Rakuten CEO: Our values may keep us from beating Amazon

The Japanese e-commerce giant will stick with its virtual shopping mall model rather than becoming a direct online retailer

The founder and CEO of one of the world's largest e-commerce sites says his firm's moral principles may keep it from defeating rival Amazon.com in the long run.

Hiroshi Mikitani, head of Japan's Rakuten, said he has no interest in making it an Internet "vending machine," his term for online retailers that sell directly to customers. Mikitani founded his firm in 1997 as an online shopping mall that charges stores to use its platform, which he says gives small businesses a piece of the profits.

"That is one of the reasons why we are sticking to this third-party marketplace model instead of just building a gigantic first-party sales model to destroy the businesses of smaller guys," he told reporters at a talk in Tokyo on Tuesday.

"Maybe we cannot beat Amazon completely, but I think that's the destiny of the company."

Rakuten says it counts 60 percent of Japan's population as members, and the company's sales in Japan alone make it one of the world's largest online marketplaces. It is also expanding actively abroad, and in February officially launched its virtual mall platform in the U.S., converting acquisition Buy.com. Rakuten has already done the same in Brazil and Germany, and is gearing up toward relaunching Play.com in the U.K.

Amazon has fewer users but generates more revenue in Japan. The U.S. giant allows third-party sellers, though they sometimes compete with its own listings.

Mikitani said his model, in which sellers maintain their own storefronts, encourages shoppers to become online regulars at certain stores, just as in the real world. He said his firm is a "service provider" that ultimately leads to lower prices.

"Most of the products on Rakuten are cheaper than the products on Amazon. Because the shops focus on one category, they are very competitive," he said.

The executive has been tapped by the current Japanese government to serve on a forum that makes recommendations to increase the country's international competitiveness. He backs measures such as allowing election campaigns to use the Internet, currently banned in Japan, and dispensing medical advice online.

Mikitani said he believes that the technology behind online shopping is now mature, and e-commerce is now evolving to a new stage.

"Up until now, Internet shopping was about the process. How to make your checkout process efficient. How to make your delivery smooth and fast. How to buy things cheaply," he said.

"Shopping should be a more rich experience."

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Jay Alabaster

IDG News Service
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