One brand, One Delivery, mobile: CEO talks with Japan merchants

Rakuten Founder and CEO Hiroshi “Mickey” Mikitani took to the stage at the 2018 Rakuten Ichiba EXPO in Tokyo last month to share the Group’s commitments for the future with the marketplace’s merchants. Mikitani spoke in depth about the biggest challenges and potential growth opportunities for the e-commerce industry, including AI, chatbots, mobile commerce, the importance of branding and – one topic that has been particularly relevant in recent months – logistics.

Tackling Japan’s logistics issues head on with end-to-end vision: One Delivery

Japan’s congested delivery network found itself in the spotlight last year, when existing logistics powerhouses announced price increases intended to address driver shortages and spikes in demand from online shopping, including the high cost of redeliveries to customers, when the first attempt at delivery is not completed. This is an issue of the highest priority for online shoppers and merchants across the board, many of whom include delivery fees in the prices of their products.

“One of Japan’s most fundamental logistics problems is that we are still using a model built on consumer-to-consumer deliveries – adding a new business-to-consumer delivery model on top of that has strained the limits of the existing system,” Mikitani elaborated. “This is a big challenge we can’t choose to avoid. We must take this on now to successfully achieve the One Delivery vision together.”

Mikitani went on to explain Rakuten’s plans for remedying the industry’s logistics issues through achievement of the One Delivery vision, initially announced to merchants at the New Year Conference earlier this year. In short, Rakuten will manage merchant deliveries from end to end, working through both Rakuten’s own logistics network and external partners to improve service, effectively manage costs and increase capacity.

Merchants will be able to store products in the expanding Rakuten fulfilment centers, to be picked and shipped with the aid of the latest automated systems. Customers will be able to opt for faster deliveries and not only be able to check the status of their packages, but also specify the exact delivery time and method (such as pickup at a convenience store or delivery locker, or alternatively, doorstep delivery).

Rakuten will utilize automation and AI to its full potential, merging delivery data and purchase data to combine deliveries of items purchased from different merchants. By boosting warehouse and delivery efficiency, Rakuten aims to cut down on both delivery time and costs for storage and transport.

“By managing the delivery process from end-to-end, under one system, we will be able to use data and AI to deliver better service, improved efficiency and effective cost management,” Mikitani told the audience. “The case now for us to take a more proactive role in logistics, and the last one mile, is one of simple logic, no matter how you look at it.”

Expanding fulfilment capacity and Rakuten Express

Mikitani also announced the opening of two new fulfilment centers in Chiba and Osaka, significantly expanding the capacity of the Rakuten Super Logistics business, which forms the backbone of the One Delivery rollout. The new facilities will take full advantage of Rakuten’s experience in automation, AI and e-commerce data analysis to optimize operations.

The new fulfilment centers also open up new possibilities for the recently announced “Rakuten-EXPRESS,” which enables deliveries to diverse customer-specified locations, including the option to leave the item by the front door. “We have already started running this as an end-to-end delivery service in central Tokyo,” Mikitani explained. “We began with Rakuten Books, then expanded it to our direct-sales business Rakuten Direct, and, more recently, we have started taking deliveries from our merchants as well.” Plans are also underway to expand to Western Japan.

A new start, a new logo

The recent renewal of Rakuten’s logo was also a key focus, as Mikitani explained how the change fits into Rakuten’s branding and strategy for future growth.

“The triangle underneath the word “Rakuten” was geometrically designed around the Japanese character for the number one,” he told merchants. “This one represents a new start. It also represents unity, as well as the concept of being the best. Lastly, it represents the unique appeal of each of our merchants and our platform as a whole.”

The design has already earned global exposure, first appearing on the shirts of FC Barcelona stars after Rakuten’s partnership with the club kicked off last July. More recently, it has been introduced in Japan with the Rakuten Eagles baseball team and Rakuten’s J.League soccer team Vissel Kobe, also now the home of international stars Lukas Podolski and Andres Iniesta.

A bold mobile strategy

The final big topic of the day was mobile, and the fundamental role it will play in the future of e-commerce and the Rakuten Group.

As of March 2018, 66.5% of Rakuten Ichiba’s gross merchandise sales were generated on mobile devices and the growth trend continues. At the same time, however, Mikitani said, “we are seeing mobile phone charges take up a huge share of household budgets: since 2000, it has jumped from 2.7% to 4.18%.”

He compared the rise in contract fees to when the Japanese government raised the sales tax from 5% to 8% in 2014. “When the sales tax went up it caused all sorts of problems and this jump in the price of contracts is basically another 1.48% dent in people’s budgets,” he argued. “We must be able to offer mobile devices at a more reasonable and convenient price for our customers and, ultimately, by reducing those fixed household costs, we can help to drive consumer purchasing on other items, including those offered by Ichiba merchants.”

This was also the idea behind the launch of Rakuten Mobile, Rakuten’s affordable mobile carrier business, which has acquired more than 1.5 million contracts in just three years and earned the top spot among MVNOs (mobile virtual network operators) in Japan. Mikitani made it clear that Rakuten would be aiming for the top even after building out its own mobile carrier network and becoming an MNO, so as to maximize the platform’s potential as a base for the entire Rakuten Ecosystem.

In closing, Mikitani reinforced the point that by offering a competitive mobile device as a base and a rich menu of diverse Rakuten services alongside that, becoming the number one mobile network operator in Japan will be a very attainable goal.