Rakuten takes diverse route to growth

10 September 2012

TOKYO: Rakuten, the Japanese ecommerce giant, is attempting to drive growth through a range of different strategies, from international expansion to "English-isation" and investing in sites like Pinterest.

The company's online retail platform operates a "B2B2C" system, effectively acting as a marketplace for lots of merchants, numbering 40,000 in Japan, which are vetted and receive consulting support.

"Our model is very different from most of our competitors," Hiroshi Mikitani, it chief executive, told Forbes. "We provide three things: the system, the traffic, and the expertise."

Mikitani thus suggested the main distinctions between Rakuten and Amazon were that his company combines "technology" and "people" to coach retailers, and also serves as a "bazaar" based on "discovery shopping".

In evidence of the success of this approach, Rakuten is applying it to sites it has acquired, such as Play.com in the UK. "We found out we can make it work in most ... countries," Mikitani said.

One exception to this rule was China, where it set up an ecommerce platform, Lekutian, in partnership with Baidu, the search engine, which closed two years later, due to a mixture of "political issues", the problem of counterfeit goods and an "overheated" market.

Elsewhere, Rakuten bought the Kobo e-reader brand for $200m, and sells it in numerous nations around the world. Mikitani argued its flexible business model and foreign expansion are still not the norm in Japan.

"Japanese are very ... famous for manufacturing excellence," he said. "But because we didn't have openness, and were really inward-looking – which we call the 'Galapagos effect' – all these Japanese products became extremely high-quality, but didn't really comply with global standards."

Another tactic adopted by the company in this area is pursuing "English-isation" – or making English its core business language. Mikitani revealed his initial optimism about this scheme has not entirely been met.

"Once we started doing it [we] realised this [is] more challenging and complex issue than purely language issue. People get stressed and sort of lost their dignity. We have to [give] lots of help, consultation, coaching so they can keep motivation," he said.

Elsewhere, Rakuten also invested $100m in Pinterest, the growing content-sharing website. "I truly believe Pinterest will open up new opportunities for e-commerce players," said Mikitani. "I think we are going to have a strategic tighter integration with Pinterest in many countries."

Data sourced from Forbes; additional content by Warc staff