HIS company’s name means “optimism”. And Hiroshi Mikitani, the founder of Rakuten, is certainly optimistic. As of July 2nd, he has insisted that all meetings at Japan’s largest e-commerce firm must be conducted in English. This is in a country where few people speak English well, and many are embarrassed even to try. But Mr Mikitani believes that Rakuten must become more global if it is to prosper. “Before we globalise our services, we need to globalise our employees,” he says.
Currently, Rakuten is too reliant on a single business in a single maturing market. It makes most of its money from an online shopping mall that Mr Mikitani set up in Japan in 1997. Rakuten Ichiba (pictured) offers a place where retailers can put up virtual storefronts; it provides the digital infrastructure and takes a cut of sales. It has been obscenely successful: Rakuten Ichiba is the main reason why investors value the group at ¥1,064 billion ($13.3 billion). Although it has several businesses in Japan, including an online bank, travel services and even a baseball team, Rakuten Ichiba accounted for over a quarter of sales in 2011 and a staggering 77% of profits.
Japan’s online retail market is still growing at 12% per year. But 70% of internet users already shop online, according to a report by Forrester, a market-research firm. That means future growth in Japan will have to come from greater spending per person.
So Mr Miktani has been looking abroad. Since 2010 Rakuten has acquired e-commerce businesses in America, France, Brazil, Britain and Germany and negotiated joint ventures in Indonesia and China. It will enter Malaysia later this year. Mr Mikitani’s goal is to expand Rakuten’s presence to 27 countries (from about a dozen now) and for 70% of transactions to take place outside Japan (10% do so now).
But Rakuten’s business model does not always travel well. In April it announced it was closing Lekutian, its joint venture with Baidu, China’s biggest search engine. Mr Mikitani says he had a tough time dealing with “an overheated market” and “very different” consumer behaviour. He promises to return to China. Yet the timing of his exit must be galling: China recently overtook Japan as Asia’s largest e-commerce market.
Rakuten’s latest acquisitions and investments suggest that the firm is trying new things. In January, it completed the acquisition of Kobo, a Canadian e-reader, which it launched this week in Japan—ahead of Amazon’s Kindle. Last month, it snapped up Wuaki, a Spanish video-on-demand service. And in May it made a big investment in Pinterest, an American image-sharing site popular with women.
Digital content could help Rakuten quickly establish a presence in several countries. It is cheap to distribute and doesn’t require much local infrastructure. And after a period of losses—e-readers are typically sold at a loss; the money is in e-books—it could be hugely profitable. (There is a big “if”, however: last year, Kobo shipped 1m devices to Amazon’s 17m Kindles; Apple, whose iPad offers a virtual bookstore, shipped just under 39m tablets.)
Digital services can also help Rakuten’s other businesses. Mr Mikitani plans to use Pinterest as a high-gloss showroom to tempt people to Rakuten’s many online shops. The idea is to make online shopping an attractive alternative to the high street instead of a place to find cheap deals. And with the emphasis on pictures, language need be no barrier.