We were given a booth at Rakuten’s Expo in Kuala Lumpur last Monday. The event was held at The Gardens Hotel, which was literally next door to our Malaysian office. The annual expo is held in several parts of the world but since it’s the first one here, the crowd was unsurprisingly small at about 100 pax.
To those who don’t know, Rakuten is a Japanese online e-commerce platform. Starting as a 6-man company with 13 merchants in 1997, it’s now a public-listed entity with over 10,000 employees, and 40,000 merchants on its platform selling 100 million products. The company’s expanding aggressively outside of Japan and is poised to set up shop in Singapore in 2014. It’s also just recently acquired Viki, a hugely popular online video website with crowdsourced translation in 160 languages.
The expo was basically about Rakuten Malaysia’s CEO Masaya Ueno talking about the company, its history, their expansion plans and an update on their first year of operations in Malaysia. There was also a panel discussion which included representatives from P1 (a local 4G operator), iPay88 (local payment gateway provider) and Berjaya Books (owner of Borders). Based on the folks that came to our booth, there were members of the media and also mostly potential customers (e.g. Bonia) that Rakuten was hoping to convert.
How Rakuten Works
I spoke to a Rakuten sales person, and this is basically how the system works: you sign up as a merchant, create your store on their website and upload your products. You get to promote your own brand on their website and to their growing user base, which currently ranges between 350,000 to 500,000 visitors a month. There is a screening process to prevent merchants from selling counterfeit products, such as fake Coach handbags.
When a user makes a purchase, Rakuten processes the payment and sends the order to the merchant, which then delivers the products. The customer can browse the products and purchase from different/mutiple merchants on the website, and will hence, receive the parcels individually from the respective merchants.
The company currently conducts regular classes at their Mid Valley office to recruit potential merchants to set up shop on their platform.
There are two fees to pay. One is the annual subscription of RM3,000 (after the current 50% off promotion) and the other’s a 5% to 8% commission on the sales.
1. The 5% to 8% commission is on the high side and I don’t think many local merchants can stomach that amount, especially if they have significant sales.
2. Their current traffic is quite low at 350,000 to 500,000 monthly visitors, considering the number of merchants they have on the website.
3. There is NO exclusivity, i.e. your competitors can also be selling there. Hence, there is no incentive for anyone to spend money advertising their store on Rakuten.
4. We spoke to a merchant who claimed to be on multiple local e-commerce websites and found Rakuten to be an underperformer, while Lelong provided the most sales.
5. In the long run, I’d expect the merchants to have their own e-commerce website and just use Rakuten as an added presence on the Internet. Already there are many affordable e-commerce platform providers in Malaysia like EasyStore (from Exabytes), Webshaper and Shopify – in which Singtel is the authorized reseller and coincidentally managed by an old friend, Julian Seah, previously from SPH.
6. In order to do well, Rakuten has to be more aggressive with their marketing – a tall order in a crowded market which has the likes of Lazada, Zalora, ipmart, Lelong, Superbuy, etc.