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Business

Rakuten trying to pick its overseas battles better

Rakuten's Japanese virtual mall faces tough competition from the likes of Amazon.com.

TOKYO -- Rakuten will shut down e-retailing websites in three European countries, continuing to scale back what had started as an ambitious global expansion drive.

Online marketplaces and physical bases in the U.K., Spain and Austria will be closed by the end of August, the Japanese e-commerce giant said Wednesday. The move is expected to impact around 100 employees. Rakuten accounts for 1% or less of e-retailing sales in various European countries, data from British research firm Euromonitor International shows.

The company will focus on the larger markets of Germany and France. But it still has a long way to go to catch up with U.S. titan Amazon.com, which boasts a roughly 20% share in each country.

Rakuten said in February that it would unload a Thai e-commerce subsidiary. It has shut down e-retailing websites in Indonesia, Singapore and Malaysia, where it is transitioning to a consumer-to-consumer model centering on a smartphone app letting customers buy and sell used products. President Hiroshi Mikitani cited a lack of development in these markets in such areas as logistics. But Rakuten also faced stiff competition from local rivals and Lazada, an affiliate of Germany's Rocket Internet with a strong Southeast Asian presence.

Rakuten, which started out with the Rakuten Ichiba online marketplace, has expanded domestically into a broad array of fields, including travel, finance and professional baseball. Outside Japan, it has made a string of acquisitions in the 20 billion yen to 100 billion yen ($187 million to $937 million) range since 2010, including Canadian e-book seller Kobo and American e-commerce company Ebates.

Mikitani said in 2014 that he aimed to boost the share of overseas sales from around 6% to 50% by 2020. The company's medium-term plan calls for doubling total sales to 1.7 trillion yen and operating profit to 300 billion yen by that year.

Rakuten's marketplaces are virtual malls where participating retailers can set up their own websites. Amazon instead buys products from suppliers and resells them to customers, enabling the company to set its own prices and maintain a consistent brand. The American giant, offering speedy delivery and new member services such as unlimited music and video streaming, is gaining ground even in Japan, where its sales are on a par with Rakuten's.

Rakuten, recognizing that it is lagging behind global rivals, is cutting back its overseas e-commerce operations from 10-plus markets to five, including the U.S. and Taiwan.

Operating profit slid 11% to 94.6 billion yen in 2015, partly because of goodwill impairment on past acquisitions. While Rakuten does not disclose how much foreign operations contribute to earnings, the picture looks grim to many analysts. The company will need to draw a new overseas road map and improve its results soon.

(Nikkei)

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