The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
Hiroshi Mikitani, chairman and CEO of Japan's Rakuten Inc., is exporting his e-commerce playbook as he seeks to rewrite the rules of the e-retail game around the world.
At a daylong meeting in January, Rakuten Inc. chairman, CEO and co-founder Hiroshi Mikitani laid out to U.S. merchants his ambitious plan to build a globe-spanning e-commerce marketplace different from existing marketplaces like those operated by Amazon.com Inc. and eBay Inc. Rakuten, he said, will set itself apart with a single-minded focus on supporting its marketplace merchants.
"We come at e-commerce with a very different concept. It is about how to empower small to medium-sized merchants using the Internet rather than competing against them and trying to destroy them," he says in a conversation with Internet Retailer.
Tokyo-based Rakuten provides a selling platform for merchants in 13 countries, and aside from a few markets where it is still phasing out direct-to-consumer sales of companies it's acquired over the last three years, doesn't compete against them by selling on its own behalf. That means merchants selling on a Rakuten marketplace won't compete for sales with Rakuten the way merchants selling on Amazon.com sometimes compete for sales with Amazon. In particular, it means Rakuten doesn't use marketplace sellers' transaction data to spot best sellers that it will then sell itself—a common complaint among merchants selling on Amazon.
"In Amazon's marketplace, Amazon takes the Buy Box almost always," says Melanie Eickhoff, strategic relations director for BuyHappier.com, a retailer of home and kitchen products that generates about half of its sales through online marketplaces, including those operated by Amazon, eBay, Newegg, Sears and Rakuten. "With [Rakuten.com Shopping] they have this different concept of not competing with us in any way, of supporting us as a merchant and our products." (The Buy Box on Amazon displays the Add to Cart button, and the merchant featured there gets most of the sales, although Amazon results pages often show other options.)
For merchants, that non-competitive stance is welcome, although the consensus among merchants interviewed for this story was that they won't be giving up on Amazon's marketplace anytime soon—all say Amazon brings them a quantity of sales no other online marketplace can yet match.
Mikitani recognizes that it will take more than fine words to win their confidence. And he says his company is now embarking on a new phase of its development in which it will put meaning behind its promise of "empowerment" by creating new services that will allow retailers that sell through its shopping sites to prosper.
That plan takes many forms. In its largest markets, including the United States, Rakuten merchant sellers are assigned an e-commerce consultant to help them make effective use of the marketplace—from designing the look and feel of the merchant's storefront to advising merchants on promotional programs that may help them drive more sales.
Rakuten also promises to help merchants build relationships with customers who buy from them through the marketplace by providing the buyer's e-mail address so the merchant can market to the shopper directly, a follow-up opportunity merchants don't get when they close a sale through Amazon.com. In some markets Rakuten also provides services, such as fulfillment with fast shipping, which can put smaller merchants on a level playing field with bigger retailers—services Rakuten plans to rev up soon.
U.S. e-retailers that sell though Rakuten.com Shopping (formerly Buy.com) say the consultants provide a level of service they don't get from most other marketplaces.
"The account managers seem to be a lot more proactive in working with sellers," says Crispin Zinsmeister, alternate channel sales manager for computers and accessories e-retailer Geeks.com. "I get an e-mail from mine every few days asking whether I want to work on a new e-mail promotion or be included in [Rakuten.com Shopping's] e-mail blast. On Amazon, it is rare, if ever, that an account manager will reach out to a marketplace seller."
Mikitani, in his January presentation to U.S. merchants, also emphasized another differentiating point. He says online shopping should be entertaining rather than utilitarian. Rakuten's belief—tested and, he says, found to work in Japan on Rakuten Ichiba, Rakuten's first and largest marketplace—is that merchants who humanize online shopping, delivering a modern-day interpretation of yesterday's Main Street shopping experience, will beat merchants who, like a vending machine, spit out products but provide no additional value. "Consumers are not just looking for products, they are looking for the stories behind it," Mikitani says. "It is about experience and discovery." Translated, Rakuten Ichiba means market of positive spirit, or in Rakuten shorthand, happy commerce.
Mikitani tells the story of one of Rakuten Ichiba's earliest sellers, a farmer who in 1997 wanted to start selling fresh, antibiotic-free eggs online. With Rakuten's help, he created a storefront where he introduced himself, his family business and explained how his eggs differed from supermarket eggs. Over the years, he added a blog, video clips and naming contests for new hens—the sort of features that build relationships between merchant and consumers—so much so that he now sells more than 500,000 eggs per month on the marketplace.
That's the kind of web retailing with a human face that Rakuten plans to take worldwide, following a series of acquisitions and startups that have made Rakuten a global e-commerce player. Will what works in Japan succeed in North America, Europe and elsewhere? Industry observers remain to be convinced.
"Amazon and eBay are really about blazing a path to the buy. They're about product and price. Rakuten is more about enjoying the experience of the shop," says Andy Hoar, senior analyst at Forrester Research Inc. "Rakuten's approach worked well in Japan, but it is possible it is a one-off. Japan is its own market."
"We certainly see plenty of potential for Rakuten to become a player in Western markets, but it will take almost flawless execution as well as big investments in brand and technology," says Colin Sebastian, an investment analyst with R.W. Baird & Co. who follows Amazon and eBay Inc. "I see them as legitimate competitors, but fighting Amazon at its own game can have a deadly outcome, so Rakuten must focus on areas of competitive strength."