The Rakuten business model is a simple approach where stores pay the company for sending customers to buy products from their websites. Rakuten then shares the commission with the shopper through cash back. You must purchase through Rakuten’s app or website and have the purchase verified by the retailer to receive your cashback.
Rakuten offers over 70 services in diverse fields, including e-Commerce, internet services, cashless and e-money payments, fintech services, securities, and banking. Rakuten’s members need a single ID to use multiple services in the Rakuten ecosystem, earn, and spend points while shopping via the different Rakuten services.
Rakuten provides remarkably convenient services related to the daily life spectrum to encourage customers to become part of the ecosystem, utilize different group services, and continue using them. The Rakuten approach creates an interaction that reduces customer acquisition costs, enhances lifetime value per member, and boosts the overall gross translation volume for Rakuten Group services, giving the company an incomparable competitive edge.
Contents
Hiroshi Mikitani’s dream of owning an online retail business started in the late 1990s. Then, the internet was evolving, and more people were embracing and utilizing it. He derived his inspiration after ordering and receiving Japanese noodles through mail-order shopping. Hiroshi was convinced that besides getting thrilled by such convenience, many customers would be encouraged to shop online.
Some of Hiroshi’s friends were skeptical about his dreams, opining that only a few people would purchase products online. Still, Hiroshi never gave up. He launched MDM, an e-Commerce company, in 1997 with six employees. The website featured an online shopping mall named Rakuten Ichiba with 13 merchants. Hiroshi planned to charge the merchants a monthly fee to have them showcase their products on the website. He would also charge an extra fee for general promotional and advertising services.
Hiroshi proved all the naysayers wrong when the company thrived, generating $183,840.00 at the end of its first year. Other core milestones followed after that. In 1999, MDM adopted Rakuten, a Japanese term that means optimism. In 2000, Hiroshi introduced Rakuten University, a program designed to teach vendors how to operate online businesses. Rakuten went public the same year and was listed on JASDAQ.
Rakuten Books, an online-based merchant for books, and Rakuten Travel, an online hotel reservation service, were birthed in 2001. Rakuten introduced Super Points, a consumer loyalty program, and Pay As You Go, a merchant fee contract system, in 2002. The company had 6,000 merchants in its system by the end of 2002. Rakuten acquired firms such as LinkShare Corporation in the U.S. to launch its operations abroad.
The company’s numerous joint ventures and acquisitions were critical to diversifying its product lines, penetrating financial services, and growing its global reach to Spain, Taiwan, Austria, and Canada. Through these moves, Rakuten became a dominant competitor in the B2B and B2C space. Currently, Rakuten has over 44,000 merchants, making it the most prominent online retailer in Japan and one of the largest e-Commerce platforms with regard to sales. Hiroshi said his company’s massive success results from “omotenashi,” a Japanese principle that means high-quality and personalized service.
The owners of Rakuten are; Haruko Mikitani (8.40%), Hiroshi Mikitani, the CEO and founder (25.5%), Tencent (3.64%), and Japan Post Holdings (8.30%).
Rakuten’s mission is “To empower people and society through innovation and entrepreneurship.”
Rakuten allows online consumers who shop through the platform to earn cash back. Before purchasing goods, shoppers visit Rakuten.com and search for their preferred online store. After locating the store, the shopper clicks to access it from their Rakuten account. Doing so generates a tracking cookie, allowing them to receive credit for their cash back. While some stores offer up to 3% cash back, others offer more.
Shoppers can use Rakuten free of charge. Rakuten acts as an affiliate for its partner stores. The stores pay Rakuten, after which it shares a percentage of the money with its customers. For instance, suppose you shop at Target using your Rakuten link. Target will pay Rakuten a certain percentage of the overall order amount. Rakuten will then offer you a portion of the amount they receive from Target.
Rakuten makes in different ways, as seen below.
Rakuten makes the largest income from internet services, with Rakuten Ichiba, an e-Commerce platform based in Japan, generating the most revenue. More than 55,00 merchants operate their stores on Rakuten, driving daily sales to nearly $100 million. A considerable percentage of the company’s marketplace-based revenue is from commissions. Sellers pay up to 4% for every product sold. Further, Rakuten charges listing and registration fees, fixed monthly consultation fees, processing fees, system reinforcement fees, affiliate fees, and fees for royalty point-earning users. Sellers on Rakuten can promote their products by buying ad slots on customer search queries. The company then earns money from each click the ads attract.
Further, Rakuten offers Rakuten Super Logistics, a merchant fulfillment service, and charges a fee. Other Rakuten e-Commerce units from which the company makes money are Rakuten Rakuma, Rakuten Bic, Rakuten Books, and Rakuten Fashion. The company’s travel offering is another big revenue driver.
The system lets travel operators list their flights, accommodations, and trains on the platform for a fee. Rakuten also receives a commission for each sale in addition to search and banner advertising. Through the Rakuten cashback program, the company receives a commission whenever consumers shop at any merchants it hosts. The company also runs various media businesses, which generate income through advertising and subscription fees.
Rakuten Ticket is a division of the company through which users can buy event tickets. Other revenue-generating divisions include Rakuten Recipe, Rakuten Infoseek, and Rakuten NFT. Rakuten also earns a commission from NFTs sold through the digital marketplace.
The Rakuten FinTech Group supervises the company’s financial division. Rakuten has a wide range of financial businesses, as seen below.
These financial services power consumption across various Rakuten internet services while enabling the company to generate revenue from interchange fees. The Rakuten Wallet generates most of its income from consumer trading fees when purchasing or selling a financial asset.
The company’s payment app and credit card enforce fees on merchants who use them, while its insurance products collect premiums monthly. Rakuten Bank can deposit member funds in interest-generating bank accounts or issue loans for interest.
Rakuten Capital is a venture capital group that invests in promising startups or incubates new businesses. In one of its venture investments, Rakuten gained $2 billion from a $700 million investment for a 13% stake. Even though the deal has since collapsed, the company recorded some wins. Rakuten generated money from Rakuten Capital when it disposed of its shares for a higher amount than the buying price.
Rakuten Mobile, a low-cost data 4G plan, was birthed in 2020. For $27 monthly, consumers would gain access to unlimited data and calls where Rakuten has network coverage. While the company’s low-cost plan gave it a competitive advantage, it admitted that implementing an individual network can be costly. Still, the industry can be lucrative, mainly due to the low customer churn rates.
Rakuten leverages its mobile offering to attract new customers. In a recent earnings report, the company announced that Rakuten mobile subscribers spend up to $260 more on Ichiba than unsubscribed users. The company also launched Rakuten Symphony in 2021, a system through which telco companies can establish virtualized networks. Symphony oversees customer relationship management tools, a digital app marketplace, and cloud storage, sold to consumers as white-label offerings.
The Rakuten Business Model can be explained in the following business model canvas:
Rakuten’s customer segments consist of:
Rakuten’s value propositions consist of:
Rakuten’s channels consist of:
Rakuten’s customer relationships consist of:
Rakuten’s revenue streams consist of:
Rakuten’s key resources consist of:
Rakuten’s key activities consist of:
Rakuten’s key partners consist of:
Rakuten’s cost structure consists of:
These supercenters incorporate home furnishings, toys, apparel, electronics, dairy products, deli, bakeries, and fresh produce to offer customers an all-around shopping experience. In the United States, the company operates under the name Walmart, Flipkart Wholesale in India, while in Central America and Mexico, it’s referred to as Walmart de México y Centroamérica.
The company follows an Amazon-to-buyer approach and provides a massive inventory and diverse product range, enabling customers to purchase their preferred products under one roof. The Seattle-based retailer has individual software development centers, websites, data centers, fulfillment centers, and customer service centers globally.
Below, there is a detailed SWOT analysis of Rakuten.
Regardless of its success, there is still room for improvement. Rakuten can take the right initiative to penetrate new international markets and adopt advanced technology. Training staff helps them learn about the company, allowing them to market it accordingly. By adopting the right marketing, customer support, and marketing strategies, Rakuten will improve its productivity and increase revenue.
Tesla, Inc. is by far one of the most well-known companies in the world. As…
The Duolingo Business Model revolves around creating an interactive language-learning platform accessible to people worldwide.…
Johnson & Johnson, a pharmaceutical and consumer goods company established over a century ago, prides…
Caterpillar, a renowned global manufacturing company, has dominated the industry for decades. With its extensive…
Instacart, founded in 2012, has quickly become a leading online grocery delivery platform. It offers…
The Quora Business Model revolves around creating a platform where users can ask questions, share…
This website uses cookies.