Japan’s Rakuten Goes All In With Global E-Commerce Strategy

While reigning as the dominant e-commerce player in Japan, Rakuten is all but unknown in the U.S. That’s not to say it hasn’t been active here, but its behind-the-scenes acquisitions haven’t done much to boost its own brand. Now the $10 billion company wants to change that.

Japan’s Rakuten Goes All In With Global E-Commerce Strategy

by Mark Walsh

Posted on 12-10-2017

When Rakuten signed on as the Golden State Warriors inaugural jersey sponsor last year, few fans had ever heard of the $8.8 billion company.

The same might be said for most Americans, in general. While reigning as the dominant e-commerce player in Japan, Rakuten is all but unknown in the United States.

That’s not to say it hasn’t been active here. For the past decade, it has been quietly building its North American presence through a series of acquisitions that include Buy.com, cash-back site Ebates, and e-book maker Kobo. In addition, it has taken stakes in high-profile startups including Pinterest and Lyft.

But those behind-the-scenes moves haven’t done much to boost its own brand.

Now the $8.8 billion company wants to change that, embarking on a global marketing push in tandem with its worldwide expansion. The sponsorship deal with the NBA champion Warriors, worth a reported $60 million over three years, is a key part of that effort.

“Our aim is to make Rakuten a household brand,” said Yaz Iida, head of Rakuten USA.

It’s an ambitious goal, especially considering the big entrenched competitors—and household names—it faces in the U.S. in Amazon and eBay.

Action Plan

Guiding Rakuten’s global strategy is the drive to replicate the ecosystem that founder and CEO Hiroshi Mikitani began building 20 years ago. While centered on its e-commerce marketplace—Rakuten Ichiba—its business spans online banking and financial services, digital content, mobile services, and travel booking.

Connecting these various offerings among its 1.1 billion registered users is Rakuten’s Super Points loyalty program. Members earn points via purchases that can be redeemed for savings across different Rakuten businesses.

Through its acquisitions in the U.S. and Canada, Rakuten has been assembling the pieces of a North American ecosystem. Its goal now is to knit them more tightly together by adding features such as Super Points, as well as integrating technology systems on the back end.

“Today we are all separate [in the U.S.], so there’s a massive effort going into creating one platform for our membership,” Iida said.

To that end, the management team he leads in San Mateo, Calif., has been working closely with its counterparts at Rakuten’s Tokyo headquarters.

Smoothing that process is the English language learning initiative the company undertook in 2010 to create a corporate “lingua franca” to accelerate its globalization. A new book about this program, written by Harvard Business School associate professor Tsedal Neeley, suggests the policy has aided its expansion.

Rakuten is also taking steps to unify its properties in the minds of consumers, wrapping acquired entities in its own brand. Ebates, for example, is labeled “a Rakuten Company” on the company website, while messaging company Viber, acquired in 2014, has become Rakuten Viber, and package-tracking app Slice is now Rakuten Slice.

“What Rakuten is saying to the world is, ‘We own this company,’ and eventually they want that halo back onto the master brand,” noted Mimvorti, executive director of strategy at brand consulting firm Landor. It’s a way to maintain the value of the acquired brand, while transitioning to the parent brand, she told CMO.com.

“These are long-term partnerships, and Rakuten is going to be the brand that consumers will increasingly start seeing,” added Rahul Kadavakolu, Rakuten’s head of global marketing.

Furthering Its Game

The company’s bid to raise its profile globally got underway in earnest in 2016 when it struck its first major sports sponsorship deal—with soccer super club FC Barcelona. The four-year agreement, worth about $260 million, provided a model for the Golden State deal a year later.

Unlike soccer, though, where jersey sponsorships are common, the NBA introduced them for the first time in 2017—in the form of an advertising patch on the left shoulder of uniforms. It’s not quite the same as a brand emblazoned across the chest, as “Rakuten” is on FC Barcelona’s shirt, but both deals include ancillary agreements to extend the brand.

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The Warrior’s practice facility, for example, has been renamed the Rakuten Performance Center, among other designations that will last longer than three years. Other tie-ins include Viber’s becoming the official messaging and calling app of the Warriors and Ebates’ becoming the team’s official shopping rewards partner.

“It’s not just about building awareness, but also about building emotional value in the consumer base,” Kadavakolu told CMO.com. “Sports and entertainment can build that value.”

He also noted the company has focused on naming rights in sports because the tactic has been left largely untapped by other big tech brands such as Google and Facebook.

“We’ve moved quickly, and we’re exceedingly positive about it,” he said.

Work Ahead

Such deals might boost exposure for Rakuten, but, alone, they won’t necessarily drive new customers; it aims to reach 2 billion registered users worldwide by 2020.

“I might be aware of your brand, but what relevance does your brand have in my everyday life?” Landor’s Chakravorti said. As such, Rakuten still needs to tell people what the company does and how it can interact with it, she said.

Company executives acknowledged there’s more work to do to educate consumers unfamiliar with Rakuten. The sports sponsorships and wider branding are only the initial steps of a broader marketing strategy, with additional phases to follow, they said.

While they are tight-lipped about their plans, the marketing mix will span digital platforms as well as more traditional media, such as TV and out-of-home advertising. The aim is to communicate more directly what Rakuten does and what the brand stands for.

Currently, the company’s combined sites draw only a fraction of the traffic of U.S. e-commerce rivals. Rakuten sites had about 9 million U.S. visitors in September, compared with 183 million for Amazon, 86 million for eBay, and 31 million for Etsy.com, according to comScore.

Forrester retail analyst Sucharita Mulpuru suggested that unless Rakuten can truly distinguish itself from its chief competitors, it faces a daunting challenge in North America.

“It’s very hard to grow a digital brand globally,” said Mulpuru, a Forrester analyst covering e-commerce and retail. “You’re not necessarily going to be successful in every market, especially in markets that have incumbents that are equally strong or stronger.”

Rakuten, for instance, has already pulled back from Southeast Asia after its marketplace failed to gain traction there.

So what will help it contend with Amazon in Amazon’s own backyard? Along with a diverse set of digital services bound by a loyalty program, the company believes its dedication to superior customer service—grounded in the Japanese concept of omotenashi (hospitality)—will help differentiate it in a crowded e-commerce landscape.

“We make sure the customer experience for the Rakuten brand is the highest and best-in-class compared with other online shopping experiences. That’s what we strive for,” Iida said.

Added Kadavakolu: “We’re playing a long-term game.”

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