Rakuten: On course to become a genuine global player?

Rakuten: On Course To Become A Genuine Global Player?


Release date: July 15th, 2014 (116 pages)
PDF/Powerpoint format. Price: GBP990.00

Abstract

Japan is the only major ecommerce market where a home grown incumbent, Rakuten, achieves higher gross merchandise sales (GMS) than Amazon, on both Amazon Retail and its marketplace combined. (The other market is China, but Amazon’s laggard position in the country is not due to Alibaba’s inherent competitiveness and business model, but an unlevel playing field and CP intervention skewing the market home grown players.)

How has Rakuten made domestic leadership and holding off Amazon possible? We believe that there are learnings that can be copied into other markets and that in time new local champions could emerge to knock Amazon off its perch in the France, Germany or the UK.

Irrespective of the industry, leading loyalty players could learn from Rakuten’s disruptions of global e-commerce. The key competitive edge in its unique business model with a diverse portfolio of businesses is the Rakuten Super Points loyalty scheme which generates loyalty and stickiness for both consumers and merchants and drives significant cross shopping effects. The super points look likely to develop into the first truly global scheme on a vertical basis including consumer finance, retail, travel, streaming content, sport etc and also horizontally across markets (Japan, USA, Germany, France, UK etc).

Rakuten Ichiba’s focus upon quality ensures that only reputable businesses are allowed to trade carrying extremely little risk of poor products and elevating Rakuten as the premium marketplace. Clearly conveying these qualities throughout its global expansion is essential if it is to have an impact in the global e-commerce space. Therefore, Rakuten offers something different to its rivals but these strengths can also be viewed as weaknesses.

The principle of quality merchants and products prevents Rakuten having the scale of Amazon and eBay as it is far more picky about who can sell on the site. This is a major drawback in Rakuten’s quest to become a global leader as it arguably needs a vast network of merchants to drive network effects and rival the big two.

This report probes into these matters and much more in great detail to provide a fascinating insight into this impressive yet relatively unknown e-commerce company whose innovative ideas, energetic expansion and strong adherence to its principles is to be admired. The great question is whether Rakuten will build as much brand awareness as Amazon and eBay have with consumers.

Table of contents

Executive summary: Rakuten 2014 p13
The core of the business model: the marketplace p21
Strengths of marketplaces: The model p22
Strengths of marketplaces: the data benefits, monetisation p23
Strengths of marketplaces: the data benefits, pricing power p24
Strengths of marketplaces: pricing power, beneficial cash flow p25
Strengths of marketplaces: beneficial cash flow, unlimited range p26
Strengths of marketplaces: unlimited range, perfect OSA p27
Strengths of marketplaces: network effects p28
Context – Japan p29
Japan: Demographics - How to tackle an ageing and shrinking population p30
Japan: Demographics - What social reforms are needed? p31
Japan: Economy – from the lost decades to Abenomics, Real GDP growth p32
Japan: Corporate - Role of small firms, financial discipline, clean image p33
Japan: Corporate - Issues facing Japanese companies, Rakuten bucking the trend p 34 Japan: Corporate - How tensions with China are affecting Japanese performance p35
Online Retailing in Japan p36
Online retailing: Internet penetration, e-commerce, m-commerce, konbini p37
Online retailing: Konbini, payment methods, understanding Japanese consumers p38
Online retailing: Competitive landscape, demographics dictating shopping habits p39
Online retailing: How will a tax rise affect spending habits? p40
Introduction: Rakuten’s business model p41
Rakuten: Philosophy and historical milestones p42
Rakuten: Rakuten Ecosystem, membership p43
Rakuten: Rakuten Ichiba – the shop centric marketplace p44
Rakuten: The mechanics behind Ichiba p45
Rakuten: Super Points, Rakuten Card and Rakuten Edy p46
Rakuten: Rakuten Ichiba towards a global vision p47
Recent Key Developments p48
April - May 2013: MasterPass and Daily Grommet p49
June 2013: Logistics and Energy p50
August - Nov 2013: Further acquisitions, Fulfilment centre, Spanish expansion p51
November 2013: Sporting success p52
February 2014: Viber, vi-vi-vi.com, European R&D centre p53
April - May 2014: Mastercard tie-up p54
May 2014: Addition of Alipay, Q1 results, Taiwanese credit card, wuaki.tv smart TVs p55
May 2014: Rakuten CAFÉ opens in Tokyo p56
May 2014: Rakuten Box locker scheme launched and SessionM p57
May - June 2014: DC Storm and attribution p58
Financials, KPI and Benchmarks p59
Gross Merchandise Sales: total & e-commerce sales in Yen, 2007 - 13, declining influence of e-comm? p60
Gross Merchandise Sales: total & e-commerce sales in €, 2007 - 13, Abenomics distorting results p61
Rakuten: Net income, margins in Yen, € 2007 - 13, a healthier outlook than competitors? p62
Rakuten Ichiba: Revenue, Ichiba sales revenue in Yen, 2007 - 2013, making its mark in Japan p63
Rakuten Ichiba: Revenue, Ichiba sales revenue in €, 2007 - 2013 p64
Rakuten Ichiba: Transactions and unique buyers 2008 - 13, the power of the loyalty scheme p65
Rakuten: Ichiba GMS per user, annual members 2008 - 2013, what drives the high GMS figures? p66
Rakuten: GMS per merchant, Ichiba as % of domestic e-commerce GMS p67
Rakuten: number of 3P merchants 2012 - Q1 14 p68
Rakuten: Fee structure, commissions UK, US p69
Rakuten: Range issues and getting global network effects going p70
Comparison Amazon & Rakuten, who leads the market? p71
Amazon: Int’l sales in €m 2008 - 13, total, Japan, in Yen 2011-13, who leads the market? p72
Amazon and Rakuten: Japanese sales revenue in Yen 2011-2013, GMS comparisons p73
Amazon: Active Customer accounts 2009 - 2013, Analysis p74
Amazon: Average quarterly spend 11 - 13, Japan in Yen, Rakuten GMS p75
Amazon: 1P Sales by geography in $m, average price, total units, customers, frequency p76
Comparison: Amazon vs Rakuten, who is number one in Japan? p77
Comparison: Amazon vs Rakuten, a defense of Amazon’s business model p78
Rakuten’s strategy p79
Strategy: Global operations and exporting the marketplace model p80
Strategy: International acquisitions – Kobo p81
Strategy: International acquisitions - Wuaki, Viki and Viber p82
Strategy: Marketplace model as a USP, global unification p83
Strategy: getting the domestic logistics network right to succeed globally, global logistics p84
Strategy: Rakuten bank, expansion into the States p85
Strategy: Viber, the vehicle for expansion p86
Loyalty strategy: the power of points, cross-use ratio p87
Loyalty strategy: the power of the points, Amazon Prime threat, click and collect p88
Rakuten’s overseas operations – the EU p89
France: the priceminister acquisition, bolstered by ADS p90
France: High competition, logistics strategy for the EU p91
France: Differentiating from Amazon, moving away from c2c p92
Germany: the tradoria acquisition, tough competition p93
Germany: slow 3P recruitment p94
Germany: aggressive growth plans p95
Spain: ambitious targets, Wuaki link up p96
Spain: a very different expansion strategy p97
UK: the acquisition of play.com, repositioning and closing 1P p98
UK: social media innovations and targeting a leadership position in UK e-retail p99
Overseas operations – emerging markets p100
Thailand: all about m-commerce p101
China, India: payment partnership after baidu failure, India plans p102
Brazil: a market showing much promise p103
USA & Japan – the biggest opportunities? p104
Japan: Synergy, supporting local communities p105
USA: attempting to crack the hardest nut p106
Outlook p107
Outlook: What stands in Rakuten’s way to become number one? p108
Outlook: focusing on quality over quantity, overcoming contradictions p109
Outlook: overcoming contradictions, challenges from within p110
Outlook: What areas is Rakuten getting right? p111
Outlook: How to challenge Amazon and eBay globally, domestic difficulties p112
Outlook: Tax rises, regulations, future of e-commerce p113
Outlook: Promising future but doubts on becoming number one remain p114
Sources p115
Table 1: Gross Merchandise Sales: total sales and e-commerce sales in Yen, 2007 - 13 p60
Table 2: Gross Merchandise Sales: total sales and e-commerce sales in €, 2007 - 13 p61
Table 3: Rakuten: Net income, margins in Yen, € 2007 - 13 p62
Table 4: Rakuten Ichiba: Revenue and Ichiba sales revenue in Yen, 2007 - 2013 p63
Table 5: Rakuten Ichiba: Revenue and Ichiba sales revenue in €, 2007 - 2013 p64
Table 6: Rakuten Ichiba: Transactions, quarterly frequency, number of buyers 2008 - 13 p65
Table 7: Rakuten: GMS per user, per quarter, in Yen, € annual members 2008 - 13 p66
Table 8: Rakuten: number of merchants, per quarter 2012 – Q1 14 p68
Table 9 & 10: Amazon: Int’l sales in €m 2008 - 13, total, Japan, in Yen 2011 - 13 p72
Table 11: Amazon: Active Customer accounts 2009 - 13, total, Japan p74
Table 12: Amazon: Average quarterly spend 11 - 13, in Yen, Rakuten GMS in Yen, € p75
Table 13: Amazon: 1P Sales by geography in $m, average price, total units, customers, frequency p76
Chart 1: Strengths of marketplaces: The model p22
Chart 2: Japan Real GDP growth p32
Chart 3: Rakuten Ecosystem and services p43
Chart 4: Rakuten Ichiba – the shop centric marketplace p44
Chart 5: Super Points, Rakuten Card and Rakuten Edy p46
Chart 6: Sales revenue in Japan (¥), Amazon vs Rakuten 2011 - 13 p73