A mobile future for e-commerce: Mikitani at New Year Conference

At the Rakuten New Year Conference each January, Rakuten chairman and CEO Mickey Mikitani takes to the stage to share his vision for the future of the e-commerce and tech industries.

This year, Mikitani had one core message for the 30,000 Rakuten Ichiba marketplace merchants and stakeholders tuning in: Mobile!

Mobile matters more than ever

“In 2006, back when we were still using flip phones,” Mikitani reminisced, “I spoke at this very conference about how we needed to focus on Mobile! Mobile! Mobile! At a time when mobile sales made up basically 0% of our GMS (gross merchandise sales), I predicted that it would reach as high as 70% in the future.”

This prediction was fulfilled – and quickly surpassed.

“On this past New Year’s Day, 89.3% of total GMS came through mobile. What this means is that mobile is no longer just our main source of revenue: It’s becoming nearly all of our revenue.”

“The whole world called this a pipe dream, but we did it. And our software is becoming increasingly open source – something unheard of in the telecom space.”

Mickey Mikitani, Chairman & CEO, Rakuten Group

For the 2023 conference, Mikitani deployed a new but familiar rallying cry: Mobile! Mobile! Mobile! Mobile!

“As you have no doubt read in the news, we are currently undertaking a new challenge in the form of Rakuten Mobile,” he reminded the conference. “But we are not trying to create just another mobile carrier like Softbank, au or Docomo. We are creating another enormous new platform to add to the Rakuten Ecosystem.”

Trailblazing, software-centric telecommunications

Powering its ambitious journey to become Japan’s fourth major mobile carrier is Rakuten Mobile’s adoption of a strong focus on cutting-edge software-based solutions – a pioneering approach that is sparking a transformation in the hardware-heavy telecom industry.

“The technology we have developed is simply unparalleled,” Mikitani explained with both pride and excitement. “Traditionally, mobile networks have always needed giant network hardware equipment from the likes of Huawei and Nokia. We’ve actually changed all of that to operate solely with software.”

The ambitious plan attracted its fair share of skeptics, but Mikitani believes the results speak for themselves, “The whole world called this a pipe dream, but we did it. And our software is becoming increasingly open source – something unheard of in the telecom space.”

This trailblazing network architecture has allowed Rakuten to provide a truly unlimited service at just a fraction of the cost of other networks. Mikitani revealed that subscribers of other carriers averaged just 9.3GB of data usage per month, compared to Rakuten Mobile’s 18.4GB.

“That is how we’ve achieved this extraordinarily fair and accessible plan – 2,980 yen no matter how much data you use. A mobile plan for the 100-gigabyte age,” he declared. “By freeing consumers from these extremely expensive, ludicrous mobile plans, we hope they’ll become fans of Rakuten Group and Rakuten Ichiba and choose to use our services.”

Rakuten Mobile empowering growth on Rakuten Ichiba and beyond

“The Rakuten Ecosystem consists of Rakuten Ichiba in the center, with services like Rakuten Card, Rakuten Securities and Rakuten Bank surrounding it as supporting pillars. And the strongest of these pillars will be Rakuten Mobile.”

“Rakuten is the one platform that continues to grow. The main reason for this is our ecosystem, and the strongest pillar of this ecosystem is Rakuten Mobile.”

Mikitani cautioned the merchants and stakeholders at the conference not to dismiss Rakuten Mobile as a separate undertaking, unrelated to Rakuten’s other businesses.

“This is all part of a plan to build an ecosystem that’s stronger than anything that has existed before,” he explained. “This is our strategy to boost GMS growth for everyone here and the biggest takeaway should be that this growth is closely intertwined with the success of Rakuten Mobile.”

Mikitani laid out his vision to grow Rakuten’s domestic e-commerce revenue to 10 trillion yen by 2030. Rakuten Mobile, he told the conference, would serve as a major pillar in this plan.

“Right now, domestic e-commerce GMS for Rakuten Group has reached 5.6 trillion yen,” he reported. “I believe that Rakuten Mobile will contribute around 2 trillion to this goal.”

Mikitani’s reasoning is simple: “Rakuten Mobile customers are buying more and more on Rakuten Ichiba. That means that as Rakuten Mobile subscriber numbers grow, so will your GMS.”

It’s more than just a hunch: Mikitani demonstrated the magnitude of this effect with hard data.

“When users sign up for Rakuten Mobile, on average they’re using 4.5 Rakuten services. One year later, they’re using seven services on average. That’s pretty amazing.”

“Subscribers purchase an average of 49% more – nearly 50% – annually compared to before joining Rakuten Mobile,” he revealed. “86% of Rakuten Mobile users shop at Rakuten Ichiba… If Rakuten Mobile reaches 15 or 20 million users, everyone’s total GMS will naturally increase by at least 50%.”

There are several factors that could be driving this phenomenon, Mikitani thinks. These include the considerable savings Rakuten Mobile subscribers enjoy, freeing up household budgets and effectively boosting disposable income.

Rakuten’s highly popular loyalty point program is also likely playing a role: Mobile subscribers enjoy a higher rate of return when shopping on Rakuten Ichiba. A similar program was implemented for users of Rakuten Card, which now handles over 70% of all transactions on the platform and has seen almost 30 million cards issued in Japan.

“We want to do the same thing with Rakuten Mobile – but on a scale several times larger.”

Rakuten Mobile is also having an exciting effect on the wider ecosystem – namely, on user engagement with multiple Rakuten services.

“When users sign up for Rakuten Mobile, on average they’re using 4.5 Rakuten services. One year later, they’re using seven services on average. That’s pretty amazing.”

Growing Rakuten’s core and the ecosystem

“Rakuten is the only company in the world that can do this because we’re not just Rakuten Ichiba, but also Rakuten Travel, Rakuten Card, Rakuten Bank, Rakuten Securities and more – all working in tandem,” Mikitani argued. “Last year, almost all major e-commerce companies in the U.S. saw decreases in market share. The same probably happened in the Japan market, but Rakuten is the one platform that continues to grow. The main reason for this is our ecosystem, and the strongest pillar of this ecosystem is Rakuten Mobile.”

Mikitani touched on the skepticism directed towards the mobile business, comparing it to that received by Rakuten’s credit card, banking and travel businesses before each turned their respective industries on their heads.

“I truly believe that Rakuten Mobile can surpass the big three mobile carriers in Japan and I believe that its success is the most effective way to dramatically grow your business,” he told the conference attendees. “Everything revolves around a core. That core is Rakuten Ichiba. It’s our heart, and it makes it possible for us to continue to grow.”