Optimism for a digital tomorrow

Rakuten Chairman & CEO Mickey Mikitani opened this year’s Rakuten Optimism conference on October 12 with a keynote address that outlined his ambitions for the future of the company — and his optimism for a digital-driven Japan.

“How would things have looked if we didn’t have the digital technology we have today?” he posed to tens of thousands of virtual attendees. “We wouldn’t have been able to work remotely, or communicate the way we’re doing now. We wouldn’t have been able to buy and sell things like we do today online. Whether we like it or not, it’s thanks to digital technology that we’ve been able to keep the global economy running as much as we have.”

E-commerce, loyalty points and logistics 

Mikitani revealed continued double-digit growth for Rakuten’s e-commerce business, projecting five trillion yen in domestic shopping gross merchandise sales for 2021. One important ingredient in this success recipe, he asserted, was Rakuten Points, the company’s ever-popular, highly versatile flagship loyalty program.

“As of August this year, we’ve given out over 2.5 trillion yen (cumulative) worth of points. It’s an incredible figure!”

Rakuten Ichiba has also adapted its logistics strategy to keep up with changing customer expectations. “Around 92% of merchants are signed up with our free shipping program,” he revealed, noting that these merchants make up the vast majority of the platform’s revenue.

Mikitani revealed continued double-digit growth for Rakuten’s e-commerce business, projecting five trillion yen in domestic shopping gross merchandise sales for 2021.

Earlier this year, Rakuten partnered with Japan Post to create the JP Rakuten Logistics company. Rakuten’s own logistics facilities cover nearly 70% of Japan’s population, and the two companies will not only merge their existing fulfillment centers, but also build a number of new ones, driven by a cutting-edge digital platform that will be open for all to use.

“To achieve truly universal service — to reach every last corner of the country with quick and affordable delivery services — it made sense to partner with Japan Post, who already have their own comprehensive delivery network.”

A robust fintech ecosystem

Rakuten Bank recently made headlines after announcing preparations to go public. The online-only bank has seen astonishing growth in recent years. Total deposits have expanded to more than 6 trillion yen, while accounts also number more than 11 million. But the banking business is just one part of a robust fintech ecosystem, Mikitani told his audience.

Rakuten Card President Masayuki Hosaka announced onstage new milestone-breaking goals for the mid-term: 30 million cards, shopping transaction value of 30 trillion yen, and a market share of 30%, dubbed the “Triple Three” goals.

“The capital provided by Rakuten Bank can be used to operate services like Rakuten Card’s revolving repayments or cash withdrawals, or to connect with Rakuten Securities,” he explained. “All of our financial services — Bank, Card, QR payments, e-money, securities, insurance — are consolidated into one [ecosystem], and organically interlinked with our e-commerce business.”

This tight integration is one factor driving Rakuten Card’s notable success in Japan. The credit card has already been recognized as Japan’s leader in gross shopping transaction value, and later in the day at Rakuten Optimism, Rakuten Card President Masayuki Hosaka announced onstage new milestone-breaking goals for the mid-term: 30 million cards, shopping transaction value of 30 trillion yen, and a market share of 30%, dubbed the “Triple Three” goals.

“The financial ecosystem we have created here is truly something you could call sustainable,” said Mikitani. “I don’t think an ecosystem like Rakuten’s could exist anywhere else in the world.”

Mobile: More than just a telco

“Traditionally, mobile carriers have gone in the opposite direction: They started with a mobile network, and swam upstream to start providing services like online shopping, loyalty programs and financial services. But we started with those higher-level services.”

Mickey Mikitani, Chairman and CEO, Rakuten Group

Another major driver of the company’s ecosystem success, noted Mikitani, is Rakuten’s fast-growing mobile business. “Rakuten Mobile is in a different league than other mobile operators… We’re much more than just a telecom business.”

Continued Mikitani, “Traditionally, mobile carriers have gone in the opposite direction: They started with a mobile network, and swam upstream to start providing services like online shopping, loyalty programs and financial services. But we started with those higher-level services.”

Mikitani pointed to Rakuten’s strong membership base as a key to driving forward the mobile service.

“One argument I often hear is that the fourth major mobile carrier in any given country rarely succeeds. But we have the strength of over 100 million memberships behind us here in Japan. Acquiring new customers isn’t as much of an issue for us.”

Going global with cutting-edge telco tech

Mikitani is also optimistic about Rakuten Mobile’s revolutionary fully virtualized cloud-native network. “Rakuten Mobile runs almost completely on software. There is practically no proprietary hardware.”

The system offers a high level of flexibility and security while also driving down costs for operators, achieving a network quality that has earned Rakuten Mobile numerous awards from industry organizations and media outlets. 

“This is a huge market..It’s expected to be worth 15 trillion yen (approximately 131 billion USD) by 2025. And Rakuten Symphony is the only company that’s able to offer all of these cutting-edge services.”

The entire suite of technologies is being made available to global operators through the newly formed Rakuten Symphony, and interest is already strong: German operator 1&1, who also spoke at the conference, will be taking on Rakuten’s entire stack.

“This is a huge market,” Mikitani revealed. “It’s expected to be worth 15 trillion yen (approximately 131 billion USD) by 2025. And Rakuten Symphony is the only company that’s able to offer all of these cutting-edge services.”

Embracing a post-pandemic digital future

“The pandemic has shown us that it’s not only possible to do things digitally — it’s often much more convenient, efficient and fun.”

COVID-19 transformed lifestyles around the world, but Mikitani remains optimistic that some of those changes were positive ones. “The pandemic has shown us that it’s not only possible to do things digitally — it’s often much more convenient, efficient and fun.”

Many eyes were opened to new perspectives on the benefits of digital technology, and not everything needs to go back to the way it was: “It’s no longer absolutely necessary to meet face-to-face,” he commented. “70,000 people from around the world registered in advance for this conference. If we had only been able to hold this conference as a physical event, I’d be speaking to 5,000 of you at most.”

“Whether we like it or not, the zero cash economy is coming.” 

The pandemic has also given significant momentum to Japan’s cashless movement, and Mikitani stressed the importance of embracing new technologies such as blockchain to propel the country forward.

“You can calculate the cost of handling physical cash to be about five percent,” he declared. “A lot of businesses insist on only handling cash because they don’t want to pay the credit card fees. But between ATMs and all the extra accounting work that cash requires, using cash can actually be considerably more expensive.”

This reluctance to make use of new technologies can also be costly for the economy at large, Mikitani argued. “Five percent is an incredible figure. The Japanese economy often sees growth rates of under one percent. Imagine if it suddenly became five percent more efficient,” he posed. “Whether we like it or not, the zero cash economy is coming.”

5G, AI, blockchain and IoT all have the potential to bring about massive changes to society, but Mikitani emphasized that it’s up to the government to stay with the times and take full advantage of what these technologies can offer.

“All of the systems, regulations and laws from the old world need to be updated for the new one,” Mikitani declared. “Systems for these new frameworks need to be created at the national level. Any country that can’t do that will fall behind.”