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Online Ecommerce

Cornering shopping: How Rakuten plans to take on Amazon


By Jessica Davies, News Editor

November 11, 2013 | 6 min read

Rakuten has been blazing the merger and acquisition trail of late, expanding into movie streaming, ebooks, social bookmarking and of course online retail as it looks to rival Amazon and build the world’s biggest online marketplace. As it kicks off a major new marketing campaign, MD Shingo Murakami shares with The Drum’s Jessica Davies the company’s plans to make the brand a household name.

Photography: Priceminister

Rakuten has long held ambitions to become a major player in the digital media merger and acquisition space, demonstrated by its £25m acquisition of online retailer in 2011. Now the Japanese company has set its sights firmly on making the Rakuten brand a household name world over.

In its native Japan the company has grown exponentially since it was founded in 1997, and now owns the country’s largest e-commerce site, offers banking services, operates a hotel booking site and even runs its own baseball team. Its biggest challenge will now be whether it can replicate this success elsewhere, growing and innovating quickly enough to keep pace in a fiercely competitive space dominated by Amazon. It is perhaps no coincidence that the Japanese word ‘rakuten’ means ‘optimism’.

The brand has undergone some rigorous changes since its acquisition, dropping its direct retail business in March this year to operate purely as a marketplace for third party sellers to sell through.

Rakuten’s marketplace lets retailers create branded e-shops within the website, and a dedicated team of e-commerce consultants help small and medium businesses with their strategy for best visibility and stand-out on the platform. It also offers physical fulfilment for businesses that don’t have the resources for their own distribution.

This new model and the shift towards it has not been without its challenges however, and the company was forced to axe more than 200 jobs this January at its former Jersey headquarters and in the UK.

Rakuten’s UK MD Shingo Murakami says it had to create an entirely new business model after finding that the direct-sell business model was no longer profitable. Presumably taking the lead from Amazon which had expanded its offering by launching Amazon Marketplace, the Kindle and acquiring LoveFilm, the e-commerce giant has since snapped up e-reader brand Kobo and taken a substantial stake in bookmarking site Pinterest as it identified the potential for social shopping.

More recently it bought Barcelona-based TV and movie streamlining service, which has content licences from Hollywood and domestic movie and TV studios for rental access, and has been described by some as the ‘Spanish Netflix’. It will have its work cut out if it is to gain a similar standing in the already overcrowded UK video-on-demand market, in which Netflix, Amazon’s LoveFilm, Tesco’s Blinkbox and YouTube are the biggest contenders, but Murakami believes Rakuten’s ability to compete will rest on the speed with which it can expand.

“This is the biggest challenge for me; how quickly we can grow,” he says. “We totally changed our business model but still more than 50 per cent of our business is our media category, which is shifting more and more to digital, so expanding the categories as quickly as possible and increasing the number of merchants will be our biggest aim and challenge. We are totally different from our competition – the difference is there – we must just take advantage of it and accelerate our growth.”

The likelihood of realising these lofty ambitions and cementing its difference will depend on how well Rakuten can integrate its various brands and produce an innovative offering. As with any acquisition, the brand’s future is still unclear, but on the subject of integration Murakami admits that “losing the brand is not something we have yet ruled out,” and that the focus for now will be on “building the Rakuten brand and marketplace”. He adds: “Perhaps next year when we feel more confident we will lose the brand.”

It’s a strategy that’s already well on its way, having launched new, dual-brand logos to help smooth the transition of what had been a strong UK brand, on the high street and online, into the Rakuten business.

The company will put into play a range of activities to boost its brand, beginning with a major marketing campaign which kicked off this month and centres on word-of-mouth social media and viral activity, supported by above-the-line activity.

It is also expanding its product categories to include home and garden and health and beauty, which are due to launch before Christmas, and it has already brought in 100 merchants for the new strands. It plans to grow this to 200 by the time of the launch.

Recognising again that integration will be central to unleashing the Rakuten brand’s true global potential, Murakami says it must continue to ramp up its single ID registration across all of its brands, which gives it a single view of customer preferences and which merchants can also tap into.

“Without the single ID registration there is little incentive for customers to use, for example, Wuaki, over something like Blinkbox,” he says. “But if a customer registers they can switch between all other services in our ecosystem as well as benefit from our loyalty scheme.”

Setting his sights even further down the line, Murakami explains: “We would like to realise a global ID where anyone in any country can buy from anywhere. That’s our final goal – to create a more entertaining shopping experience globally.”

Before it gets there however, it must strengthen its own marketplace, admits Murakami, “which can later lead to cross-border trading in Europe, and consumers in Europe can see products from all merchants across the continent. That would be fantastic.”

Online Ecommerce

Content created with:

Rakuten Marketing

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