Together into our tech future: Rakuten CEO Mickey Mikitani on digital Japan and ecosystem synergy

From e-commerce to fintech to mobile communications: Rakuten CEO Mickey Mikitani works on the frontlines of a broad spectrum of future-oriented industries. Each summer, Mikitani joins thousands of e-commerce merchants for the annual Rakuten Expo, where he shares his uniquely valuable insights on business and the greater tech landscape. On July 21, 2022, more than 1,600 attendees were on hand to listen to Mikitani’s speech in person, with a further 30,000 joining online.

Japan playing digital catch-up

In recent years, Japan has taken a proactive approach to the adoption of digital technologies such as cashless payments, joining a global digital shift that has been further accelerated by the COVID pandemic.

“It’s not simply that shopping online is more convenient, fun, or affordable than physical retail. It’s that society itself is moving toward digital transformation.”

MICKEY MIKITANI, CHAIRMAN & CEO, RAKUTEN GROUP

“The whole world is facing a digital transformation,” Mikitani told the conference. “The internet is now the main way we watch movies and TV shows. Digital currencies will soon be coursing through the global economy.”

But Mikitani believes that Japan still has some catching up to do. Despite significant growth in Japan’s e-commerce sector, physical commerce still makes up the overwhelming bulk of the local retail industry.

“Japan still lags behind Europe and North America in this regard. I believe this gap will continue to shrink,” he predicted. “Online shopping as a share of overall retail could increase from the current 7-8% to 15%, 20%, even 25%.”

The pandemic has undoubtedly played a role in driving more shoppers online, but one major question remains: Will these shoppers stay online?

“Japanese e-commerce has undergone significant growth — particularly in the last year. A lot of people, unable to leave their homes much or travel, turned to online shopping. Most important here is that this phenomenon has sparked a marked change in behavior,” Mikitani argued. “It’s not simply that shopping online is more convenient, fun or affordable than physical retail. It’s that society itself is moving toward digital transformation.”

The Rakuten ID is a lifestyle ID

“Over the last three years, GMS (gross merchandise sales) on Rakuten Ichiba have grown,” Mikitani reported. “We reached five trillion yen in domestic e-commerce GMS last year. We now have over 36 million monthly active users in Japan using at least one service, and we will soon reach 40 million.”

One major driver of new users has been Rakuten’s fintech businesses; namely, payment services such as Rakuten Pay and Rakuten Card.

“The synergy between our financial services and e-commerce has been particularly significant. The retail share of online shopping in Japan is still just 7-8%, meaning that over 90% of retail is still physical,” he reasoned. “By covering this space through our credit card, payments and bank services, many consumers are basically doing all of their shopping through Rakuten.”

As Japan goes increasingly cashless, more and more customers are engaging with the Rakuten Ecosystem for the very first time through services like Rakuten Pay. The service is helping Rakuten overcome a crucial hurdle of customer acquisition that many online businesses face: the jump from offline to online.

“I believe that online-merges-with-offline (OMO) marketing will be extremely important going forward,” Mikitani stressed. “We are trying to make the Rakuten ID into something like a lifestyle ID.”

This lifestyle ID concept can already be found in the wild: Mikitani related his recurring experience meeting customers who simultaneously shop on Rakuten Ichiba, use a Rakuten credit card, hold a Rakuten Bank account, subscribe to Rakuten Mobile and even have a Rakuten home loan.

“With Rakuten involved in every aspect of a customer’s lifestyle like this, we become their first choice,” he explained. “If they go traveling, they’ll book through Rakuten Travel, which commands a 20% share of accommodation reservations in Japan. We’re on our way to issuing nearly 30 million Rakuten Cards, and have 12 million Rakuten Bank accounts now. Meanwhile, Rakuten Securities is one of Japan’s largest (online) securities brokers, in terms of the number of accounts.”

In fact, of the 36 million monthly active users in Japan, Mikitani revealed that around 75% were using multiple Rakuten services, while customers active on both Rakuten Travel and Rakuten Ichiba had increased by over 50% since the previous year.

“This is Rakuten’s strength: not just shopping, but a combination of many different services.”

Rakuten Mobile is making its presence felt

At the beginning of 2022, Rakuten’s cutting-edge mobile network hit a major milestone of 97% 4G population coverage in Japan. Mikitani stressed that the performance of Rakuten Mobile is highly relevant to Rakuten Ichiba merchants — and not only because mobile devices are responsible for the overwhelming majority of the platform’s sales volume.

“Over 20% of new Rakuten Mobile subscribers are engaging with the Rakuten Ecosystem for the first time,” he reported. “Meanwhile, over 80% of Rakuten Mobile users are shopping on Rakuten Ichiba.”

Every service seeks to encourage return customers, and this is an area in which Rakuten Mobile is making a clear impact: “This return ratio jumps by 7.8 percentage points among those signed up with Rakuten Mobile. It’s an extremely sticky service.”

Rakuten Mobile is not only sticky, but also highly effective at encouraging more spending, Mikitani argued.

“Users who have joined Rakuten Mobile are spending 54% more on Rakuten Ichiba,” he revealed. “Right now, we have just under six million subscribers, but if this grows to 20 million, this alone would push Rakuten Ichiba’s total GMS up by 30-40%.”

Mikitani stressed that the growth of Rakuten Mobile was closely intertwined with that of other services like Rakuten Ichiba, describing Rakuten Mobile as the glue holding the various Group services together, working through loyalty programs like Rakuten Points.

“We have now issued a total of over three trillion Rakuten Points,” Mikitani boasted. “I can see us reaching a time in which we give out a trillion points every single year.”

“This is Rakuten’s strength: not just shopping, but a combination of many different services.”

MICKEY MIKITANI

Together into the future

Mikitani spent a significant portion of his time with Rakuten Ichiba’s merchants exploring Rakuten’s relationships, not just with its partners, but with the environment.

Including a joint venture with Japan Post, Rakuten is pursuing a number of innovative and highly efficient logistics solutions (even some involving drones and autonomous robots). Meanwhile, Mikitani is optimistic about taking Rakuten Group, Inc.’s success in transitioning 100% of its operations to renewable energy and extrapolating it across the wider spectrum of Group companies.

All of these undertakings, he stressed, are only possible thanks to the human touch provided by Rakuten Ichiba’s community of merchants.

“Ultimately, the one belief that has remained consistent over the past 25 years is how vitally important our merchants are to us,” Mikitani affirmed. This merchant-centric approach sometimes puzzles pundits from abroad, but Mikitani isn’t fazed: “I tell them it doesn’t matter why ⁠— it just is. That’s one of the good things about the Rakuten Group. Maybe it’s a weakness, but our vision is to create a truly world-class, fun, and exciting shopping mall that still has a human touch.”