Japan’s surprising potential for e-commerce growth
Headlining Rakuten Ichiba e-commerce marketplace’s annual merchant conference in January, Rakuten CEO Mickey Mikitani shared learnings from the extraordinary growth of 2020 and perspectives on the future.
“Rakuten Ichiba’s GMS (gross merchandise sales) for December last year grew around 50% year on year,” he reported. “And it’s looking like GMS growth for January will also be tracking at this level.”
Mikitani was candid about the circumstances behind this growth, but maintained that it was more than just a temporary boost. “The coronavirus pandemic has, of course, played a role in this. But I believe that this has brought about a transformation in consumer behavior, which will continue into the future,” he argued. “For example, spend per customer has grown by over 10%, and we’re seeing more and more repeat users as well.”
“Rakuten Ichiba’s GMS (gross merchandise sales) for December last year grew around 50% year on year. And it’s looking like GMS growth for January will also be tracking at this level.”
Mickey Mikitani, Rakuten CEO
Japan’s online shopping rate is currently only single digits
Mikitani argues that this is part of a larger digital trend in Japan. “I believe we can keep a reasonably high growth rate. The reason for that is that Japan still has an extremely low rate of online shopping compared to the rest of the world, at just 6.76%,” he revealed. “That rate in China, for example, is over 20% — and in America too.”
With so much room to grow, Mikitani sees serious potential for Japan’s e-commerce industry and Rakuten. “I’ve always had this rule about ones and threes. Once we hit 100 million yen [in GMS], our next goal was 300 million, then 1 billion, 3 billion, then 10 billion,” he said. “For our next annual GMS target of 10 trillion yen, I’d love to see Rakuten Ichiba get there by 2030.”
Once you go digital…
Mikitani also spoke about Japan’s great digital transformation of 2020 and how it might play out into the future, echoing points from a recent discussion with Japan’s Digital Transformation Minister, Takuya Hirai.
“Looking back over this past year, I’m sure none of us foresaw this pandemic lasting so long,” he told the merchants. “Imagine what would have happened if we did not have the internet and other digital tools, like this online web conferencing tool we are using right now, when the pandemic hit.”
As many consumers experience the digital economy for the first time, Mikitani argued, the sheer convenience and practicality of online services will keep them coming back. “Take Rakuten Travel, for example. Despite the current state of emergency, it is clearly ahead of the rest of the industry in getting back on its feet. How many people are going to return to physical travel agents? Anyone who has had the chance to use an online travel service even once is going to continue to do so.”
Growth of the Rakuten Card business is another example of the effects of this digital transformation. The company issued its 21 millionth card in November 2020 and usage is still growing, despite a slowing economy. Compound annual growth rate (CAGR) for overall transaction volume also remains strong. “Why is this happening? One reason is that there are a lot of digitally savvy users among Rakuten Card holders. Another is that Rakuten Card is used a lot for online purchases,” adds Mikitani.
This is all a result of the border between customers’ online and offline lives disappearing, Mikitani believes. “From now on it’s no longer going to be a question of shopping online or banking online — everything will be online.”
“Rakuten Mobile is in fact bringing many completely new users to the Rakuten Ecosystem. Many of these new users have made their first purchases on Rakuten Ichiba, used Rakuten Card for the first time, or opened an account with Rakuten Bank, showing us that they are beginning to engage with the Rakuten Ecosystem.”
Rakuten Mobile: Building the customer appeal of the ecosystem
In 2021, online shopping is an overwhelmingly mobile affair. Mikitani recounted how the approach of the mobile revolution had been the topic of the day at the very same Ichiba conference some 15 years previously.
“Since I talked about it back then, the explosive growth of mobile data usage hasn’t slowed down,” he reported. “On Rakuten Ichiba, some 76.5% of sales are already coming through mobile devices.” During holidays such as New Years, that figure was closer to 90%.
With so much traffic coming through tightly controlled platforms operated by just three major telcos, Mikitani decided to take action. Since 2017, Rakuten has devoted significant resources into building its own mobile network — Rakuten Mobile, which launched in April 2020. The revolutionary network and its groundbreaking pricing strategies have dominated industry headlines since.
For the Rakuten Ichiba merchants wondering how the new business would fit into Rakuten Group’s overall strategy, Mikitani had some good news. “Rakuten Mobile is in fact bringing many completely new users to the Rakuten Ecosystem,” he reported. “Many of these new users have made their first purchases on Rakuten Ichiba, used Rakuten Card for the first time, or opened an account with Rakuten Bank, showing us that they are beginning to engage with the Rakuten Ecosystem.”
Among Rakuten Mobile subscribers, Mikitani also reported an uptick of 44% in monthly spending on Rakuten Ichiba.
“We currently have around 100 million members [in Japan]. Our cross-use rate — that is, people who are using two or more services — is 72.6%. An astounding 470 billion points are awarded yearly,” he added, noting that while many other loyalty schemes are often abandoned, leaving unredeemed points, Rakuten’s perennially popular point program enjoyed a usage rate of over 90%. “55.1% of Rakuten Mobile users also use Rakuten Ichiba. We hope that this number grows steadily toward 100%, and I believe that Rakuten Mobile will continue to grow as a core part of the Rakuten Ecosystem.”
“We have already implemented measures for 17 services — including Rakuten Ichiba — to conform to the RE100 initiative. Rakuten, Inc. as a whole has achieved 51.4% renewable energy.”
Taking responsibility for sustainable e-commerce
Mikitani concluded his session by outlining Rakuten’s strategy to continue operating sustainably in the age of climate change. “It isn’t something we can afford to ignore,” he said. “I believe that soon we’ll reach a stage where companies that don’t act will be shunned by society, and I believe that it’s my responsibility as a member of society to do something.”
In 2019, Rakuten made a commitment to the RE100 initiative, an international environmental program encouraging businesses to adopt 100% renewable energy. “We have already implemented measures for 17 services — including Rakuten Ichiba — to conform to the RE100 initiative,” he revealed. “Rakuten, Inc. as a whole has achieved 51.4% renewable energy.”
Mikitani also revealed that Rakuten is considering switching its delivery vehicles to electric, despite added costs, and looking to start research into employing renewable energy such as solar, offshore wind and geothermal.
“Rakuten Group was recently recognized as an Eco-First Company by the Japanese Ministry of the Environment. We have also been recognized for excelling in various other sustainability indexes,” he explained. “Rakuten works closely with our merchants in all aspects, so I would like to ask everyone watching to treat the issue of sustainability and the environment as one we must be responsible for as a society.”
Rakuten Ichiba’s New Year Conference: Where merchants come together
For the past 19 years, Rakuten Ichiba’s New Year Conference has been an annual tradition. The event brings together e-commerce merchants from across Japan — which today number over 53,000 — with Rakuten leaders such as CEO Mickey Mikitani, as well as the employees who keep the platform running from behind the servers.
In addition to keynotes and main stage presentations, attendees participate in e-commerce workshops, study sessions and lectures from industry experts and other long-time merchants. The event brings the merchant community together for an opportunity to acquire important e-commerce skills and to learn from each others’ real-world failures and successes. Holding this year’s conference virtually didn’t stop the Rakuten merchant community from coming together. More than 30,000 Ichiba registrants joined the event — a bigger turnout than all previous physical conferences.
For more, watch the video of Rakuten CEO Mickey Mikitani’s Full Speech at Rakuten New Year Conference 2021 here:
