The nation’s largest online shopping mall operator appears to be building an empire, or what its president calls a new zaibatsu in the world of Internet retail.
Rakuten Inc. announced in September its purchase of Mytrip Net Co., which specializes in online hotel and travel information services, for 32.3 billion yen from its parent company, shipbuilder Hitachi Zosen Corp. This was only one of Rakuten’s aggressive expansion moves.
“We are trying to build a corporate group, like zaibatsu, capable of offering various services in the Internet business,” Rakuten President Hiroshi Mikitani said.
Rakuten was established by Mikitani in 1997 and is based in Tokyo. It operates an online shopping mall that features lower prices by removing the need for wholesale distribution networks.
The firm has purchased a number of online businesses, including portal-site operators Infoseek and Lycos Japan.
On a consolidated basis, Rakuten posted sales of 4.1 billion yen in the April-June period, up 73.7 percent from the same period a year earlier. The company attracted nearly 7,000 shops to its virtual shopping mall, handling 5.7 million items.
“We have so far attracted 19 million visitors to online services offered by our corporate group,” said Mikitani, 38, who was among Business Week magazine’s Top Entrepreneurs of the Year in 2002.
Mikitani expects the online shopping mall to post annual sales of 1 trillion yen within three years. It is expected to post nearly 240 billion yen in sales in 2003.
According to a report by Nomura Research Institute in May, the nation’s online shopping market totaled 1.04 trillion yen in fiscal 2002, up 420 billion yen from a year earlier.
Rakuten began offering a new service this month that allows diners at selected restaurants in Japan and the United States to accumulate points that can be spent at the virtual mall. For example, a diner who spends the equivalent of 10,000 yen might be awarded 1,000 points that would be equivalent to 1,000 yen at the online mall.
Although Rakuten has formed ties with 10,000 restaurants in the U.S., compared with just 500 that have joined the program in Japan, its Web site is not available in English, however.
Mikitani, a graduate of Harvard Business School and a former employee of Industrial Bank of Japan, took a risk in April 2002 when he decided to expand his business.
In a major shift from its business model of applying a fixed monthly charge to online retailers, Rakuten introduced a new system of charging large online stores in proportion to their sales as well as a fixed monthly charge of 50,000 yen.
At the time, industry watchers warned that many retailers would withdraw from the virtual shopping mall.
“It was a drastic decision, but Rakuten needed financial resources to invest in upgrading facilities to support the growing business,” Mikitani said.
The new system ultimately worked, and Rakuten now faces another turning point.
At issue is the role of its corporate group in boosting the efficiency of Rakuten’s operations, Mikitani said.
Rakuten opened offices for most of its corporate group firms at Roppongi Hills in Tokyo in late September. Rakuten is now pursuing new business plans shared by its group companies, Mikitani said.
As an example, he said Rakuten now offers customers ID numbers that can be used for all of the company’s online services.
“Compared with traditional zaibatsu groups, we would offer more coordinated services for the convenience of our customers,” he said.
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