The Biggest Internet Mall / EC In Japan

< Company Study > The Japanese Largest Internet Mall Cozy Mizoguchi [email_address] / +81-80-1205-8448 RAKUTEN is 1 of the most successful internet conglomerate, starting from internet shopping mall. This is brief analysis why RAKUTEN could success?

1 Basic Business Concept: MATCHING Business Tenant Shops = Consumers *Numbers of Shops opened *Numbers of Unique User on RAKUTEN = 31,831 shops @ RAKUTEN = 8,540,000 users Why so many shops have Why so many consumers opened on RAKUTEN? tend to use @ RAKUTEN? **Local Shops to be tough for **Consumers to be easier for expanding business by themselves, finding out “niche” kind of items, less knowledge of Internet. + getting them via Internet. Business Concept <1> Cozy Mizoguchi all rights reserved / 20100310

2 Basic Business Model: Commission Revenue Tenant Shops ⇒ RAKUTEN Business Concept <2> *to pay 46% for opening Shop + margin up to gross sales *to provide effective / useful opportunity / scheme to reach to potential consumers 3 Business Approach: Traditional “Order Taker” Sales to directly approach to customers via maximizing state-of-the arts web tools , but those approach is exactly similar with “Traditional” type of sales tactics / activity ⇒ Personalization : Accurate users profiling based on user’ preferences, behavior, etc 　⇒ Leveraging “words of mouth” effectively via SNS, Blogs, for expanding awareness, etc Cozy Mizoguchi all rights reserved / 20100310

3 Basic Business Approach: Traditional “Order Taker” Sales Business Concept <3> to directly approach to each users + delivery ordered liquors ,etc, enabling to collect each of users’ actual profiles. enabled ordering liquors without “Specifics” based on the relationships built upon direct / close communication with bottle shop people Built luxurious exterior type of buildings, encouraging consumers to visit & buy items, Enjoyed “shopping activity” @ stylish department-stores, but less intimate relationships w/ each other Established useful business opportunity to reach users even living outside of trading zone via web + users’ profile / data. Enabled searching for “Wants” commodity due to helpful recommendation, + getting them @ home. 　< Long time ago > < Just recently / currently > < RAKUTEN > SHOPS came to users Users went to shops INFO comes to USERS, SHOPS knows USERS Cozy Mizoguchi all rights reserved / 20100310

Web tools can realize “Virtual” direct communication between Shops = Consumers Business Concept <4> < RAKUTEN > INFO comes to USERS, SHOPS knows USERS SHOPS came to users Cozy Mizoguchi all rights reserved / 20100310

4 Business Strategy: Horizontal x Vertical business developments ⇒ Strategically expanding RAKUTEN business arena x enhancing wide array of items / services 5 Basic Solution / Business Expansion: M&A 　 ⇒ Tactically pursuing M&A methods 6 Business Promotion: Sports / Athletes activities, etc 　 ⇒ Usefully leveraging their own professional baseball / soccer teams + RAKUTEN CEO Mr. Mikitani appearing on various media Business Concept<5> < 2009 business performance > *units; billion / % to compared with last year - Gross Sales: 298.2 　 +19.4% - Operational Profits: 56.6 　 +20.1% - Pretax Profits: 54.8 　 +23.3% - EBITDA78.4 　 +17.5% 　 - Net Profits: 53.5 Cozy Mizoguchi all rights reserved / 20100310

Cozy Mizoguchi all rights reserved / 20100310 Vertical Horizontal ＜ High Profits / High Growth arena ＞＜ Area where RAKUTEN is fully developing > Credit card biz Bank biz Travel biz ＜ Marketing oriented business arena ＞ Securities biz Portal / Media Pro sports biz ＜ Area RAKUTEN is focusing on local Japanese + building up local procurements ＞ Asia US / EU ＥＣ biz Japanese ･ Contents server:500Tbyte ･ DB server:75Tbyte ･ Driving Private Cloud Business Strategy / Frame Actively entering into net-related fields by leveraging EC business Developing global business activities by leveraging EC business model

Vertical business activities by their subsidiaries with 09 results ・ RAKUTEN KC ・ e-Bank ・ RAKUTEN Credit ・ Fusion Communications -sales 57,698 -profits 3,312 -sales 30,301 -profits 2,418 -sales 23,549 -profits 4,463 -sales 115,002 -profits 36,222 -sales 19,320 -profits 8,801 -sales 44,017 -profits 1,526 -sales 8,360 -profits -617 -Sales 298,252 -Profits 56,649 （ units ； million ） Cozy Mizoguchi all rights reserved / 20100310 ＜ High Profits / High Growth arena ＞ Credit card biz Bank biz Travel biz ＜ Marketing oriented business arena ＞ Securities biz Portal / Media Pro sports biz ＥＣ biz ・ RAKUTEN Securities ・ RAKUTEN ・ RAKUTEN Auction ・ RAKUTEN Travel ・ RAKUTEN Research ・ Tohoku RAKUTEN Golden Eagles

Business Tactics / Performance, etc 1 Personalization 2 Group Synergy 4 Points Program 3 SNS, Blog, etc Members Acquisition / Retention ⇒ Realizing Cross Selling - RAKUTEN members 38,400,000 - RAKUTEN Shops 31,831 - Unique Users 8,540,000 - Cross usages 40.7% Cozy Mizoguchi all rights reserved / 20100310

1 Global EC biz ＜ sales potentials; big ＞１ JV with ＢＡＩＤＵ・ Build up #1 Chinese search company, enabling to be ready for full scale business developments in China. ・ to Launch late 2010 / Investment amounts; 4.3 billion 2 Started EC in Taiwan, Thailand 2 Exports Biz ・ Exporting some posted items on Japanese RAKUTEN to overseas customers, especially Japanese residents 3 Imports Biz ・ Coordinating personal import biz via US subsidiary LinkShare, icn ・ Open the page for Drugstoe.com, FragranceNet.com to Japanese customers ・ RAKUTEN to define 2010 as the “ 1 st year deployment in global markets” Cozy Mizoguchi all rights reserved / 20100310 Horizontal business activities in Global fields ＜ sales potentials; small ＞＜ Area where RAKUTEN is fully developing > ＜ Area RAKUTEN is focusing on local Japanese + building up local procurements ＞ Asia US / EU Japanese

Benchmark Expanding their fields more from July, 2011 when Digital Terrestrial Broadcasting will be launched in Japan. ⇒ All households can access to Internet via Remote Control. TV will have huge potentials to become a centric tool. What we can learn from RAKUTEN: < basis > Knows Customers, Understands Trends, and Communicates Customers as mush as possible, but smoothly, repeatedly. Cozy Mizoguchi all rights reserved / 20100310 Benchmark / Future potential Potential

RAKUTEN Finance Condition in FY2009 Cozy Mizoguchi all rights reserved / 20100310 Calculated based on 2009 Financial Index posted on RAKUTEN official sites. 18.05% ８） Labor's Share 　 76.51% ７） Added Value / Gross Margin on Sales 　 360,942,963 ６） Capital Intensity of Labor 　 4,005,745 ５） Capital-Intensive Indicator 　 10,989,741 ４） Marin generated per 1 employee 　 46,822,323 ３） Labor Productivity 　 8,449,118 ２） Payroll per 1 employee 　 110,679,000,000 １） Added Value / Gross Margin PRODUCTIBITY 23.48% ６） Gross Costs on Sales 　　 3.04% ５） Return on Capital Employed 　 24.50% ４） ROE 　 17.96% ３） Profits Margin on Sales 　 18.40% ２） Recurring Profit Margin 　 18.99% １） Operating Profit on Sales PROFITABILITY 66,413,000,000 １） Cash Flow CASH FLOW 0.17 １） Total Assets Turnover EFFICIENCY 0.94 ８） Inventories Turnover 　 2.23 ７） Receivables Turnover 　 5.38 ６）Ａ ccounts Ｒ eceivable Ｃ ollection Ｐ eriod 　 704.70% ５） Debt Ratio 　 12.45% ４） Capitol Ratios 　 62.82% ３） Fixed Assets to Fixed Liability Ratio 　 111.87% ２） Fixed Ratio 　 110.75% １） Current Ratio SAFETY

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The Biggest Internet Mall / EC In Japan

by Cozy Mizoguchi on Apr 06, 2010

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