EcommerceBytes-NewsFlash, Number 3081 - June 06, 2013     1 of 5

Rakuten CEO Has Message for Ecommerce: Collaborate, Don't Destroy

By Greg Holden

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"Our whole approach is how to help merchants and how to partner with our merchants - not how to destroy our merchants."

This was the concluding statement by Hiroshi Mikitani, Chairman and CEO of Rakuten, the world's third largest ecommerce company, in a keynote address to attendees of the Internet Retailer Conference & Exhibition in Chicago June 5. Founded in 1997 with just 13 merchants, Rakuten went public in 2000 one week before the ecommerce bubble burst. Today, the company has expanded far beyond its base in Japan. In 10 countries across Europe, Asia and the Americas Rakuten now has 40,000 merchants, 73 million customers, and 142 million products.

In his talk, it wasn't clear whether Mikitani was implying that other marketplaces actively try to destroy their merchants. But he did draw the following contrasts between Rakuten and its competitors:

Long, long web pages. In the U.S., Web pages tend to be short. On Rakuten, stores like GALSTAR (global.rakuten.com/en/store/galstar) have home pages that stretch on for many screens. (Even GALSTAR's mobile home page presented 36 products and photos when I checked.) GALSTAR's approach enables it to sell $3 million worth of goods per month. "We found that the conversion rate of small pages is not so high," said Mikitani.

Emphasis on personal stories. "On the Internet, you are not buying from a computer screen; you are buying from the person behind the screen," he commented. On Rakuten, merchants are encouraged to share their personal stories through blogs, text, and videos.

Food and food products sell. In Mikitani's breakdown of the types of products sold on Rakuten, food took the largest portion with 59 percent. His personal favorite store is one that sells fresh eggs in Japan. Initially, Mikitani himself said eggs couldn't be sold and shipped online. But the seller was persistent; today he sells $500,000 worth of eggs per month online.

Merchant education. To help merchants create better stores and learn about new technologies, Rakuten offers them lots of conferences and documentation, a Rakuten University, and a magazine. It holds six conferences for merchants at the beginning of year and six conferences during the summer. "Even though we are talking about Internet shopping, this demonstrates how important face-to-face communication really is," said Mikitani.

Emphasis on mobile devices. Smart device adoption is already a big proportion of Rakuten's traffic. In Japan, 27 percent of transactions on Rakuten are coming from mobile phones. "We project 40 percent by end of this year and 50 percent next year," said Mikitani. A full 96% of Rakuten of shop owners actively edit their mobile storefronts. The company sees a 4X difference between shops that edit their mobile stores and those that don't.

The core philosophy of Rakuten is to empower merchants, he explained. "Most ecommerce companies talk about convenience and speed, and these are important factors, but I think it's not so exciting. Rakuten wants to create an exciting Internet bazaar, with many merchants. There are many marketplaces, but even if you join their program you are disconnected from the end customer. You are not much different than a wholesaler. Our concept is: we empower you. We will let you get connected with our customers. We are a platform provider; our merchants are the heroes."

Acquiring customers is expensive because of the money a merchant is required to pay to search services and other providers, he said. Rakuten's emphasis is on keeping customers and making Rakuten as "sticky" as possible through the Rakuten Super Points rewards program.

In Japan, the Rakuten credit card has become a "virtual currency," he said. "When you buy something, you get rewarded. You can use points to buy everything to reserve hotels etc. It is becoming the strongest weapon for us to compete against the global giants."

Collaborating with merchants rather than competing with them or making selling difficult for them is the key, he said. "By collaborating together we are able to grow faster than just one big company." This is especially critical in ecommerce, where alliances shift constantly and competition grows ever more intense, he observed: "On the Internet, your friend can become your enemy; your enemy can become your friend."

Mikitani also announced the company is acquiring Webgistix, which offers fulfillment services for ecommerce retailers, Rakuten's second logistics investment outside of Japan.


About the author:

Greg Holden is EcommerceBytes Contributing Editor. He is a journalist and the author of many books, including "Starting an Online Business For Dummies," "Go Google: 20 Ways to Reach More Customers and Build Revenue with Google Business Tools," and several books about eBay, including "How to Do Everything with Your eBay Business," second edition, and "Secrets of the eBay Millionaires," both published by Osborne-McGraw Hill. Find out more on Greg's website, which includes his blog, a list of his books, and his fiction and biographical writing.


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