If anyone can be considered an expert on the Rakuten Ecosystem, it’s Naho Kono. A veteran of Japan’s online services industry, Kono has been engaged in Rakuten’s diverse array of businesses for nearly two decades. She took the helm of Rakuten Ichiba in 2016, and today serves as Rakuten Group Executive Vice President and Chief Marketing Officer.
Earlier this year, Kono shared her expert insights on Rakuten’s ecosystem through a virtual keynote at the 2022 World Retail Congress in Rome, an annual summit that attracts some of the most influential leaders in the retail industry. Below is a summary of her address.
An ecosystem powered by points
2022 marks Rakuten’s 25th anniversary. We launched Rakuten Ichiba in 1997, and e-commerce remains a core business to this day. But we have also expanded our scope of operations over these 25 years, launching services in fintech, digital content and communications to create a dynamic ecosystem of over 70 offerings in Japan alone.
We serve our customers in every part of their lives, from managing their finances and travel plans to providing their mobile phone service. This approach is clearly a winning formula, as we have attracted some 100 million registered members in Japan, who have helped drive many of our services to the top of their respective industries.
At the heart of this ecosystem is our loyalty program Rakuten Points. This program has been consistently named the number one loyalty points program in Japan in overall customer satisfaction, in part thanks to the high liquidity of Rakuten Points: In addition to Rakuten’s own services, customers can spend their points at offline locations such as their local convenience store or corner drugstore for just about anything available on the shelves.
We also give customers plenty of opportunities to earn points: In 2021 alone, we issued over 530 billion points — equivalent to roughly 4.6 billion US dollars. Our customers use an average of around 90% of their points, an extremely high usage rate for a loyalty program.
Issuing Rakuten Points causes a kind of chain reaction that is considerably more effective than simple coupons or cashback for attracting customers back into the Rakuten Ecosystem — a model that is not easy to replicate.
Overcoming the pandemic through diversity
The pandemic has had a significant impact on businesses around the world, and has shifted the way people work, shop and enjoy leisure time. The uncertainty of the last few years has been difficult for many in our industry to manage, from partners to merchants and employees.
At the same time, we have seen an acceleration of digital transformation in Japan. The market penetration of e-commerce in the retail industry grew from just 6.8% in 2019 to an estimated nearly 20% in 2021.
We expect this trend to continue. In fact, our online platforms have seen customer loyalty rise — in our e-commerce segment, our retention rate of customers making repeat purchases within a three-month period rose to nearly 75%.
Other Rakuten services such as Rakuten Travel were negatively impacted in the early stages of the pandemic. Today, however, Rakuten Travel’s recovery is outpacing the industry average, and we’re seeing a similar story with our credit card business, with Rakuten Card growing 25% compared to an industry average of 4%.
When we launched the first Rakuten-branded credit card almost 20 years ago, some people in the financial industry told us to stay in our lane — to stick to e-commerce. Today, Rakuten Card is Japan’s leading credit card provider, with over 25 million cards issued.
We have since diversified our ecosystem even further with the launch of our mobile business. With the addition of Rakuten Mobile, we are seeing a new acceleration of growth in cross-use and increased use of our services. For example, mobile subscribers who are new to the ecosystem spend almost 70% more on our e-commerce marketplace.
An ecosystem of partnerships
The Rakuten Ecosystem reaches beyond Rakuten’s own offerings. The online e-commerce marketplace near the core of the ecosystem also benefits from the presence of some 55,000 merchant partners, many of whom grew up with us on the platform. This marketplace has always been our first priority, unlike some other e-commerce platforms which are more focused on their own first-party transactions.
Breaking down the barriers between offline and online retail is a key area of focus for us. By working across traditional boundaries, we can collaborate and share expertise with partners from outside our own industry.Naho Kono, Executive Vice President and CMO, Rakuten Group
Working across traditional boundaries to partner, collaborate and share key strengths is also crucial. Our alliance with Japan Post to build a robust logistics platform together for merchants is a great example of this. Our alliances with supermarket retailers in Japan is also starting to yield fruit — with customers in stores being able to access new services and incentives, and partners able to leverage new platforms and drive efficiencies.
We have announced a new collaboration with Japan’s nationwide supermarket chain Seiyu, through which Rakuten Points can be earned and used at 300 stores across the country, and we also began issuing Seiyu-branded Rakuten credit cards.
Through these partnerships with physical businesses, we have expanded our ecosystem into the offline world. This not only boosts convenience for our customers, but allows for highly effective marketing strategies that merge online and offline data.
Breaking down the barriers between offline and online retail is a key area of focus for us. By working across traditional boundaries, we can collaborate and share expertise with partners from outside our own industry.
What’s in store for the Rakuten Ecosystem?
As a tech company, we are continually pursuing the potential of technology not just to provide better services, but to open up new markets and address core issues facing society today, from equal access to information through the internet to climate change.
Over the years Rakuten has grown and expanded to 30 countries and regions – offering services worldwide. And this global vision continues to drive us to reach new heights.Naho Kono, Executive Vice President and CMO, Rakuten Group
One example is drones: We have conducted more than 20 drone delivery trials and services in locations across Japan, over land, up mountains and over the ocean. The goal is to enable deliveries of essential items by drones and other unmanned vehicles to people living on remote islands and other logistically challenged locations. We’re developing and evolving this technology with our partners to lay the path for the next generation of efficient deliveries.
Our mobile operator business is another area where we have the opportunity to provide new open technology and democratize mobile services. Consumers in Japan were paying several times what their counterparts in the U.S. or much of Europe paid. Since we launched the world’s first fully virtualized cloud-native mobile network, the average mobile phone bill in Japan has dropped over 60%, making mobile services more affordable for everyone across the country.
We’re also taking a proactive stance on climate change, which we believe is one of the biggest challenges facing our planet today. As a first step, Rakuten Group, Inc. achieved 100% renewable energy in 2021, four years ahead of our 2025 target. Now we are turning to consider how to achieve that same goal in all of our businesses across the Rakuten Group. This is no small goal.
To the next 25 years
Over the last 25 years, we have remained optimistic, taking on challenges that others told us were impossible. We have been able to overcome these challenges thanks to our unbreakable spirit of teamwork, a healthy embrace of new technologies and disruptive innovation, and our powerful ecosystem.
Over the years Rakuten has grown and expanded to 30 countries and regions — offering services worldwide. And this global vision continues to drive us to reach new heights. I’m looking forward to what we can do together in the next 25 years.