Japan’s Rakuten opens office in Bengaluru; poaches mid-level managers from Flipkart, Amazon Japan’s largest ecommerce marketplace operator, which opened a development centre in Bengaluru in 2014, has established a business office in the city and started poaching mid-level managers from Flipkart and Amazon for setting up an online retail platform in India, people familiar with the development told .
Alibaba, which has invested in local ecommerce companies, plans a direct entry sometime this year.
A Rakuten spokesperson declined to comment. “India is a vibrant growth market and a great source of talent and ideas for us at Rakuten. We are always interested in new global opportunities for growth but we don’t have any comments on developments in India at this time,” the Tokyo-based firm’s spokesperson said in an email. Ecommerce sales in India are expected to grow from $14 billion in 2015 to $55 billion in 2018, according to research firm eMarketer.
India has seen the fastest growth in retail ecommerce among Asia-Pacific countries, surging 133.8% in 2014 and 129.5% in 2015.
Promising as the Indian ecommerce market seems, it would be challenging for Rakuten or any other newcomer to establish itself in the space as top players such as Flipkart, Amazon and Snapdeal dominate Indian ecommerce, each with billions of dollars in gross sales.
In fact, the combined Gross Merchandise Value (GMV), or total value of sales, of the country’s top three ecommerce marketplaces last year at $13.8 billion exceeded that of the top 10 offline retailers, which stood at $12.6 billion for the same period.
Started in 1997 as a small online marketplace with half-a-dozen employees, Rakuten currently employs more than 12,000 with sales of over $5 billion. It accounts for more than aquarter of Japan’s ecommerce business, ahead of Amazon in that country. It also has interests in financial services, digital content and travel businesses.
A foray into India would form part of Rakuten’s expansion strategy. In 2010, it acquired Buy.com in the US in a $250-million all-cash deal as part of its push into North America.
In 2014, it acquired San Francisco-based online cash back company Ebates Inc. for $1 billion. Ebates deals with a host of US retailers including Amazon.com, Best Buy, Macy’s, Home Depot and others.
A few months before that, Rakuten had bought the Viber internet messaging and calling service for $900 million. Other trophy investments by Rakuten include US ride-hailing app Lyft and online scrapbooking site Pinterest.
In Japan, it operates the flagship Rakuten Ichiba marketplace with more than 40,000 merchants. The company also helps traditional retailers go online.
India last month allowed 100% foreign direct investment in online marketplaces, clearing ambiguity over the business models of Amazon, Flipkart and Snapdeal. The country had earlier allowed 100% FDI only in business-to-business ecommerce and brick-and-mortar retailers had accused ecommerce rivals of circumventing the law and selling directly to consumers.
In the latest guidelines, India has barred marketplace operators from offering any discounts themselves and influencing prices on their platforms. Also, no vendor can have a share of more than 25% of total sales on a platform.
About 40% of Rakuten’s revenue comes from its Japanese operations and the company is increasingly looking at international markets for growth. Outside Japan, Rakuten operates in several markets including the US, UK, Brazil, Spain, Malaysia and Indonesia.
Source: The Economic Times