Rakuten's CASE STUDY

When we think of global giants in the digital space, names like Amazon, Alibaba, and Google might immediately come to mind. However, there is another powerhouse in this arena that hails from Japan and has carved a unique path through its comprehensive ecosystem model: Rakuten. Founded in 1997 by Hiroshi Mikitani, Rakuten has grown exponentially, offering a variety of consumer and business-focused services, ranging from e-commerce and digital content to communications and FinTech. This blog post delves into the fascinating story and strategies that make Rakuten a case study in business excellence.

The Genesis of Rakuten

Rakuten, which means "optimism" in Japanese, was founded with the ethos of empowering people and society through the internet. Hiroshi Mikitani, a Harvard MBA graduate, envisioned a platform that would strengthen local economies by democratizing commerce. The first iteration of this vision was Rakuten Ichiba, an online marketplace that allowed small and medium-sized enterprises to sell directly to consumers. Today, Rakuten Ichiba is Japan's largest e-commerce site, with over 49,000 merchants and millions of products. According to Rakuten’s Financial Report 2022, the platform contributed USD 13 billion in gross merchandise sales, cementing its dominance in the Japanese market.

The Comprehensive Ecosystem

What sets Rakuten apart is its comprehensive ecosystem model. Unlike competitors who often focus on a single or limited range of services, Rakuten has expanded horizontally, integrating its various services to provide a seamless user experience. This “Rakuten Ecosystem” encompasses e-commerce, digital content, FinTech, and communications. Firstly, Rakuten Ichiba remains the cornerstone of their e-commerce segment. Complementing this are digital content services like Rakuten Kobo, which offers millions of e-books, and Viki, a global video streaming service. In the FinTech domain, Rakuten Bank holds the title of Japan's largest online bank, Rakuten Card provides credit card services, and Rakuten Securities offers online brokerage services. In communications, Rakuten's acquisition of Viber in 2014 for USD 900 million (Forbes, 2014) added a messaging service that counts over 1 billion users globally.

A Multi-Faceted Revenue Model

A particularly fascinating aspect of Rakuten’s business strategy is its diverse revenue model. Within the e-commerce sector, revenue is mainly generated through transaction fees charged to merchants. According to their 2022 Financial Report, these fees accounted for approximately 45% of their e-commerce revenue. In the digital content sector, earnings come from subscription fees and advertising revenues, much like Netflix or Spotify. FinTech contributes through interest on loans, transaction fees, insurance premiums, and other service charges. The communications sector, particularly Viber, earns primarily from user fees for data and calls and advertising revenue. One unique feature is the Rakuten Super Points loyalty program, which bolsters customer engagement and retention. Customers earn points through various Rakuten services and can use them across the ecosystem, driving repeat purchases. As of 2022, over 70% of Rakuten’s customers were enrolled in this loyalty program (Rakuten, 2022), translating into significant cross-selling opportunities and customer lifetime value.

Innovative Customer Relationships and Data Utilization

Rakuten's approach to customer relationships is another aspect that underlines its uniqueness. We leverage a high level of personalization and internally sourced data to anticipate and meet customer needs effectively. According to a study by McKinsey, businesses that leverage data-driven decisions are 23 times more likely to acquire customers and six times more likely to retain them. Rakuten provides personalized recommendations, targeted promotions, and improved service delivery based on a comprehensive data analytics framework. Moreover, Rakuten places a strong emphasis on security and trust. Hiroshi Mikitani himself has often stated that "trust is the currency of the digital economy," emphasizing the importance of secure transactions and data privacy (Harvard Business Review, 2018).

The Human Side: Enhancing Social Value

While making a profit is essential, Rakuten also focuses on creating social value. The company champions life-changing values such as belonging and affiliation, emotional rewards through a well-designed and enjoyable user experience, and functional needs by integrating various services to simplify the user journey. Hiroshi Mikitani has mentioned that their ultimate goal is "to contribute to society by enhancing people's lives." Rakuten not only meets functional needs but also resonates deeply on an emotional and social level with its users.

Challenges and Future Prospects

No business journey is without challenges. Rakuten faces significant competition, both domestically from giants like Amazon Japan and globally from e-commerce titans like Alibaba. Additionally, the rapid pace of technological change requires continuous innovation and substantial R&D investment, slightly increasing operational costs. Nevertheless, Rakuten's prospects appear bright. The global e-commerce market is expected to grow to $6.54 trillion by 2023 (Statista, 2022), offering ample opportunities for expansion. Furthermore, their foray into 5G networks through Rakuten Mobile signifies an ambitious leap into telecommunications, setting the stage for future growth areas.

Conclusion

Rakuten's journey from a small e-commerce platform to a global digital powerhouse demonstrates the power of a well-executed ecosystem model, diversified revenue streams, and a relentless focus on customer needs. As we continue to observe Rakuten’s strategies and their impact on the digital economy, it becomes clear that they are more than just an e-commerce company—they are a comprehensive lifestyle and business solution provider, poised to shape our digital futures. In the fast-paced, ever-evolving digital landscape, Rakuten offers a compelling case study in innovation, diversification, and customer-centricity. For businesses looking to succeed in the digital age, Rakuten provides invaluable insights into creating and sustaining a multi-faceted, resilient, and customer-centric business ecosystem.