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We’ve written a lot about Rakuten’s (JSD:4755) overseas adventures over the past year or so. The Japanese e-commerce giant now has partnerships, investments, and acquisitions peppered across the map. But of course it wasn’t always this way.
The company’s first venture abroad was back in 2008, back when e-commerce was a fledgling industry and the company’s reputation was only really well established at home in Japan. It was then that Rakuten looked to Taiwan to expand its B2B2C business, joining forces with retailer President Group – the operator of Starbucks, 7–11, and others in Taiwan – to establish a joint venture (51 percent Rakuten’s capital, 49 percent PG). Rakuten Ichiba Taiwan was launched in May of that year, with the company hoping its success in Japan would translate well to the Taiwanese market.
So how did that game plan work out? Initially, it didn’t go so well says Rakuten Taiwan’s CEO Yuichi Ejiri. The company struggled with all kinds of problems out of the gate, including brand recognition:
 Rakuten Taiwan CEO Yuichi Ejiri
At that time 14 Japanese people came to Taiwan and just tried to copy everything from Japan. As you can imagine, it didn’t work and we changed a lot of things. For example the website design. Rakuten’s webpage now has changed; at that time they preferred more text not graphics or banners.
But in Taiwan they preferred more fashionable banner designs. At that time we did copy the Japanese simple, text-focused pages and the reception from the market was terrible. Many people said it looked like an old-age portal site. So we started changing piece by piece, now our page design is totally different than the Japan page.
Ejiri notes that even though Rakuten had changed its online public face, the basic logic that made the company successful at home still remained – the company’s expertise in improving things like conversion and click-through rates, this was still key to building its business in Taiwan in the early days.
In addition to wooing Taiwanese consumers, Rakuten also had the difficult task of acquiring new merchants to sell on its platform. In Japan the company was already established as an internet giant, and it didn’t have to work so hard to bring merchants on board and could do most of it online. But in Taiwan Rakuten was still a new brand, and so the company required more offline activities in order to acquire merchants, such as send forms or explanations, make calls from sales staff, or visit them in person.
Even today, years after Rakuten first arrived in Taiwan, the company still uses such methods, noting that Taiwanese merchants are more demanding. The result is a local management process very different from Japan. The brand is better recognized now however, and as Rakuten’s online application interface improves it hopes to gradually make merchant acquisition easier.
The company’s efforts with certain types of merchants have indeed paid dividends, particularly gourmet/food merchants. Ejiri tells us that Rakuten paid special attention to these merchants:
Most other platforms don’t want to take these merchants in, because it takes time to implement such internet shop operations. But we thought it was a big opportunity, because there are so many types of local food. So we intentionally tried to focus on these gourmet shops and sent a lot of sales people to go to the islands and the countryside to recruit all those unique food shops. It took a long time to teach them and also we did many tie-ups with gourmet websites and TV programs. But finally we are the largest gourmet e-commerce site in Taiwan.
The other big category for Rakuten Taiwan is women’s fashion. The Taiwanese e-commerce space began with online auctions and low-cost clothes of relatively high quality imported from China. Rakuten has catered to this market segment well, and currently nearly 80 percent of its users are female. The company has also begun heavily promoting men’s fashion and note that this sector is growing quite fast now as well.
Considering that Rakuten just recently launched its Kobo e-reader in Japan (though not without some difficulties), what about the prospect for e-books and other digital content in Taiwan? Rakuten Taiwan already has a headstart in a sense since its mother company, 7-Eleven, has the largest online bookstore (books.com.tw) with somewhere between 70 and 80 percent of the market. There’s a corresponding shop on Rakuten Taiwan with the name Rakuten Books. So it appears there’s a ready-made space for Kobo to fit in there.
Looking at the big picture, Ejiri points out that business for Rakuten Taiwan is growing 50 percent year on year. It currently has around 2000 merchants, over 1.8 million items, and 1.5 million users in total. But perhaps most importantly, I’m told that Rakuten Taiwan started being profitable as of a couple of months ago.
The next step I think is to create a kind of Rakuten ecosystem, like we have created in Japan. I think we can do the same in Taiwan, and that would be a great differentiator for us, and it should be a very different business model never seen in Taiwan.
While we don’t have any revenue figures for Rakuten’s Taiwan subsidiary, it looks like the group is making good progress since its initial entry into the market in 2008. One of the things that I like about Rakuten’s ‘Englishnization’ program (though I’m not a fan of that name) is that it facilitates good cooperation and communication between the company and its subsidiaries. So lessons learned in markets at home and abroad can have a greater impact. Indeed the company’s expansion plans have not been without the occasional speedbump, such as its Lekutian joint venture in China with Baidu which recently closed.
But like other Japanese internet companies expanding abroad, it is encouraging to see organizations like Rakuten actively looking to markets abroad rather than focusing on business at home and treating foreign markets as a bonus.
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Carousell, Singapore based mobile marketplace that allows you to buy and sell things on it, just went live on the App Store and is available for free.
