Japan’s e-commerce scene is lively, dynamic and enjoying double-digit growth. While Rakuten continues to enjoy the largest market share among major players with over 25% of e-commerce transactions*, consumers are benefiting from healthy competition among platforms and retailers. Years ago many thought that nobody would bother with online shopping in such a dense and sophisticated brick-and-mortar retail landscape, but we continue to see innovation and new players enter the market to pursue a share of the growing pie.
Since the end of last year, Rakuten has seen an acceleration of sales and revenue in the e-commerce business. In the fourth quarter, we saw year-on-year growth in domestic e-commerce gross transaction value of nearly 15%. This includes our shopping mall Rakuten Ichiba, populated by merchants large and small and our mobile C2C shopping properties. We were also delighted to be recognized by internet users once again as the number one web brand in Japan, ahead of many familiar global brands.
I often get asked about how we compete with the newer entrants here on our home turf. I like to start with two or three key points.
Depth and diversity of the product lineup
With over 200 million products across 44,000 merchants, you can shop for designer baby clothes, order customized curtains, buy top-of-the-line handmade fly-fishing lures or ask a local farmer in Hokkaido to send you a bag of his organic rice. In local food and apparel in particular, we are way ahead of our competitors. They simply do not have this depth or variety.
With such a broad range of business partners on our platform, from local breweries and fresh produce merchants to specialists in pets, tennis and outdoor equipment, it is vitally important to us that every single merchant in our community performs to high quality standards. That starts with monitoring the basics such as fulfilling orders on time and responding to customer queries. It includes a rigorous compliance program with formal penalties and extends to providing incentives such as priority on search results and special promotions for those merchants accredited for their delivery of a quality shopping experience.
In recent months, we’ve also made UI/UX improvements and enhanced our search functions in ways that have seen a terrific positive response from users and merchants alike, even within a very short period from launch. Ad revenue also saw positive growth year-on-year in the last quarter. We have now come through a period of streamlining advertising to improve the user experience and made the shift to a new customized model that provides a better result for all.
A membership-based ecosystem of over 70 services
Shoppers on Rakuten overwhelmingly choose to sign up and shop as Rakuten members because they know that Rakuten Super Points earned on every purchase can be used on a broad-ranging ecosystem of other services. Members are using their points to pay for movie tickets, book a haircut or a golf outing or take the family on a hot springs trip.
Since we were founded 20 years ago, we have been passionate about realizing dreams. Some merchants we started out with in the early days now enjoy sales equivalent to millions of dollars annually and we’re proud of how we have grown and developed together, focused on providing the highest possible quality service to our users.
As we explore new territory with commercial drone delivery and personalization of the user experience with AI, I expect there is much more exciting innovation just over the horizon. In fact, it’s probably a lot closer than any of us expect.
* “Mail Order and e–Commerce Business 2017: Current Status and Future,” Fuji Keizai