with the examination.

However, considering Mr. Kodama's intention that `` as a matter of fact, the current management team will continue to manage, we wanted to leave veto rights indeed, '' and the current market capitalization, shareholding ratio, etc. From the world's point of view, it has settled on a scheme of "investing 10 billion yen by purchasing stock from existing shareholders + lending."

It's a benefit for Laxus, too, to express that you inject ¥ 10 billion. That was to reduce competitors.

The sharing economy can easily end up in price competition. Uber and Airbnb. But with Laxus's 10 billion yen in funding, it has come to me that competitors are less likely to compete on price. Of course, we use data and invest to avoid price competition. (Mr. Kodama, and so on)

Issues that could not be solved even with money

What is the purpose of Luxus' decision to join the World? According to Kodama, there were three main purposes.

The first is, of course, the 10 billion yen raised through the borrowing mentioned above. The second is new customer development. Laxus will use the 10 billion yen procurement as a source to accelerate the procurement of bags and use "a bag that is even better than ever". The world has about 6 million active members, mainly apparel brands. It seems that this member is planning to send customers to Laxus. If this is successful, Laxus will be able to acquire new customers with good cost performance.

The third purpose of joining the umbrella is people. In recent years, the funding environment for startups has been improving year by year, and what is said to be "too much money". However, one of the challenges of the startup industry today is that it can raise funds but no one invests in it. There is no one who can do it even if there is a move, especially someone who has experience. This is the same for Laxus. So we work with the world to send people in and invest more and more.

Even if you say "send people from the world", the image will come if you ask. By working well with them, Laxus will be able to provide better quality services.

The world's managers are both born and professional, and they are all experienced. They're really logical and experienced, so it's really nice to borrow their wisdom.

The World is not necessarily looking for financial returns. I wonder if contributing from a variety of aspects by getting bigger than that level will be a reward.

Contribute to users through collaboration between Laxus and World

Well now​ ​Laxus, which has become a World subsidiary after several acquisitions, is basically irrelevant to users whether it is an independent company or a subsidiary of a large company. But if there's any effect on the user, it's a different story. Kodama says, "It only has a positive effect on users."

The first is that you can rent a "better bag" as I mentioned earlier. Kodama plans to increase the current cost rate by 50%. In other words, Laxus will have an even more expensive bag inventory. At Luxus, profit margins are grasped in bags. It is said that there is a prospect of recovery even if the cost ratio is raised.

今より良いバッグを仕入れれば、ユーザ体験のレベルが上がって、チャーンが減ることもデータから分かっています。ラクサスのKPIは原価率ではなく継続率。継続率が1%改善できれば、1.5倍の原価なんてすぐに回収できます。

Despite increasing retention, Laxus' monthly retention is already above 90% on average. This is not low for a toC service. Conversely, the main reasons for unsubscribed users are "there is no bag to borrow in the first place" or "the bag you want to borrow". Investing in better bags helps prevent these withdrawals.

The second user benefit is the combination of bags and clothes.

Laksus also posts user posts and coordinates with clothes when introducing bags (see the figure above). Originally, it was a measure to check the atmosphere of the bag, but there were quite a few users who said, "I want you to provide this coordination as well."

Previously, they borrowed photographic images of clothes and only sent customers to the borrowers when inquiries were received, but they did not always respond to user requests because they did not always have stock available. . At the time of this acquisition, if all the clothes were unified into brands under the World umbrella and cooperation such as inventory information could be made, the flow of "when borrowing a bag, purchase the coordination that fits the bag at once" was completed. Coordination with clothes as well as bags will be provided. Of course, it is also possible to propose a bag that is compatible with CRM and the taste of fashion.

IPO preparation continues

Laxus has become a World subsidiary through this acquisition, but will continue to pursue its IPO. Although he did not specify a specific time, he said, "It is not so far." In the future, Kodama says he wants to be aware of overseas expansion plans he had planned before (see previous article).

Actually, there are overseas celebrity brands that we have already negotiated. There aren't many business models that allow me to go to the world from Japan, so I've always wanted to go to the world. This acquisition scheme was taken care of by the world for that challenge.

I still have more than 33% of my stock (laughs), and that is not the end. With this acquisition, I would like to take Laxus even further.

—

About a year and a half ago I covered Laxus last time. In the meantime, the fashion industry has felt a global movement towards sustainability and the circular economy. Specifically, the development of renewable materials, reduction of waste and reuse.

The subscription model implemented by Laxus also fits the context of the circular economy. In fact, Laxus frequently mentions sustainability in sites and services.

Laxus web page

The circular economy, in which the consumer side is ready for secondary distribution and the development of materials that can be recycled, goes well with the business model of subscription. Even if you don't own it, you can borrow it when you need it and recycle it if you can no longer use it. In the future, influences such as circular economy and environmental protection will increase.

On the other hand, there is still no worldwide dominant subscription company in the fashion space. As Kodama says, the rental and subscription business model feels like a world-class base. We are waiting for a day to tell you how Laxus will fight in the world.