Rakuten bridges gap to Japanese online consumer

In Alibaba and Amazon’s shadow, Japanese Rakuten Ichiba is quickly developing. Several Western chains are using the platform to sell their products to Japanese online consumers.

Profitable

Rakuten Ichiba (loosely translaed into “Optimist”, what’s in a name?) has been around for twenty years, three years Amazon’s junior, but still two years older than Alibaba. It would do it justice to just label it as an internet retailer: it allows current retailers to attract Japanese online consumers and foreign online shoppers can order Japanese products through Rakuten. However, the company has more than this gateway: it is active in plenty of industries, including banking, trael, messaging, e-books and more.

Over the course of the past twenty years, the owner and founder Hiroshi Mikitani turned Rakuten, with the help of some 14,000 employees, into a company with a 7.2 billion dollar annual turnover and a 350 million dollar profit. An online retailer with profit seems like an anomaly. Nevertheless, a sizeable portion of its profit comes from abroad: ever since it decided to spread its wings in 2005, it acquired several local platforms, including Buy.com (United States), Tradoria (Germany) and PriceMinister (France).

Bridge to consumers

It is no surprise that Rakuten Ichiba has an excellent position in its home territory, with 90 million registered members and a 27 % market share of overall Japanese online turnover. The key to its success cannot be brought back to one reason, but its main advantage is that it managed to culturally bridge toe gap to the Japanese consumer. In other words: Rakuten knows how this particular type of consumer “acts”.

Wearepentagon’s consultants wrote a clarifying article, stating that these consumers have very high expectations and should not be approached too “aggressively”. These consumers have high demands when it comes to service, like how they receive communication about the delivery times. These are still quite an issue, seeing how nearly one in four deliveries gets returned because the consumer is not there to receive the package. The country’s populace works legendary long hours and perhaps Rakuten could benefit from a “deliver at work” option?

High penetration

The Japanese online retail world currently ranks fourth worldwide and will generate about 122 billion dollars (source: Statista) in 2018. The forecast is that it will be able to continue the growth it achieved in the past few years. The Japanese consumer already spends considerable amounts online, about 1,000 dollars per year. The country also has a very high internet penetration: 91 % is online and prefers to shop on computer. Tablets (and definitely smartphones) are considerably less popular.

Further growth will mainly come from new consumers, but that will require a solution to the aforementioned delivery issue. The careful Japanese shopper also appreciates his orders to be protected, something the major internet platforms (including Rakuten) have also taken into consideration.

Insatiable appetite

Rakuten feels it can also grow thanks to synergies between markets in which it is already active. It is clear it wants to attract all types of services like a spider in a digital web. In order to get to that position, the company will invest in four different areas that impact every single one of the holding’s activities: AI / deep learning, user interaction (which includes virtual reality), large-scale distribution and the internet of things / drone technology.

It will take too much time to delve into each and every single of these areas. The internet of things / drone technology is a combination of the three other areas, according to Rakuten. The company previously experimented with Sora (a pilot on a golf course), a delivery drone that will help lower delivery costs in the future. This is a major issue for every eCommerce company like Rakuten (just look at the company’s delivery statistics, which have plenty of room for improvement).

It will take some time before delivery drones will be used at a large scale, but there will be a larger impact from Rakuten’s international delivery service, launched in May 2017. This should help simplify shipments from and to Japan and exclude third party companies. Rakuten, the Japanese spider with an insatiable appetite.