This man wants to destroy AmazonAugust 2, 2012: 10:28 AM ET
Hiroshi Mikitani is not a typical Japanese CEO. He's at the head of Japan's largest -- and the world's third largest -- e-commerce company . Now he is starting a colossal offensive on Amazon's turf.
By Michael Fitzpatrick, contributor
As head of Japan's biggest internet company, Rakuten, and the third largest ecommerce marketplace company worldwide, the maverick 46-year-old long ago rejected the tenebrous style of business that has shaped Japan. Instead, this Harvard-educated, young iconoclast has opted for a more aggressive Anglo-Saxon modus operandi. Mikitani is unafraid of red-blooded entrepreneurship and, unlike "Old Japan" bosses, he enjoys the limelight.
Hence the "Destroy" T-shirt, which made its debut at Tokyo's book fair in July where Mikitani launched, with Canadian e-reader maker Kobo, Japan's fist successful attempt to jumpstart the e-book business which never really materialized in Japan.
The Amazon (AMZN) taunt, written in Japanese, may be in jest. But because Rakuten is Amazon's only real competition at home and worldwide there is some iron to add to that levity. Mikitani's aim, as he as stated repeatedly, is to build the world's biggest internet company, no less. Now, as owner of the world's third most popular ereader, Kobo, he is starting with a colossal offensive on Amazon's turf. "We plan to expand abroad massively," he says, in his Japanese-tinted American drawl, about his plans for his e-commerce site and Kobo which he recently bought for $315 million.
"We are already in 10 countries but we plan to be in more than 27 countries in five years," he goes on. "Kobo will be launched in more than 27 countries that is for sure next year."
Rakuten has used its compatriot status to make pacts with Japanese publishers reluctant to deal with outsiders it seems. Leaving Amazon very much behind. Now, along with his Kobo incursion, Mikitani wants to bring his successful "B2B2C" business model -- which unlike Amazon eschews a warehousing function -- to merchants outside of Japan. "How does Amazon work? It's just a giant vending machine. Product centered," he says. "They create a huge catalogue. You sell on there, but if it sells well, Amazon will then be your competitor. That's the strategy of most e-commerce sites. Rakuten is shop-centered. Amazon is a supermarket."
Mikitani is counting on his retailer-friendly model wining over merchants and punters alike. He has already had success in the UK and in France and says the French have now adopted Rakuten's business model."Amazon's model is its own worse enemy," he says.
Figures from Rakuten's operations in Japan appear to bolster his claims. Mikitani founded Rakuten in 1997 and quickly built the enterprise into Japan's largest online retailer, employing more than 8,000 people. With a value of about $13 billion, its annual revenues are up 177% since 2007, to $4.75 billion in 2011. The company offers more items than most supermarkets, department stores and convenience stores combined in Japan. The site will sell you anything from eggs to samurai armor. Amazon's sales in Japan, according to one estimate, are about $1.9 billion.
Despite the bravado, it hasn't been all success for Japan's youngest billionaire. A foray into the Chinese market went wayward after partnering with search engine Baidu. That business has now been abandoned. There could be more trouble ahead for Mikitani as Rakuten, which translates to "optimist," further tests its ambitions, says Tokyo-based tech consultant Serkan Toto. "The recently closed [joint venture] with Baidu in China might not be the first big failure for Rakuten outside Japan," he says. There has never been a web or mobile company from Japan that has ever gained foothold in the US, he adds.
In his favour, there has never been a company, save for Uniqlo -- who do very well internationally -- that has made integration with the global market by speaking English a priority as Rakuten has. "To do this we are pushing forward our, what I call, Englishization project. Converting our language of communication from Japanese to English. Many (in Japan) thought this was crazy idea but they are coming around and they too are thinking they will pursue such a change as well," explains Mikitani.
Meanwhile, out-of-the blue tie-ups with firms such as Pinterest which lets users clip images to a handsomely designed virtual pinboard, shows that Mikitani is capable of being savvy in his search for opportunities. "The main goal here is showcase products listed on Rakuten to users off the site, on Pinterest, and turn those users into buyers and ultimately Rakuten members," explains Toto.
Pinterest could help in Mikitani's drive to bring more foreigners (pictures don't have a language barrier) and even more Japanese shoppers to his sites. But why did American Pinterest hook up with Rakuten? Mikitani says it was chemistry and as an entrepreneur's entrepreneur he liked the fact Pinterest had so few employees. "Pinterest share our vision for the internet. They got the impression that we are different, and that helped to get us aligned," he says.
To challenge American internet retail dominance, Rakuten is aggressively recruiting foreign nationals and partnering with non-Japanese firms across the globe. Success seems like a tall order but it's clear Mikitani won't stop trying. "We will be six to five times larger than we are now in five years. Other companies like us, like Uniqlo; other aggressive Japanese firms are emerging and those will set a precedent and set the trend."