The news came about as quite a shock, as e-commerce leader Rakuten announced last week that it has decided to pull its operations from Singapore, Malaysia and Indonesia marketplaces.
This is counter-intuitive for the layman. Rakuten is often considered the Japanese equivalent of Amazon, another e-commerce giant in the United States that is disrupting how Americans make purchases. Futhermore, with the strong growth in South East Asia, especially in Singapore, it is confusing that Rakuten, with its size, has decided not to pursue this growth and the opportunities within.
This article will look at Rakuten Singapore in particular, studying it in the competitive retail landscape of Singapore, and seek to understand why Rakuten has decided to pull its services out of Singapore.
Singapore’s E-commerce Landscape
E-commerce has always been growing strong in Singapore. According to Euromonitor, online sales in Singapore had grown from SGD800 million in 2012, to SGD1.34 billion in 2015. In merely three years, what has caused the huge 60% increase in online sales in Singapore?
The simple answer is the realisation of the potential in mobile retailing. Singapore is seeing an increase in mobile penetration, and there is internet connectivity in almost all areas in Singapore. These two factors have helped tech-saavy Singaporeans cement mobile technology as an essential part in their lives. The more Singaporeans are on mobile, and the longer they spend time on mobile, the higher the potential is present in mobile. As a matter of fact, according to Insideretail.sg, more than 50% of Singaporeans shop online, the highest rate in South East Asia.
E-commerce leaders with their sights set on Singapore include Qoo10, Lazada, Zalora and Carousell, and they understand this. They have been pushing aggressively for the use of their mobile apps, using exclusive deals and promotions to encourage Singaporeans to download and use these apps.
And yet, with an evidently growing market in Singapore, why is Rakuten pulling itself out of it? As we shall see, it’s a mix of competition, customer experience and possibly a set of new directions.
Cutthroat Competition in Retail
The main reason for this is the competition that retail companies face in Singapore. It is no mystery that in Singapore that only the toughest brands will survive, offline and online alike.
There are more than 10 successful e-commerce sites in operating in Singapore, and they cover general interests to niche markets. The most successful is Qoo10, at the lead with a 14% market share in Singapore (according to Euromonitor). Qoo10 has been able to offer a variety of products at competitive prices, while offering online and offline payments methods convenient to Singaporeans. It is also aggressive in its promotional strategies, including Time Sales and Group Buys.
But where does Rakuten stand among its competitors? We looked at the SimilarWeb statistics between Qoo10 (leader in B2C), Carousell (a rising C2C in Singapore), and Rakuten itself. The statistics are startling. This is hardly the results we’d expect from the giant Rakuten, that competes on an international level with other giants such as Amazon and Alibaba.
(data from Euromonitor.com)
And yet none of the three giants have a strong foothold in Singapore. Neither Amazon or Alibaba is among the top e-commerce sites visited by Singapore. This hints us that small- and medium-sized enterprises have found the agility to outmanoeuvre these giants. Carousell, which was founded in 2012, is a perfect example of this, almost doubling its web traffic in Singapore in just four months from September 2015 to January 2016.
To further understand the challenges faced by Rakuten Singapore, we need to look at the customer experiences provided by the retailer.
Online Shopping Experience Management
Rakuten Singapore also faces another issue, and that is management of customer experiences in the Rakuten Singapore website. This includes complaints of difficult searches for on the Rakuten website, email confirmation is not intuitive, and a non-friendly website design.
However, these are no the main deciding factors for a site’s difficulty (in fact, Qoo10 doesn’t have a “great” design according to many users). The biggest obstacle Rakuten Singapore faces is actually the lack of product reviews, which Singaporean shoppers depends on heavily. As part of the buying process of Singaporeans, especially for products with high monetary or personal value, Singaporeans do in-depth research on search engines, finding reviews and recommendations from various sites, and make comparisons between competitors and options. Qoo10 allows review for both products and sellers. Carousell allows users to review both buyers and sellers. Rakuten Singapore, on the other hand, does not have such a rating feature at all, which misses a key buying step of Singaporeans. (It is unlikely that a retail giant would miss such an imperative element, which means it is probably a conscious decision not to include such a rating system.)
(Screenshot from qoo10.sg. Not only does qoo10 allow ratings on sellers and the products, buyers are allowed to upload photos of the products that arrive, showing off the authenticity of products received)
Is Rakuten leaving South East Asia?
This news of withdrawing its marketplace from South East Asia should not represent Rakuten’s lack of confidence in it (including Singapore).
Rakuten says that “its moves are in line with a new roadmap, … [as] it plans to introduce its consumer-to-consumer marketplace mobile app, called Rakuma, in Southeast Asia.” (via Tech in Asia) Perhaps this is the decision Rakuten arrived upon, seeing growths of C2C brands such as Carousell, and the opportunities available. It is interesting, that instead of competing or improving services, Rakuten has decided to focus on a different core business. However, laying off 150 staff (30 in Singapore according to Straits Times) as in winds its operations up, instead of reallocating those resources to Rakuma, could question the lack of confidence in Rakuma.
(Screenshot of rakuma.rakuten.co.jp. Likely short for “Rakuten Marketplace”.)
Rakuten also continues to do plenty of research to find opportunities. In Singapore, it has a research department of the Rakuten Institute of Technology, focused on mobile and social innovation. Rakuten has also made aggressive acquisitions, which includes Viber in 2014 and Viki in 2013. These would hint that Rakuten is refocusing its business in South East Asia, and people in the retail industry will be looking out for Rakuten’s next story.