Rakuten Group was built from a desire to empower Japanese merchants and consumers in a new marketplace in the early days of the Internet age. Today, the philosophy of empowerment remains at the core of Rakuten’s business and operations. Masatada Kobayashi, co-founder of Rakuten Inc. and CEO of Rakuten Asia, shares more with Sharon Tian.
It all started about 20 years ago with the Kobe earthquake of 1995. Masatada Kobayashi was having an animated conversation with five like-minded friends about the future of Japan.
That conversation, which involved Hiroshi Mikitani, founder and chairman of Rakuten, inspired the establishment of Rakuten Ichiba, Japan’s B2B2C e-commerce platform, and laid the foundations for what would eventually become one of the world’s leading Internet service companies.
Kobayashi, who is one of the six co-founders of the company, recounted the mood that spurred the group of young people.
“In the early ‘90s, Japan was coming off an extended period of rapid and continuous economic growth, but had begun to stagnate. We felt that there was still a lot of potential in Japan, and we thought that perhaps we could revitalise Japan using the Internet.
“I remember having a conversation with Mikitani-san and the other co-founders. We wanted to find a way to empower the people, and strongly believed that human beings need communication and connection. We thought that e-commerce could be a great way to enable this while creating a win-win situation for all involved.”
Kobayashi said at the time when Rakuten Ichiba was launched, companies all over the world were just starting to sell over the web. “Jeff Bezos had already started Amazon by then, selling books, while others had ‘online shopping malls’ where multiple merchants could sell goods via a single website. However, this model was tricky due to the complex relationships involved and did not take off in the end.”
According to Kobayashi, what is different and unique about Rakuten is its offer of a fundamentally different shopping experience that is better for consumers and merchants.
Rakuten operates on the core principle of empowerment. It seeks to empower merchants to go online by providing them the tools and resources to create an interactive, engaging and fun shopping experience. It seeks to create better online shopping experiences for consumers. “We want to replicate the experience, interaction and fun of going out for a shopping trip, but without the hassle and inconvenience. This benefits both customers and merchants, creating a win-win situation.
“When Rakuten started, we saw ourselves as agents of change, who could give small and mid-size merchants the opportunity to easily set up shop on the Internet. In return, we charged a fixed monthly fee, with the option of paying extra for advertising. This was but a fraction of what the bigger players were charging at that time. In addition, we gave merchants the freedom to customise their web presence rather than forcing them to conform to templates. We told merchants to see themselves as consultants rather than sellers when interacting with customers, in order to build connections and relationships.
“I believe in the Rakuten business model of empowering merchants and consumers, and having a marketplace that encourages discovery and connection.
“Consumers have learned to set low expectations for online shopping because the most popular sites are essentially just the vending machines of the Internet. We don’t believe that robots are that engaging or that helpful, but we believe in our merchants, who happen to be experts as well as human. We believe that shopping is entertainment and aim to elevate consumers’ expectations for what online shopping can and should be – fun!”
While Rakuten started off as an online marketplace, Kobayashi said it has since expanded into a diverse array of online services, including eBooks & eReading, travel, banking, securities, credit cards, e-money, media streaming, and more.
“We are building an ecosystem for e-commerce as we want Rakuten to be a one-stop shop that can serve almost all the needs of our customers. Our membership programme, known as Rakuten Super Points, is the thread which ties all the services together and is the core of the ecosystem.”
As one of the co-founders of Rakuten, Kobayashi is excited about its growth and the impact that the company has made in the marketplace beyond Japan. The success not only validates the founding principle, but has given Rakuten the impetus to move forward even more aggressively towards its goals.
Like many Internet companies, Rakuten has been on an acquisition trail in recent years to build its business. While there may be debate about the sustainability of its growth through a long trail of acquisitions, Kobayashi is quick to debunk the misconceptions. He points out that the company is following a firm plan to become a truly global company.
“We’ve grown from having 36 billion yen (US$333.5 million) in gross transaction volume in 2001 to 3 trillion yen (US$27.8 billion) in 2011. That’s approximately an 80-fold growth in the space of 10 years, which is tremendous!
“I think the perception that Rakuten purely buys companies has been shaped by the number of acquisitions we’ve made, but our growth has also been organic. We launched Rakuten Travel for online hotel reservations and Rakuten Books for online book shopping back in 2001 while continuing to grow the Rakuten Ichiba business. In 2002, the Super Points programme was born which would eventually become the link between Rakuten Ichiba and the other services.”
In 2005, Rakuten began moving out of the Japan home market and entered the US affiliate marketing business by acquiring LinkShare Corporation. The e-commerce business then expanded overseas in 2008 with the launch of Taiwan Rakuten Ichiba through a joint venture. This was followed by more overseas e-commerce expansion through acquisitions in the US and Europe in 2010 and Rakuten became increasingly global.
Its globalisation strategy continues today, with the latest move being the launch of Rakuten Singapore early this year.
“Our strategy is to grow our scale, scope and global footprint. Since 2008, Rakuten has grown from a domestic Japanese success story to become a global Internet services force to be reckoned with.
“A series of acquisitions, plus the launch of Rakuten Austria – our first European, home-grown e-commerce platform, means that we are now able to offer a comprehensive range of services, including digital content and eBooks, performance marketing, Internet services such as travel and financial services, e-commerce and consumer technology, across 28 countries and regions worldwide.”
Kobayashi explains that the expansion into new markets and services means that Rakuten has established, and is building upon, the beginnings of a true Internet services ecosystem which is able to deliver a diverse range of consumer services, yet is anchored and unified by its membership loyalty programme, Rakuten Super Points.
“Our goal is to become the No. 1 Internet services company in the world. This may sound ambitious, but Rakuten means ‘optimistic’ in Japanese, and this is a goal we have set our hearts on.
“To be top in your industry, especially an Internet company, where everything is constantly changing at an unprecedented pace, you must be agile. English has been one of biggest challenges we have faced in expanding our business model, but it has now become one of our greatest assets.”
Kobayashi said Rakuten introduced “Englishnisation” in 2010 with the aim of getting all Rakuten employees to learn and speak English and to adopt a global mindset. “Today, almost all of Rakuten’s business units have fallen in line with Englishnisation – it hasn’t been easy, but we’re a company that relishes challenges.
The business imperative is not to grow in size to be as big as other Internet e-commerce players such as Amazon or Alibaba, says Kobayashi. “Because the business model we adopt is different, the opportunity for Rakuten is not a question of taking market share. It’s more a question of Rakuten offering a true global alternative to the previously accepted status quo – both for shop owners/merchants, and for consumers. We are confident that [our model of offering a different way of doing business] will play out successfully in the world of online retail.
Building in Asia
Asia will be a key theatre of play for Rakuten in the coming years, and particularly for Kobayashi who was only just appointed President and CEO of Rakuten Asia in September this year, overseeing operations in Indonesia, Malaysia, Singapore, Taiwan and Thailand.
“I have two overarching goals for the business in Asia – to ‘go wider’ and ‘go deeper’. We will go wider by expanding our business into new markets. At the same time, Rakuten will go deeper into existing markets by introducing more businesses in addition to our e-commerce presence, building out the entire Rakuten ecosystem similar to what we have in Japan.”
Kobayashi will also be focusing on spreading the word about the Rakuten business model as it extends its presence in Asia. “I want people to understand that Rakuten’s e-commerce model is unlike other players, as we are focused on the experience of discovery and connection. We are a bazaar of curated shops rather than a vending machine, and want to delight people and bring the fun of shopping into the online space.
“We believe in creating value for merchants and customers by allowing both to build relationships with each other for mutual benefit. Our role is to provide the platform and tools that empower merchants to create a unique offering.
“The knowledge that Rakuten can empower our merchants and employees to achieve their dreams also excites me and keeps me going.”
Raising the bar for e-commerce
Consumers have learned to set low expectations for online shopping because the most popular sites are essentially just the vending machines of the Internet. We don’t believe that robots are that engaging or that helpful, but we believe in our merchants who happen to be experts as well as human. We believe that shopping is entertainment and aim to elevate consumers’ expectations for what online shopping can and should be – fun!”
“Human beings need communication and connection. We wanted to find a way to empower people … and thought that e-commerce could be a great way to enable this while creating a win-win situation for all involved.”