Excerpted from an address by Rakuten Group Chairman and CEO, Mickey Mikitani, to Rakuten Ichiba merchants at Rakuten Expo 2021.
“Last summer we experienced a tremendous surge in customer demand, spurred by COVID-19. Now, even in the wake of that remarkable growth, we’re seeing a sustained 17% increase year-over-year. Our two-year compound annual growth rate (CAGR) is growing steadily at 23.6%.”
Thank you everyone for joining. I hoped we would be able to hold this event in person this year, but I believe we are taking the safest route by inviting you all to gather online. It’s great to have more than 25,000 viewers joining us from across the country.
For many of us in e-commerce, it’s been a very busy year. Last summer we experienced a tremendous surge in customer demand, spurred by COVID-19. Now, even in the wake of that remarkable growth, we’re seeing a sustained 17% increase year-over-year. Our two-year compound annual growth rate (CAGR) is growing steadily at 23.6%.
When looking at this impressive growth, one of the questions that often comes up is whether this is only attributable to the pandemic. In reality, the strength of our business is not the result of just one year’s events; Nor is the growth we’ve seen since the beginning of the pandemic, or the strong user retention.
With the introduction of what we call the Rakuten Mobile Triangle Strategy, we are confident that we will continue to see strong gains for both the business overall and for our merchant partners.
I’d like to share why this strategy — which allows us to hit three birds with one stone — is so important to our future growth.
“With e-commerce as an anchor, Rakuten has built an ecosystem of businesses that support and enhance one another and create value for the consumer.”MICKEY MIKITANI, CHAIRMAN AND CEO, RAKUTEN GROUP
An Ecosystem like no other: Creating consumer value through interconnected services
Rakuten Ichiba was launched almost 25 years ago by young people, including myself, who shared an ambition to empower small-scale merchants from regions across Japan, as well as companies both large and small. We wanted to revitalize Japan. An information revolution was just around the corner, and we knew change was necessary, so we started this company.
Since the beginning, the core of our business has been empowering merchants with the freedom to do what they needed. Each merchant could showcase their own uniqueness. This made Rakuten Ichiba unique. And since then, we’ve also shifted our focus to better incorporate the consumer’s point of view.
“Rakuten’s domestic shopping gross merchandise sales (GMS), which includes Rakuten Ichiba and other businesses, is on course to reach 5 trillion yen this year.”
Looking at our sales figures, Rakuten’s domestic shopping gross merchandise sales (GMS), which includes Rakuten Ichiba and other businesses, is on course to reach 5 trillion yen this year. We already generated 2.3 trillion yen in the period from January to June this year.
With that at our core, and by introducing a certain level of standardization, we have seen Rakuten Ichiba’s Net Promoter Score (NPS) increase by 9 points in the 18 months since last January. Thanks to your efforts, Rakuten Ichiba also ranked No.1 among all online shopping sites in a recent brand survey. It is great to see us ranking so highly among the top service and consumer-facing brands.
With e-commerce as an anchor, Rakuten has built an ecosystem of businesses that support and enhance one another and create value for the consumer.
Mobile! Mobile! Mobile! Exploring groupwide synergies with Rakuten Mobile
So how will online shopping evolve going forward? This brings us to the second point in our triangle. Around 10 years ago, I introduced the phrase “Mobile! Mobile! Mobile!” at the Rakuten Ichiba New Year Conference. At the time I was sharing my expectation that in the near future, more than 70% of all transactions would be made on mobile devices. We’ve now surpassed this percentage by quite a lot. I too do most of my shopping on my phone.
“Using mobile devices will become so natural that it will almost become an extension of your body. It may be a slight exaggeration, but if we combine the internet with AI technology, it could even serve to help boost your brain.”
We used to have to turn on and sit in front of a computer to purchase things online. Now we can do it while we’re on the move, when we see something we want in town, or even when we suddenly remember we were low on something. Mobile devices are there for us to make that quick purchase.
Transactions via mobile devices have far surpassed that of laptops and desktops and are expected to be the main source of our growth going forward.
The mobile business strategy of the Rakuten Group is now attracting a lot of public attention. It gives a positive boost to our ecosystem — bringing new users to our ecosystem and even helping us with current Rakuten customers. We’ve seen that when people sign up for Rakuten Mobile they spend more on Ichiba. Indeed, there are powerful synergies between Rakuten Mobile and the greater Rakuten Ecosystem.
But that’s not our only reason for investing in mobile. Rakuten Mobile has some very bold ambitions. In the future, your mobile device will not only be used for shopping or communication. It will become your TV, your radio, your wallet, and maybe even your personal physician or main health management tool. Using mobile devices will become so natural that it will almost become an extension of your body. It may be a slight exaggeration, but if we combine the internet with AI technology, it could even serve to help boost your brain.
Of course, with the introduction of many new mobile applications comes a problem. Data consumption. Data consumption is set to exponentially increase in the future, leading to even more expensive mobile bills. As of 2020, the average person spends 8,175 yen per month on mobile service. This amount might include a number of supplementary services, but this costs a family of four around 30,000 yen per month, which adds up to over 300,000 yen for just one year of mobile service. Over 10 years this would total around 4 million yen (nearly $37,000 USD).
Rakuten is aiming to democratize the mobile industry, to bring down mobile subscription fees to a reasonable amount. Rakuten Mobile sought to create a plan that is simple and easy to understand — a single plan for everyone. Many competitors have since referenced us when setting their pricing plan, which is 0 yen for the first 1GB, 980 yen for usage up to 3GB, 1,980 yen for usage up to 20GB, and 2,980 yen for unlimited usage above that.
Growth through Global Expansion: Laying the framework for future success
“We began as a company dedicated to revitalizing Japan, but we exist today as a global company dedicated to improving the lives of people all over the world.”
Finally, the third part of the triangle, is global expansion. We began as a company dedicated to revitalizing Japan, but we exist today as a global company dedicated to improving the lives of people all over the world.
We have rolled out the Rakuten Communications Platform, our solution for mobile network operators, enterprises or governments looking to build a cloud-native, open RAN-based 4G or 5G mobile network. Rakuten Symphony — which we launched earlier this summer to bring our solutions to the global market — is attracting attention from operators all around the world, including our first full-scale contract to build a mobile network for 1&1 in Germany. Global expansion remains a key driver of our momentum and will help support our continued growth in Japan.
Amid this ever-changing business environment, we are confident that our triangle strategy will help us find continued success. We will continue to work with you to improve and further evolve Rakuten Ichiba. As mentioned earlier, Rakuten Ichiba’s core is our unique merchants and your ability to thrive, to serve your customers and deliver high customer satisfaction. It is from that common goal that we all succeed.