Rakuten’s 20th Anniversary: Our founding story
To celebrate the 20th anniversary of Rakuten’s founding in 1997, Rakuten Today presents a series of special posts exploring Rakuten’s unique history, culture and achievements.
MDM, Inc., the predecessor to Rakuten, Inc., was founded two decades ago on February 7, 1997. Just four months later, when it first launched its e-commerce marketplace Rakuten Ichiba, the company was a small start-up with six employees. But they were young, enthusiastic and committed to pursuing their dream – even if it involved some sweat and tears along the way, there were also many laughs. Following are some episodes from those early days that shed light on the underlying essence of Rakuten’s corporate culture.
Rakuten might not have been an internet company?
Nowadays, Rakuten is known for its market-leading Rakuten Ichiba internet shopping mall, but the company could have been very different. More than 100 business ideas were originally considered, such as creating a nationwide chain of small-scale craft beer breweries, franchising a U.S. natural yeast bakery in Japan, or doing parallel imports of contact lenses. But, in the end it was an internet shopping mall that was chosen, because it would not require much capital, had future potential, and could create new social value.
Belief in the potential of the internet
In launching Rakuten Ichiba, Hiroshi Mikitani made four crucial assumptions, namely, that (1) the internet would become simpler and more convenient to use, (2) the internet would undergo explosive growth, (3) Japanese consumers would come to buy things via the internet, and (4) the internet would transform retail and distribution of goods. At the time in Japan, 94% of internet access was through slow dial-up connections, so while these assumptions might appear obvious today, at the time they seemed so unlikely that many people did not take him seriously.
Mikitani and his colleagues, however, never wavered. They were propelled into action by their passion to tap what they saw as the internet’s potential – to enable small regional stores to compete on the same stage as larger companies with nationwide operations.
An easy way for retailers to sell online
The business concept of Rakuten Ichiba was set forth in a business plan finalized on October 24, 1996, about six months before its launch. The idea was to provide a platform where people who were good at selling things, but inexperienced with the internet, could easily create and make changes to their product web pages.
Most of the existing internet shopping malls at the time outsourced the creation of webpages to professionals. Once the pages were created, it was extremely difficult for merchants to revise them on their own, since they lacked the skills, and the fees for having revisions made were quite high. As a result, product pages would be neglected and quickly become outdated, with listings of products that were no longer in season and information about sales that had already ended. The result: people stopped coming back to visit them.
Analyzing the factors causing these difficulties, Rakuten came up with the “circle of success” concept, which became the foundation for the Rakuten Merchant Server (RMS), the store management system for participating merchants. The RMS fee was a fixed 50,000 yen per month, an exceptionally low price at the time.
Aiming for an active and open market
The service name, Rakuten Ichiba, was chosen as one that matched the business concept. It combines rakuten, meaning cheerful and optimistic, with ichiba, marketplace. The name brings to mind the bustling markets that resulted from the rakuichi rakuza policies implemented by Oda Nobunaga in the sixteenth century, which enabled people to freely open markets and set up new businesses. Another service name considered was Porta Palazzo, which is the name of one of Europe’s largest open air markets in Turin, Italy.
The thinking behind long web pages
One of Rakuten Ichiba’s distinguishing features today are its long product pages, positively brimming with information. These trace back to July 1998, when a particular merchant, Egg Merchant of Shinshu Ina Valley (Shinshu Inadani no Tamagoyasan), began experimenting with them. Owner Rei Kimura had previously applied to join Rakuten Ichiba to sell fresh eggs, but the application was rejected due to concerns that eggs might break during delivery and the difficulty of maintaining freshness. Kimura had graduated from a university in Tokyo and had worked at a trading house before returning to Nagano Prefecture to take over the family business. His strong desire to sell his wonderful eggs nationwide finally led Rakuten Ichiba to accept his application. But the first two years were rough, since hardly any eggs were sold.
Kimura didn’t give up, however. Instead, he added more information to his product page, describing his affection for his cute chickens, his special feed, and the environment in which he raised his chickens, including many photographs. The more he posted, the longer the page grew. And as it did, more and more customers came to visit the page, until his eggs eventually became so popular that supplies sometimes ran short. As his product page grew longer and longer, it visibly conveyed to customers Kimura’s passion for his eggs.
Thinking that there must be many others on Rakuten Ichiba just as passionate about their products as Kimura, e-commerce consultants shared this successful case with numerous merchants, and the long web page came to be a feature of Rakuten Ichiba. And it continues to be so today.
In 20 years, much has changed. But the things that made Rakuten unique and successful all those years ago continue to guide our work today – whether it’s our belief in the power of the internet to empower, our unique store management system or even the unflagging passion of our retailers to deliver the very best products they can.
