Optimism

Updated: Feb 23

Optimism -Rakuten, biggest Japanese online retail store, shows optimism in the market If you are a fan of soccer, especially of FC Barcelona, you might have noticed a brand label “Rakuten” printed on the team’s uniform. It sounds like a Japanese combat video game (Tekken) or a Japanese anime about a blade battle (Bakuten Shoot Beyblade). Indeed, Rakuten is one of the biggest homegrown online retail companies that competes against Amazon in Japan. Rakuten (“optimism” in Japanese) is pretty optimistic about its future. Founded in 1997 by Hiroshi Mikitani, Rakuten has become the second-biggest online retail company in Japan. It took up a 20% share of the market in 2016 while Amazon did 23%, according to Euromonitor. (In the US, Amazon takes up more than 50% of the market share as of 2019.) Interestingly, just like its American rival, the giant Japanese brand not only focuses on online retailing but also branches out its business into many other different services: mobile payments, online banking, insurance, music streaming, video streaming, etc. In fact, the total annual sales of the company in Japanas of June 2019 were estimated to be US $31.7 billion, surpassing Amazon’s US $25.42 billion sales. So, what makes Rakuten competitive? Many business experts say that Rakuten’s uniqueness makes the company thrive. First, unlike Amazon’s concise website that shows items related to the user’s past purchases on the main page, Rakuten bombards its main page with products that are not necessarily relevant to the user’s preference. And the website gives the sellers much leeway to go on a litany in the product description. While this renounces the “simplicity” many business models pursue these days, it is known to appeal to conventional customers who like window shopping and delving into the details of products. Second, Rakuten gives customers points when they purchase products or use any of its services. (Rakuten styles the entire chain of services as “Rakuten World”). Afterward, customers can use those accumulated points at any of its 40-odd subsidiaries. Rakuten is known to offer the most efficient point system in Japan. While many predict that Amazon and Rakuten will equally dominate the Japanese online retail market, the rise of Yahoo Japan should be heeded. Z Holdings Corp. and South Korea-based Naver Corp. on Nov. 18 announced their plans for a merger of Yahoo Japan and LINE, their respective subsidiaries. (LINE is Japan’s most popular messenger app with 194 million global users.) Experts predict that Yahoo Japan can optimize its online retail business through a merger with LINE. In addition, the company just took over Zozo, Japan’s biggest online fashion retailer, in September. Yahoo Japan was estimated to take up a 10% share of the online retail sector in 2016, third after Amazon and Rakuten. Whatever may happen at Yahoo Japan or Amazon, Rakuten founder Mikitani is content with his company’s direction. “As far as our gross is concerned, we are growing at the right speed,” he said in an interview with Bloomberg about losing market share to Amazon in March 2019. Investors are curious to see if the CEO will stay optimistic about his company’s future in Japan.

@dylanyang0930 theasians.org

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