Rakuten to expand abroad amid Amazon rivalry

Bloomberg

Rakuten Inc. plans to expand in India and Australia as the likelihood of slowing economic growth at home hurts demand at its online shopping malls.

“We’re making very steady progress in terms of expanding our global presence,” Chief Executive Officer Hiroshi Mikitani, 47, Japan’s third-richest man, said Thursday in Tokyo. Japan’s top Internet retailer aims to have 70 percent of sales transactions abroad by as early as 2020, he said.

The retailer in the past three years announced more than $1.6 billion worth of purchases, such as stakes in social network Pinterest and digital bookseller Kobo Inc., as part of its strategy to catch up with Amazon.com.

Mikitani, whose company’s revenue is about one-tenth that of his U.S. rival’s, has a T-shirt that reads “Beat Amazon.”

The move to expand abroad has yet to contribute to earnings, said Tokyo-based analyst Justin Weiss, who is ranked second in one-year performance among 17 analysts tracking Rakuten.

“It hasn’t disclosed country-by-country numbers showing what progress has been made to date and what it expects going forward,” said Weiss, who recommends selling the firm’s stock.

Mikitani, a Harvard Business School grad who requires employees to learn English, said he plans to expand to 27 countries and regions from 13 at present.

“We’re not that picky,” he said when asked for details on the expansion plans. “We will adjust our strategy depending on the situation and maturity of the market.”

He is also considering expanding into Southeast Asia, Eastern Europe and Latin America.

The company isn’t just smaller than Amazon, it’s also expanding at a slower pace. Rakuten’s annual sales growth averaged 13 percent over the five years through 2011, less than half the rate of Amazon’s 35 percent, according to Bloomberg data.

The Bank of Japan on Sept. 19 followed the government in downgrading its assessment of the domestic economy, saying growth has “come to a pause.” Morgan Stanley & Co. and Citigroup Inc. expect the economy to contract in the two quarters through December.

In the past two years, Rakuten acquired online businesses, including U.K. music and game retailer Play Holdings Ltd., U.S. retailer Buy.com Inc., French electronics seller PriceMinister S.A. and Brazil’s Ikeda. It bought Canada-based Kobo this year for $315 million.

The company’s flagship shopping portal, Rakuten Ichiba, connects about 40,000 merchants to customers shopping for products such as toys, electronics and pajamas. Its English-language website also offers Japanese goods to overseas customers. The firm had $10 billion in cash and short-term investments as of June 30, about double the amount for Amazon.