With Rakuten Travel scheduled to speak at WIT-Web In Travel, any news about the giant Japanese e-commerce site is bound to stir our interest.

Thanks to Timothy Hughes of BOOT who called our attention to his article¹ in Tech Crunch – "Japan's Rakuten: Can The Biggest E-Commerce Site You Never Heard Of Become a Threat for Amazon Globally?"

It talks about Amazon's success in North America and Europe but says it faces severe competition in markets like China and Japan from players such as Taobao and Rakuten respectively.

According to the report, CEO of Rakuten, Hiroshi Mikitani (left), has said he wants to see his company generate US$1 million in daily sales outside Japan by the end of the year.

It puts forward a case study on Rakuten's success factors and its efforts to go global.

Here's what you need to know:

1.    Rakuten Ichiba (Rakuten Marketplace) has 47 million members – that's 1 in 3 Japanese registered with the site. "The biggest difference to Amazon is that Rakuten was founded as a B2B2C company without a warehousing function. It's a platform for individual merchants to sell their products to individual customers online."

2.    It cites Rakuten's success factors as aggressive pricing and wide diversification.

"The idea and main success factor for Rakuten was helping Japanese brick and mortar businesses that wanted to set up customized online storefronts by themselves. As early as around the end of the 1990s, CEO Mikitani began systematically undercutting prices of existing hosting services by up to 75-85% and combined this with an aggressive sales and consulting model. As a trade-off for cutting out middlemen, merchants had to pay upfront, which made it possible for Rakuten to maintain a positive cash flow. Until today, the site offers its merchants a number of services to make their lives easier (real-world seminars, a monthly merchant-only magazine, phone support etc.). In return, Rakuten pockets fixed "virtual real estate" fees from the 28,000+ merchants currently registered on the site, in addition to commission payments (2.6% of each retailer's sales revenue)."

Specific to Rakuten Travel, the company has expanded to Korea, Guam, Thailand and China. "International customers can already book hotels in many Asian countries through Rakuten Travel's English interface (which is on Rakuten Japan and works very well)," said the article.

It added, "About a fourth of all items available for Japanese customers can be ordered from selected countries through a service called Rakuten International Shipping Services. Non-Japanese users can access Google-translated item pages (24 languages are currently supported), place an order, pay via credit card and then wait for direct delivery from Japan (it's even possible for foreigners to collect Super Points).

"This is just a makeshift solution, sure, but way better than what many other Japanese online retailers offer."

We look forward to hearing what Rakuten Travel's President Masashi Okatake (above right) has to say about his company's plans at WIT. The online hotel reservation website books over 2.2 million room nights per month.

¹ - www.techcrunch.com/2009/07/05/japans-rakuten-can-the-biggest-e-commerce-site-you-never-heard-of-become-a-threat-for-amazon-globally

Yeoh Siew Hoon, one of Asia's most respected travel editors and commentators, writes a regular column on news, trends and issues in the hospitality industry for 4Hoteliers.com.

Siew Hoon, who has covered the tourism industry in Asia/Pacific for the past 20 years, runs SHY Ventures Pte Ltd. Her other writings can be found at www.thetransitcafe.com

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www.webintravel.com - October 20-23, 2009 Suntec Convention Centre, Singapore