Rakuten enters Malaysian e-commerce market in a unique way

• Sees enough potential to come into Malaysia without joint venture or via acquisition
• Aims to deliver to consumers an ‘entirely new and unique online shopping experience’

AFTER years of operating in a relatively benign competitive environment between themselves, Malaysia’s e-commerce players have had to face up to the aggressive and noisy market entry early this year by Rocket Internet and its Zalora, Lazada and FoodPanda online properties.
 
And now come the Japanese in the form of Rakuten, that nation’s top e-commerce company. It announced this past May of its intention to launch an online mall in Malaysia, promising that the service will introduce consumers here to an “entirely new and unique online shopping experience.”
 
Rakuten Malaysia will mark its third e-commerce entry in the South-East Asia region, following Tarad.com in Thailand in 2009, and Indonesia’s Rakuten Belanja Online in 2011. Thailand was an acquisition while Indonesia was a joint-venture.
 
Rakuten’s modus operandi is simple. It wants to own a simple majority in the countries it expands into because it believes it has cracked the code on how to operate a successful e-commerce business and does not want management control to be in any other party’s hand.
 
As its CEO in Rakuten Malaysia Sdn Bhd, Masaya Ueno (pic), says, “We are the world’s third largest e-commerce operator with around 10,000 staff and with e-commerce experience built up since 1997, not only in Japan but globally.”
 
In other words, he is saying, “Rakuten knows e-commerce, thank you.” It will build its own business-to-business-to-consumer (B2B2C) model in Malaysia.
 
But because there are other players in Malaysia who also happen to think they know e-commerce, Rakuten was unable to form a joint-venture with any Malaysian party. Neither was it able to acquire a controlling stake in a leading e-commerce player.
 
Hence its decision to go it alone in Malaysia, the first time it is taking this approach in a new market.
 
A number of reasons underpinned its confidence that it could go it alone in Malaysia. Ueno points to the e-commerce penetration of over 50% in Malaysia, its rapid broadband adoption and strong smartphone penetration rate. On the latter, Celcom just announced on Sept 4 that its smartphone user base has hit 20% of its 12 million total users, up 25% over its 2010 smartphone base.
 
Malaysia also has strong local players in the online payment space and here Ueno singles out iPay88. “We are very confident they can provide us with the service we require.”
 
And then come the logistics capabilities. “The merchants we spoke to here were very much satisfied with the service they get from PosLaju. But besides them, we are also going to be working with GD Express Sdn Bhd and Yamato Transport (M) Sdn Bhd.”
 
This is for the simple reason that they will have strengths in different parts of the country or will be able to offer deliveries to certain areas more competitively than the others.
 
The rising GDP (Gross Domestic Product) of the country with a young population base is another attraction for Rakuten, with the company aiming for those in the 20s to 50s as their main market segment.
 
Ueno also credits AirAsia on helping get Malaysians started on the e-commerce path. He notes that Malaysia also makes it easy for an e-commerce business to be established here without a local partner.
 
“In this sense the business and IT infrastructure is very good here,” he notes.
 
The concerns over going it alone are of course that Rakuten is concerned that its brand is not well known in the market and getting it out will be challenging especially with no local partner to leverage on.
 
Nonetheless, with so many positives in the local ecosystem working in their favour, Ueno admits Malaysia was too good an opportunity to walk away from just because they could not leverage on a local partner.
 
“We feel that we have a real opportunity to apply our global knowledge and help Malaysian merchants improve and expand their business.”
 
Rakuten is doing this with three key messages it shares with merchants. It will draw traffic to its site when launched and from there the merchant will see spill-over traffic on his page. This ability to “see” the traffic will also be a strong attraction to merchants, predicts Ueno.
 
“Our system will help merchants identify who is coming to their site and what products they were looking at and which page they left from,” he says.
 
At the same time, Rakuten has employed a team of knowledgeable e-Commerce consultants to help the merchants grow their online business for the simple reason that if a merchant does not grow his revenues, Rakuten does not collect its fees from him. Its fees are in the shape of a monthly fee and a cut of the net profit from merchants.
 
Customer service is important and Ueno says that helping merchants acquire new customers is another value add from Rakuten.
 
“Customers want not just good and/ or original products, but also to experience good service.” He believes Rakuten, with its mix of various loyalty points, will prove to be a key partner for merchants.
 
Rakuten Malaysia’s office in Petaling Jaya, a small city bordering Kuala Lumpur, is run like a tight ship with a 15-person headcount and “no fancy coffee,” says Ueno.
 
And, while they “are here for the long term” Ueno needs to show profitability by the end of the third year. The Rakuten Malaysia site will be in English.
 
Next: The similarities between the Malaysian market today and the Japanese market 10 years ago, and Rakuten’s target to become profitable. 
 
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