International Herald Tribune
07-19-2007
On the same day that one Japanese technology pioneer took a step backward in Europe, the executives of another were busy planning a European roll out, showing that all high-tech exports from Japan are not equal. The missteps belong to NTT DoCoMo, whose i-mode mobile phone service revolutionized the telecommunications world when it started in Japan in 1999 by bringing electronic commerce to handsets. O2 in Britain said this week it would phase out the i-mode service there because of a lack of interest.The expansion plans belong to Rakuten, which runs the biggest Japanese online mall, with nearly 40 million users and sales last year of 460 billion, or $1.6 billion.It has made a name for itself by serving as the Internet storefront for tens of thousands of small and midsize merchants - the Amazon.com of Japan, as it were, but without the inventory or the focus on big brands.How can Rakuten, whose virtual mall sells everything from cookies to cars, expect to succeed in Europe, where e-commerce is already flourishing and competitive, if not downright cutthroat?John Kim, Rakuten's executive vice president for international business and president of Rakuten USA, said during an interview that Europe, like Japan, had a large population of niche, specialist businesses that were underrepresented in Internet commerce. He sees an opening in bringing Europe's small merchants online.''We see the same kind of merchants here, small and specialized and very proud of what they do,'' said Kim, a Korean-American.Rakuten plans to trade on its own name - well known in Asia, but, as Kim confessed, ''not always easy to pronounce in English'' (the accent is on the ''rak'') - by first opening an online store in Britain by the end of the year.Rather than commit to debuts in other European geographies after that, Kim instead hinted that Rakuten's ensuing expansions here would be over the mobile phone, a device that is serving the company well at home, where e-commerce via handsets now exceeds traditional department store sales. In Japan, roughly 12 percent of Rakuten's gross merchandise sales are made by cellphone.The e-tailer recently bought 54 percent of an Internet phone company in Japan with an eye to merging some telecommunications services with Internet shopping. For instance, the company could assign a phone number to each customer to communicate with the online stores, the Nihon Keizai Shimbun reported.Rakuten is also testing a way to let people download video advertisements by snapping photos of articles in a printed magazine.Rakuten also could capitalize on its LinkShare subsidiary, which 18 months ago expanded its online advertising and marketing business from the United States to Britain. Other acquisitions in Europe are possible, Kim said.Founded by Hiroshi Mikitani, the 42-year-old Harvard MBA who is in the top 20 on the Forbes Asia list of Japanese billionaires, Rakuten makes money by charging its sellers monthly fees and takes 2 percent to 5 percent of their sales.Rakuten will have to take care not to let some of its problems follow it into Britain, however. Last month, Japan's financial regulator ordered Rakuten's online brokerage unit to improve internal controls and fix its recurring system problems, its second such warning in two years.Rakuten - which trades on the Jasdaq, the Japanese stock market for smaller companies - reported that profit and revenue both slipped in its first quarter, but both drops were attributed to its financial services side, not the online mall business.The company knows something about taking on the competition. Rakuten already goes head to head with a very aggressive Yahoo in Japan, while Amazon recently opened a Japanese site that lets merchants set up their own shops the way that Rakuten does.''In this sector, everybody competes and everybody cooperates,'' Kim said. ''We have to be flexible and adaptable. We don't necessarily have the only recipe for success. But we think we have an exportable business.''
2007 Copyright International Herald Tribune. http://www.iht.com
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