Most U.S. consumers, and many retailers for that matter, have probably never heard of Rakuten. But if Japan’s largest e-commerce marketplace has its way, that will soon change: The company has set its sights on becoming a household name in the United States. An even loftier goal: outpacing e-commerce giant Amazon.com.
Founded in 1997, the Tokyo-based retailer is banking on a new strategy that employs a business-to-business-to-consumer model (B2B2C) — rather than the direct-to-consumer model it initially employed — to conquer the American market.
Rakuten boasts $4.9 billion in global revenue, and bills itself as the third largest e-commerce marketplace worldwide, behind Amazon and eBay. It sells everything from computers and consumer electronics to fashion, health and beauty items, home furnishings, toys and sporting goods.
Strategic acquisitions of leading online marketplaces around the globe have fueled its growth. Currently, it offers e-commerce services in some 20 countries, including Taiwan, France, Germany and the United Kingdom.
In 2010, the retailer scooped up the U.S. site Buy.com (now billed as Rakuten.com Shopping) to gain a foothold in the American market. It is betting on its B2B2C model to shake up U.S. online retailing.
“The business models used by many major online marketplaces can be counterproductive to their merchants’ businesses,” said Bernard Luthi, chief marketing and operating officer, Rakuten. “The ubiquitous B2C model, for example, allows a merchant to set up a presence on the marketplace and sell to customers. If their products start to sell rapidly, however, the marketplace owner will often use their own stock to undercut the merchant they are supposedly partnering with.”
Rakuten sees things a bit differently. It believes that for online marketplaces to evolve and prosper, the merchants should be empowered to make the very most of the channel to build their brands and customer relationships. It’s for this reason, according to Luthi, the company shifted to its current model.
“With this model, Rakuten, as the online marketplace provider, has certain duties to its merchants,” he said. “Therefore, we’re striving to provide a more thorough and detailed marketplace service than has been seen before — one which elevates our merchants to the status of true partners and removes the fear that the marketplace will evolve into a competing retailer.”
Rakuten’s “omotenashi,” or “empowerment,” philosophy of supporting its merchant partners is integral to its strategy. The company offers training to its merchants via “Rakuten University” on how best to optimize the online channel for sales.
“This, combined with regular expos and insights provided by e-commerce consultants, gives merchants all the information and tools they need to stay at the forefront of e-commerce,” Luthi explained.
Unlike Amazon, Rakuten does not maintain its own inventory. As a result, third-party merchants selling on Rakuten need not worry that they will end up in a losing competitive battle with the marketplace, he added.
While Rakuten’s marketplace model is key to its goal of surpassing Amazon, the company also believes it has other advantages, including its loyalty program, called Rakuten Super Points, whereby shoppers earn at least 1% back on every purchase and can apply earned points as discounts on future purchases.
The company also strives to offer a reprieve from the dry, transactional experience that still defines many e-commerce sites by tapping into digital social shopping trends.
“The vending machine style of e-commerce is becoming antiquated,” Luthi said.
On the social front, the company has made a number of key investments, including in Pinterest. Recently, it signed an agreement to acquire global video streaming platform Viki.
“Rakuten’s focus is on entertaining ‘discovery’ shopping. The concept is based on making connections between people based on areas of interest, which means that individuals as well as merchants can become curators, influential to other interested parties,” Luthi explained.
Logistics expertise is critical to its success — and to competing with Amazon. In 2013, the company acquired Webgistix, a U.S.-based logistics and services company specializing in fulfillment technology for e-commerce retailers. It owns a strategic network of company-operated fulfillment centers that enable merchants to reach 98% of e-commerce customers in the United States within one to two business days via ground delivery.
In taking on the U.S. market, the Japanese online giant is all too aware that as a relative unknown to American shoppers, it has got its work cut out for it.
“Amazon, eBay and Wal-Mart are major competitors whose predominance and brand recognition in the market present a challenge for a newly re-branded company such as Rakuten. com Shopping,” Luthi said.
“But we are confident that by uniting and empowering independent retailers into one strong force, we can compete.”