Vision 2020: Rakuten
As Rakuten recently announced financial results for 2015, we also launched Vision 2020, a new mid-term strategy map for the future. Let me set out the key points here.
Going forward, Rakuten is going to focus on 3 types of businesses: Strong, Smart, and Speed. Here is an outline of each:
1) Strong Businesses
These are the businesses where we are strong enough to defend our turf and keep growing 10-30% annually. Our Japanese ecosystem belongs to this category, as well as our Taiwan business. In Taiwan, we’re strong not just in terms of our marketplace but our credit card business is growing and our travel business has started to take off, especially travelling to Japan.
In Japan, we have leading positions in services from e-commerce, online travel, internet banking, credit cards and e-money, to mobile payment and online golf reservations. We will continue to add new services to our strong platform. In our e-commerce business, we will focus even more on quality and customer satisfaction and, at the same time, offer incentives to promote cross-use of the more than 70 group services available in Japan.
2) Smart Businesses
These businesses are unique and smart, mainly focusing on niche markets, yet with enough market share and sustainable profit opportunities for the future as well. The growth target for these businesses is between 25% and 70%. Ebates, Rakuten Marketing, our marketplaces in the US and Europe, Kobo, Overdrive, and Wuaki.tv belong to this category.
In the US, Ebates is the membership platform for our open e-commerce strategy that connects over 3000 consumer and retail brands to a growing group of highly loyal and active users. With gross merchandise sales already at USD 4.9 billion and year-on-year growth of more than 40%, we envision Ebates as the center of a vibrant e-commerce ecosystem in the US.
3) Speed Businesses
These businesses are high-growth disruptive businesses that require a lot of creativity, innovation and entrepreneurial leadership. We see the growth target for this category of business as more than 70%. Viber, Viki, Rakuma, Rakuten Mobile, Rakuten Smart Pay and Rakuten ID Payment belong to this category.
When we bought Viber in February 2014, they had 305 million unique IDs and, by December 2015, they are tracking at more than 711 million. Our Vision 2020 sees this trajectory taking Viber to over 2 billion unique IDs and a very active user base by 2020.
Accelerating Topline Growth and Achievable Pace of Profit Growth
With this vision, we are planning on growing rapidly. By 2020, we are looking to achieve 1700 billion yen in annual revenue (or approximately US$15 billion at today’s exchange rates). We also plan to achieve operating income (non-GAAP) of 300 billion yen (US$2.7 billion) by 2020, and EBITDA of 360 billion yen (US$3.2 billion).
Here is the breakdown of our plan for non-GAAP operating income. Last year, our domestic e-commerce business did 96 billion yen in profit and we plan to grow this to 160 billion yen. Operating income from other internet services was negative at -18 billion yen and we’re planning to take this to 20 billion yen by 2020. Our Fintech businesses made a profit of 64 billion yen last year and we’re planning to make 120 billion yen in 2020. These numbers add up to 300 billion yen. These are not overly optimistic or ambitious goals. If we execute well, we will be able to achieve these numbers.
Transformation of E-Commerce
Under our new and very comprehensive strategy, we have decided to adjust our business portfolio.
For e-commerce in the US, we have decided to focus on Ebates, our open platform cashback membership program, and our Rakuten.com marketplace. This has also meant moving away from the first party sales model in the US. In Brazil, we have moved away from the marketplace business model and are focusing on SaaS (software-as-a-service) for our merchants, an approach which should soon become profitable.
In Southeast Asia, despite our best efforts, unfortunately we had not developed the appropriate scale and so we announced a restructuring of the marketplace businesses in this region. In Malaysia, Indonesia and Singapore, we will scale down and exit and, in the case of Thailand, we are considering handing over the business to another company.
At the same time, we believe that a C2C, smartphone-based marketplace model is much more suitable to these areas so we’re going to roll out our Rakuma C2C mobile business, which is growing explosively in Japan.
Rakuten Strengths
We are data driven and possess very unique proprietary technology. Our mobile services and “smartphonization” are doing extremely well. In fact, 60% of our gross merchandise sales (GMS) in Japan e-commerce is coming from mobile. We are very KPI-driven and have a unique data-based marketing approach. On top of all this, we have a very strong corporate culture.
Conclusion
As we go into our 20th year, we are entering a stage of stability but our ambitions are very big. Therefore, we need a crisp strategy to maintain stability, as well as grow smartly and sometimes be aggressive. This strategy is our Triple-S Strategy: Strong, Smart and Speed. If a business doesn’t fit into one of these 3 categories, we need to reconsider whether or not we should keep doing that business.
For our shareholders, our employees and all of our stakeholders, this is the outline of our vision for the future.
See the below video for a more in-depth explanation of Rakuten’s Vision 2020 strategy.
