Rakuten eyes top spot in global e-commerce market by 2020

Toru Shimada, chairman and CEO of Rakuten Asia, said last week that Rakuten’s key model is to provide B2B2C.

B2C e-commerce would destroy the local retail business, but B2B2C e-commerce is a win-win solution – Rakuten is happy, local merchants are happy. B2C is the Amazon model. They keep putting sales targets to merchants and there are only a limited number of merchants. In a B2B2C model like Rakuten’s, there are a lot of merchants. 

“We empower local merchants with our e-commerce platform,” he said.

The worldwide e-commerce industry is suddenly growing. Especially in Asia, every country’s e-commerce is growing a lot. The growth rate depends on each country’s fundamentals, infrastructure and readiness. 

In Thailand, the average growth rate of e-commerce is 30 per cent. But Rakuten expects to grow at 50 per cent this year in this market. 

“Based on our internal research, Thailand’s e-commerce market size is estimated at US$1 billion. It is going to be $6 billion between 2020 and 2025. It is B2B2C combined. Thailand is one of the next star countries for Rakuten because it is growing a lot. The number of Internet users, smartphone users and 3G networks is growing as well. Of course, we continue to invest in this market,” he said.

The strategy to expand its e-commerce business in this region starts with logistics because a lot of e-commerce businesses in this region are SMEs and they are not capable of handling logistics themselves. Their e-commerce businesses are growing very well, but once growth meets their capability, the growth is stopped. So Rakuten provides a fulfilment service including inventory and stock management, logistics and pay per usage. 

The second approach is the payment infrastructure. The obstacle for e-commerce in Thailand is payment infrastructure. E-commerce in developed countries, compared to the entire retail industry, is about 6 per cent. In developing countries, e-commerce is less than 1 per cent of the entire retail industry. Many Thais do not use online payment. 

In developed countries like the US, Japan and Korea, the online payment ratio is almost 100 per cent. In developed countries, credit cards are very popular, while in developing countries, debit cards are a popular payment method, so Rakuten needs to offer several payment methods. 

In Thailand, about 40 per cent of total e-commerce transactions are done offline. Online payment is only 60 per cent even though everyone has a smartphone. But they do not complete their online shopping. 

“We need to encourage e-commerce users to use online payment as much as possible,” he said.

The third part is the e-commerce platform. Rakuten has been stepping into many markets, so it will transform local e-commerce by focusing on embedding the domestic market with the global e-commerce platform called Rakuten Merchant System Global (RMSG), where there are no boundaries throughout the global market. 

“All countries. Malaysia, Indonesia and Spain have already moved to use RMSG. Thailand is moving,” he said. 

The last part is advertising. Rakuten Ads is an application that allows merchants to advertise their shop and products on PriceMinister.

Rakuten’s e-commerce business is in 13 countries around the world, including Indonesia, Taiwan, Malaysia and Thailand. The service will begin in Singapore next month.

It has 52,000 merchants in Japan and 87,000 globally. In Japan, gross merchant sales are about US$20 billion. Asians use the Internet through mobile phones and tablets. They skip their PC. That’s why many start-ups in this region are booming and are investing in useful applications and platforms for smartphones. It is innovative. 

“We need to catch up to this trend. We are basically based on PC businesses. We are established in Japan. We see a good future for smartphone applications for e-commerce because the web technology on smartphones and tablets has improved and is of better quality,” he said.

However, e-commerce based on PCs is still the main business and it continues to expand. PC-based Internet saw early adoption of this type of service in this region. That is why PC-based Internet users are very good customers for e-commerce business compared to smartphone users. The number of Internet users via smartphone will be much bigger than via PCs in the near future, but worldwide, PC-based Internet is a very important platform for e-commerce.

E-commerce users in other countries are not different. The difference is merchants. In developing countries, most merchants are SMEs and they are beginners. Rakuten seeks to educate them in terms of e-commerce via its Rakuten University, a team providing training in countries where the firm operates.