Businessmodel of Rakuten

Customer Segments

Rakuten has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

• Consumers: Individuals seeking to order products and services online.
• Merchants: Businesses seeking customers to purchase their products and services online. ### Value Proposition

Rakuten offers four primary value propositions: customization, cost reduction, risk reduction, and brand/status.

The company enables customization by allowing merchants to design their pages on the website so they can showcase their stores’ originality. This feature contrasts with other multi-sided retail sites that try to have retailers’ page branding and look mimic that of the host brand. Merchants are also given the ability to communicate with customers directly through social media and e-mail.

The company offers cost reduction through its Rakuten Super Points loyalty program. The program enables consumers to earn points through shopping (1 point per JPY 100 of purchases) and the use of various services in the website’s ecosystem. One point equals JPY 1 that can be used for another purchase or travel reservations. Points can also be obtained when customers use the Rakuten credit card or its Edy electronic money at physical locations.

The company reduces risk through its strong vetting of potential merchants. All vendors go through a thorough screening process in which company staff members ensure that their products comply with general laws and Rakuten’s specific guidelines. In addition, Rakuten conducts daily checks to remove items that are non-compliant. Moreover, it offers a phone line for the reporting of such goods. Beyond these features, the company ensures payment security and provides settlement options.

The company has established a strong brand as a result of its success. It is Japan’s biggest online retailer with over 95 million products from more than 44,000 vendors. In addition, it has 700 million users in over 170 countries, with over 108 million being members of its loyalty program.

Channels

Rakuten’s main channel for merchants is its sales/business development team, through which it acquires most vendors. Its main channel for consumers is its website. The company also promotes its offerings through its social media pages, as well as the hosting of Rakuten-branded conferences and expos twice a year in Japan and once a year at 13 other locations.

Customer Relationships

Rakuten’s customer relationship with merchants is primarily of a personal assistance nature; the company offers various forms of personalized support. It provides eCommerce consultants who give vendors guidance on how to increase sales and solve everyday challenges. It also maintains Rakuten University to provide training for merchants who are new to the Internet commerce world. Lastly, it operates Rakuten Travel College to provide education for travel companies with services on the site. Rakuten awards the best-performing retailer “Rakuten Shop of the Year” (SOY), an award that involves travel abroad with company representatives to study industry trends in other locations.

Rakuten’s customer relationship with consumers is primarily of a self-service nature. Customers utilize the website while having limited interaction with employees. That said, there is a personal assistance component in the form of e-mail support.

Key Activities

Rakuten’s business model entails maintaining a common and robust platform between two parties:  consumers and merchants.

Key Partners

Rakuten’s partners include the shipping and logistics companies that help it deliver its products to consumers; the financial institutions that enable it to carry out transactions that occur on the site; and travel associations from whom it receives advice on how to manage the travel portion of the site. The specific associations include Japan Ryokan Association, Japan Hotel Association, and Japan City Hotel Association.

Key Resources

Rakuten’s main resource is the proprietary software platform it uses to run its website. The company also depends on human resources in the form of its technology staff to maintain and update the platform, customer service staff for support, and training staff for merchant instruction.

Cost Structure

Rakuten has a value-driven structure, aiming to provide a premium proposition through significant personal service. Its biggest cost driver is cost of merchandise and services, a variable expense. Other major drivers are in the areas of advertising/promotion, customer support/operations, and administration, all fixed expenses.

Revenue Streams

Rakuten has three revenue streams:

Hosting Fees – Revenue generated from monthly fixed fees charged to merchants for the privilege of having their products/services hosted on the site.

Transaction Fees – Revenue generated from the commission Rakuten charges for each purchase transaction that occurs on the site.

Advertising Fees – Revenue generated from the fees the company charges to third parties for advertising their offerings on the site.