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Rakuten looks for a goal overseas with partners FC Barcelona

Stuck on defense at home, Japanese e-tailer rebrands and expands abroad

Rakuten President Hiroshi Mikitani, far left, shows off the new FC Barcelona jersey with team members including Lionel Messi, second from left.

TOKYO -- Rakuten, once Japan's e-commerce king, is extending its global expansion and rebranding via a sponsorship deal with Spanish soccer titans FC Barcelona, adapting to survive as its domestic presence fades under an onslaught led by Amazon.com.

At an event here Thursday celebrating the start of the partnership, President Hiroshi Mikitani held up a Barcelona jersey emblazoned with Rakuten's logo -- notably in Roman letters, not kanji characters -- as he stood with a lineup of star players including Lionel Messi. At 220 million euros ($250 million), the four-year contract did not come cheap for Rakuten. But the meaning of the company's brand is changing, said Mikitani, who expects the investment to be recouped economically as well.

Rebranding is a gamble, Mikitani said early this month. He believes the effort will succeed, but all the company can do is give its all, he said.

Many have grown used to seeing the 20-year-old e-tailing veteran's Japanese logo on pro baseball uniforms and elsewhere, and if the bet goes sour, its domestic businesses could suffer especially badly. But feeling in a bind at home, Rakuten took the plunge.

Stiff competition

Rakuten kicked off its online shopping business in 1997 in the dawning age of the internet. Its sales representatives traveled to stores across Japan and advised them on how to sell their wares, building its market by renting out space on its virtual mall.

But Amazon Japan, which sells directly from its own stock, has exploded. Its fiscal 2016 sales well surpassed 1 trillion yen ($8.82 billion at current rates), catapulting it to the No. 6 spot in the retail sector overall. Rakuten's range of offerings is not significantly different from Amazon's, besides certain specialty products, but Amazon's large-scale direct selling gives it the upper hand in price wars.

Other competitors -- such as clothing specialty site Start Today and flea-market app Mercari -- are also on the rise. Meanwhile, the number of merchants selling via Rakuten edged down in March to around 44,600. Sales are rising for those merchants, says Naho Kono, president of Rakuten's e-commerce company and a managing executive officer. But the days of Rakuten's unchallenged dominance in Japan are plainly gone.

The way out is out

Thanks to its domestic troubles, Rakuten's net profit has slid by double-digit percentages since a recent peak in the year ended December 2014. Its market capitalization has more than tripled over the last decade, but Amazon's has risen more than tenfold in that period, passing the mighty Wal-Mart Stores to take the No. 1 retailer spot worldwide in enterprise value terms.

With Japan's population on the decline, Rakuten cannot expect growth at home. To smash free of its bind, it needs overseas expansion.

Such expansion has been a theme at the company for more than a decade. It plunged into the U.S. market in 2005 with the $425 million purchase of online ad agency LinkShare, an acquisition it followed with others, including messaging app provider Viber and retail site Ebates. In 2012, it adopted English as the official company language.

Now Rakuten's logo uses that language's alphabet, and the company has found help in FC Barcelona even as core operations have not been fully cultivated. It remains to be seen whether the brand that once symbolized Japan's online business can regain its luster on the world stage.

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