In any ordinary summer, merchants on Japan’s leading e-commerce marketplace Rakuten Ichiba would be gathering in Tokyo at the annual Rakuten Expo to network, learn and connect with their peers. 2020 saw a different take on this time-honored tradition, as some 25,000 people instead tuned in virtually to the Rakuten Online Expo 2020 last month.
Rakuten CEO Mickey Mikitani addressed the merchant community remotely from Rakuten’s Tokyo headquarters, to review learnings from the year and share his vision for the future.
Japan is more online than ever
“At first I thought we would quickly shift back to the way we did things before,” Mikitani began. “Today I’m speaking from Rakuten’s headquarters in Tokyo for this conference. This is actually only the second time I’ve stepped foot in the office in the six months since February.”
As Japan entered its voluntary lockdown and physical retail shut down, Rakuten Ichiba saw an influx of traffic from those seeking to do their shopping online. But despite physical retail having mostly reopened by June, Ichiba’s growth rates have continued to climb, with a 48.1% year-on-year (YoY) increase in shopping e-commerce GMS* for April-June 2020.
“After the end of the first wave here in June/July, frankly speaking, I expected we might see some slowdown in growth. But even now, we continue to grow at a rate of around 50% year-on-year,” Mikitani explained. “The momentum of the e-commerce industry has changed radically during this time… If you speak with analysts, market researchers or investors, you will hear that they expect the Japan e-commerce market to continue to grow at a rapid rate of perhaps 30 or even 40%.”
But this isn’t simply because existing users are buying more, Mikitani shared, revealing that new users rose by a startling 63.1% YoY, while returning users rose by 80.9% YoY. Those who shopped with Rakuten Ichiba before have come home.
Mikitani sees potential for Japan’s shopping habits to shift even further online, explaining that e-commerce only comprises around 6 to 7% of household consumption in Japan, compared to 15% to 20% in China and across Europe. As the pandemic sends even more people online, Mikitani believes Japan’s figure could soon reach 20% as well.
Solving Japan’s logistics woes
In 2017, major players in Japan’s logistics industry began raising prices to cope with the skyrocketing demand generated by online shopping.
“As demand increases, logistics capacity will again become an issue. So we can expect those price negotiations to start up again,” Mikitani predicted. “That’s why we decided to build our own logistics network. We’re planning to invest a total of 200 billion yen to build our own logistics network, with completely automated and semi-automated warehouses.”
Plans to expand this logistics network continue to unfold — Rakuten will soon be opening a new warehouse south of Tokyo. Rakuten EXPRESS’s Last Mile initiative now covers 62.5% of the entire Japanese population,” he said. “We intend to expand that to 80 to 90% coverage. In the near future, you will see more and more trucks bearing the Rakuten logo delivering branded boxes to customers across Japan.”
Going by the data, reducing the time and money merchants spend on shipping seems to be an effective way to grow the Ichiba platform. “From April to June this year, merchants who are frequent users of Rakuten Super Logistics saw a 35.9, close to a 36-percentage point greater increase in their GMS on top of the average growth rate for Rakuten Ichiba merchants.”
Another major initiative driving growth on the platform has been Rakuten Ichiba’s freshly implemented uniform shipping program. Previously, each individual merchant was left to set their own shipping fees, but user feedback revealed that the system was potentially confusing and in need of improvement.
Rakuten Ichiba launched an opt-in program in March 2020 that includes the shipping price in purchases over 3,980 yen from any participating merchant. “Merchants who have introduced uniform shipping grew 20 percentage points more than those who didn’t,” Mikitani revealed at the Expo. “Currently, 80% of our merchants have introduced uniform shipping… I personally believe that if 100% of merchants choose to participate, this 20% growth figure could jump to 30% or even 40%.”
The platform also began clearly displaying shipping costs for each item directly in search results, and user feedback has been positive. “Many light users told us they avoided Rakuten because our shipping options were too complicated. Now their perception of us has improved across the board.”
A new addition to the Rakuten Ecosystem
Rakuten’s e-commerce business forms just one part of an ecosystem spanning payment services, travel, entertainment and much more, firmly anchored by Japan’s most popular loyalty program: Rakuten Points.**
A recent addition to the Rakuten Ecosystem, Rakuten Mobile became Japan’s fourth major mobile carrier with its full-scale commercial launch in April — at a price point less than half that of competitors. The new fully virtualized network has been in the global spotlight for its revolutionary software-centric approach. By running an efficient, agile and resilient software-based network with the support of multiple vendors, the company is disrupting industry norms and establishing numerous new benchmarks along the way.
There is also solid overlap among users of the two platforms and exciting new potential for synergy, with some 47% of Rakuten Mobile users already having made purchases on Rakuten Ichiba. Rakuten Mobile, combined with its MVNO service launched in October 2014, provides services to over 3 million users in Japan.
“We expect this number to jump to 15 million, 20 million and then 25 million. And I believe these users will also come to use Rakuten Ichiba as their main place to shop,” Mikitani speculated. “They will join our point ecosystem. Those 20 million, 30 million users will start shopping on Rakuten Ichiba as well.”
An accelerated digital shift
Despite the turmoil of the pandemic, Mikitani believes that Japan’s embrace of online services has staying power. “There is one thing that I am certain of,” he told the Rakuten Ichiba merchants. “While this pandemic will end eventually — whether it takes a month or half a year — some changes will be permanent.”
Japan’s embrace of the digital economy might not be so far off after all.
*Shopping E-commerce: Rakuten Ichiba, first party (Rakuten Fashion, Rakuten Books, Rakuten24 (Direct)), Rakuten Seiyu Netsuper, Open e-commerce (Rebates, Checkout) and Rakuma.
**Rakuten Points are the number 1 loyalty points program in Japan by overall customer satisfaction. Source: “Survey on Points Systems.” Valid responses: 1,000. Online survey conducted by MyVoice Communications, Inc. in October 2018.