Here in the U.
S.
we're used toAmazon's unquestionable dominance.
Nearly 50 percent of e-commerce transactionsin the United States take place on the platform, while the runnerup eBay only holds about 6 percent of the market.
But in Japan, it's a different story.
Though the country is Amazon'ssecond largest international market, here the e-commerce giant is locked ina tight competition for market share with homegrown Japanesecompany Rakuten.
2016 was the tipping point whenactually Amazon started to finally take over market share.
Last figures I saw was Amazon hasabout 25 percent market share and Rakuten is closer to 20 percent.
A third player, Yahoo Japan, also holdsabout 9 percent of the market.
Yahoo Japan launched in 1996, Rakutenlaunched in 1997, and Amazon entered the market in 2000.
For years, Rakuten's knowledge of thelocal economy and wide suite of products helped it maintainits market lead.
But recently, Amazon's focus onprice and convenience, superior logistics capabilities, and fast shipping haspropelled it into first.
Amazon Prime, I believe, in Japan isone of the cheapest in the whole world.
And for that you get access toAmazon Prime Now, which can give you free delivery in two hours incertain areas of Japan, particularly in larger cities.
Rakuten doesn't have ashipping service like Prime.
And while it's working to buildout its own shipping and fulfillment centers, right now these logistics arehandled by third party companies.
So some consumers are turning toAmazon for quicker and cheaper delivery, not to mention access to the vastamount of online content that a Prime subscription provides.
The layouts of the twosites are also very different.
While Rakuten presents a busy frontpage with many links and featured products, Amazon's site issimpler and more targeted.
Amazon is really built around search.
So you go in there and yousearch for a specific product and those products will come up, whereas theRakuten website allows you to browse through a variety of products, similarto the experience that you would have in a department store.
The user interface on Amazon is quitegood for very specific daily use products.
Higher value items tend to beseen to be bought through Rakuten.
Analysts believe the platform's differencesmean it's unlikely that either will dominate themarket anytime soon.
With its shopping mall model, Rakutenappeals to consumers used to traditional brick and mortar retail.
Each seller has their ownhighly customizable landing page.
Product descriptions are extensive, appealing toconsumers who want to dig in and do their research.
So if you're a Rakuten merchant, you canhave your product page as long as you want.
And some of these pages aremore than 10 meters long.
So Rakuten has for a long time said, we are the champion of freedom for the merchant, for them to communicateto consumers how they want.
Whereas Amazon seems to stick toa very regimented way of displaying product information.
Hart says Japanese consumers also appreciatethe superior look of Rakuten's packaging.
Japanese customers value receiving a nicelywrapped present for example, or something that's been handledwith extreme care.
And so for items such asbirthday gifts, anniversary gifts, they may actually prefer to buythat through Rakuten.
In addition to e-commerce and fancypackaging, Rakuten offers a whole ecosystem of products and services referredto in Japan as the Rakuten World.
And once a customer isabsorbed into this world, the company's robust loyalty points program meansthey're highly incentivized to stick around.
So we have about 100 millionmembership, of 130 million population in Japan.
And we have a very verystrong, the most popular point program in Japan.
So that's our approach.
Our membership andour reward program.
Rakuten offers more discount pointsthe more services you use.
So they are the numberone credit card in Japan.
So if you use their credit cardwhen you shop, you get additional discounts.
If you use their mobilephone service, then you will get additional discounts onyour shopping.
And if you were to use theironline security service, you would get additional discounts ontheir service.
So they've created a bundling strategyto give value to consumers.
Rakuten operates the country's largestonline bank, offers a streaming service that competes with Netflix, home-sharing that competes with Airbnb and owns messaging app Viber.
The company is launching its own wirelessnetwork, and in a push for global recognition sponsors the GoldenState Warriors and Barcelona Football Club.
It expanded into the U.
S.
e-commerce market as well and acquiredcashback site Ebates in 2014.
You talk to a typical Japanese consumer inJapan, they may have six or so Rakuten apps on their phone.
The strength of Rakuten is not whatwe're kind of a single service company, but we are providing variousdifferent values through our memberships.
So I think that isgoing to be our strength.
As for Yahoo Japan, it stayscompetitive as Japan's clear leader in consumer auctions, and its e-commercewing has a partnership with Softbank, so mobile phone subscribersget discounts for using Yahoo Shopping.
Alls to say, though Amazon leads themarket for now, it can't take its position for granted.
To keep up, the company has rolledout its own points based loyalty program.
It also recently introducedAmazon Pay, a cashless payment service similar to what Rakutenand Yahoo already offer.
Both Rakuten and Yahoo have movedvery aggressively into both credit cards and now cashless payments .
Financial services would be the obviousthing that Amazon is not really doing at scale.
As for Rakuten's future strategy, Matthewsays he envisions the company continuing to build out itslogistics capabilities, creating its own shipping and fulfillment centersto compete with Amazon.
But ultimately, Hart doesn't believe thatRakuten should be too worried about Amazon's increasing presencein the country.
I don't see within the foreseeable futurethat Rakuten is going to be massively disrupted by Amazon.
They have a very deepunderstanding of the local consumer.
I see more Amazon having to changeto accommodate Rakuten's way of doing business in Japan than vice versa.
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