japanese-post
Business Management

Japan's eCommerce Giant Rakuten Bids to Conquer the World

Online retailing giant Rakuten is a household name in Japan yet it is only just starting to become known in other countries. It was founded in 1997 by Hiroshi Mikitani, a graduate of the prestigious Hitotsubashi University in Tokyo, who showed his remarkable understanding of business by landing a job at the Industrial Bank of Japan. After working there for eight years, during which time he completed an MBA at Harvard University, the still young Mikitani ventured out on his own to start Rakuten and has never looked back. He is now considered so influential in Japan that he was mentioned in an article in The Wall Street Journal as being instrumental in helping the Japanese economy to continue the stellar growth it has shown since Prime Minister Abe made radical changes to Japanese fiscal policy after taking office in December 2012.

Rakuten is a comparison shopping site. As of May 10, 2013, there were 39,773 stores selling their wares on “Rakuten Mall,” yet it is not just physical products that are available on Rakuten. As it has expanded, Rakuten has grown into an all-encompassing eCommerce giant, with a travel service (dealing with 90,324 different hotels, tour agencies and airlines), its own bank, a stockbroking service, a credit card issuer and online content retailer. It even has its own successful professional baseball team. The staggering total of all products on the site, both physical and service-related is 133,428,646. At the beginning of this year, Rakuten was the world’s third largest online retailer in terms of net sales, with Amazon being number one and Apple being number two, yet Rakuten’s total sales was only one third that of Amazon’s.

Here in Japan, the low birth rate (along with the disproportionate ratio of old people to young people) is a major topic of discussion, primarily because of the huge problems it is already creating for the economy and the even bigger economic dilemmas that lie ahead because of these demographic problems.

Mikitani is well aware of this and once Rakuten started gaining momentum he realised that the only way to generate significantly greater profits for Rakuten was to expand globally. Since purchasing New York-based Linkshare for $425m in 2005, Rakuten has gone on to acquire France’s Priceminister for €200m Euro, American online retailer Buy.com for $250 million and, more recently, the Canadian eBook manufacturer Kobo for $315m.

This latest purchase is perhaps the most significant for Mikitani as he has revealed that he believes that digital contents will be the main avenue for Rakuten’s market expansion in the coming years. The iPad has been a massive seller since it was introduced here in 2010 and Amazon’s Kindle has also been remarkably popular after making its debut in September of last year. In 2012, Japan had the fourth-largest publishing industry in the world, so Mikitani has said that he made the price of the Kobo eBook reader (which went on sale in July 2012) much cheaper than the Kindle or iPad so that it would be affordable to people who just want to read books and not surf the web or take pictures. It currently sells in Japan for around £52 but despite this low price, industry insiders have said that it is not selling nearly as well as Rakuten had hoped. The Kobo bookstore had 26,000,000 (as of October, 2012) titles available for download and the company is using its size and buying power to gain access to internationally popular Japanese comic books like One Piece, boasting 890 titles in that series alone.

Mikitani also said that he was particularly interested in boosting sales of online content in countries like India and Australia where Kindle does not have the market penetration it does in the US.

Rakuten’s desire to expand overseas is well known throughout Japan after its president’s controversial announcement in 2010 that all internal communications such as email, meetings and documents would be carried out in English by the year 2012. This drew criticism from many Japanese companies yet it was also viewed as a radical and inevitable step by others. Fast Retailing, the company that owns the largest Japanese clothing chain Uniqlo, also announced in 2010 that, by 2012, all meetings at the company would take place in English. Fast Retailing’s president Tadashi Yanai is also considered to be a business guru in Japan and he has similar views to Mikitani when it comes to the importance of English.

As impressive and forward thinking as Mikitani’s decision to force his employees to use English might sound, it has been anything but a smooth transition as a quick look at Rakuten’s global online shopping site (which is offered in English, Korean and Chinese) will show. On the site, Rakuten, somewhat embarrassingly, admits that the product descriptions and other explanations have been translated using an automated computer translator, which means the English is at times almost incomprehensible. Despite graduating from Harvard and his strong insistence on English as the driving force behind Rakuten’s expansion, signs in English at the company’s offices, and occasionally even the English used by Mr. Mikitani himself, is far from natural.

Currently, only 7% of all Rakuten’s business is generated in countries outside Japan and only time will tell if it can succeed in increasing its global presence.

 

Ben Olah is originally from Sydney but he has lived in Japan since he graduated from university.


 

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Ben Olah

Ben Olah is originally from Sydney but he has lived in Japan since he graduated from university and, even after living there for many years, he says he never ceases to find Japan and its people to be a source of amazement. Ben is passionate about innovation and transfixed by the way that technology is changing our society in ways that nothing before has even done. 

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