June 5, 2013, 11:06 AM

Rakuten looks to empower businesses

CEO Hiroshi Mikitani aims to be a $125 billion online player by 2020.

Lead Photo

Tokyo-based Rakuten Inc. CEO and chairman Hiroshi Mikitani today announced that the online marketplace operator has acquired Webgistix, a fulfillment services provider that operates five warehouses across the United States.

Webgistix says that its facilities enable merchants to provide one- or two-day delivery to 98% of the United States via ground shipping

Mikitani did not disclose the deal’s terms.

Webgistix is Rakuten’s second major fulfillment acquisition outside Japan in the past year. The other is Alpha Direct Services, a French company that provides online retailers such logistics-related services as order management, warehousing, fulfillment and delivery and customer support.

The move is the latest by the e-commerce giant that, Mikitani said during his keynote address at the Internet Retailer Conference & Exhibition, aims to empower businesses by providing small- and medium-sized merchants with tools to compete in an increasingly cutthroat e-commerce market.

Rakuten has more than 40,800 merchants selling on its online marketplaces, Mikitani said, and the company’s strength is its ability to leverage the collective assets of those merchants.

“By working together we able to grow faster than one big company,” he said.

That’s the model that enabled Rakuten to become No. 2 in Internet Retailer’s 2013 Asia 500. Rakuten provides a selling platform for merchants in 13 countries, and aside from in a few markets where it is still phasing out direct-to-consumer sales of companies it has acquired over the last three years, it doesn't compete against them by selling on its own behalf.

The company has big growth plans, Mikitani said; he aims to operate online marketplaces in 27 countries in the near-future.

That would continue a rather robust growth sprint. Over the last three years, Rakuten has expanded globally in three ways: through acquisition, such as its purchases of Buy.com in the United States and Play.com in the United Kingdom; by investing in existing web companies like Russian e-retailer Ozon.ru and social network Pinterest; and by establishing startups in countries where it sees potential to grow.

Those expansion efforts will help its revenue to grow from $14 billion in 2012 to $125 billion by 2020, Mikitani said.

Part of that revenue boost will stem from its technology investments, including ensuring consumers have a quality experience on mobile devices, he said. Mikitani said he expects that, by 2020, 70% of Rakuten’s transactions will stem from mobile devices.

The efforts will give it an advantage as it competes with other e-retailers, Mikitani suggested, in what appeared to be a reference to Amazon.com Inc.

Amazon is a major marketplace player and it has also been stepping up its logistics offerings. Last year it acquired fulfillment services provider Kiva Systems Inc. for approximately $775 million in cash. And Amazon is expected to have more than 100 warehouses dotted across the globe by the holidays.

Merchants selling on a Rakuten marketplace don't compete for sales with Rakuten, Mikitani reiterated. Retailers selling on Amazon.com sometimes compete for sales with Amazon. Rakuten also doesn't use marketplace sellers' transaction data to spot best selling items that it then sells itself—a common complaint among merchants selling on Amazon.

Rakuten is a partner for retailers, Mikitani said. While Amazon does not allow marketplace sellers to build relationships with consumers who buy from them on Amazon, Rakuten encourages it.

“You aren’t buying from a computer screen but the people behind the screen,” he said.

To illustrate his point he told 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 and 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 merchants and consumers—so much so that he now sells more than 500,000 eggs per month on the marketplace. “He’s very rich now,” Mikitani said.

By empowering merchants, Rakuten can help others follow the farmer’s path, he suggested.

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