Rakuten’s recent aggression in capturing Indian market

Daniel Posted On - June 25, 2014

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It is a fact that Japanese online retailer Rakuten Inc. is likely to enter India in the next six to eight months. Three persons familiar with the company’s future focus has expressed a clear idea that Rakuten is aiming towards a strategic alliance to gain rapid growth in the country’s Rs. 62,000 crore E-Commerce market.

It is also putting special effort in screening opportunities to penetrate market as back-end solution provider in the fields of logistics, through an acquisition, said the other two persons. And all three spoke on condition of anonymity. According to a 2013 report by the Internet and Mobile Association of India (IAMAI) and audit firm KPMG, Rakuten the Tokyo based organization, is looking forward to hold a share of an e-commerce industry that has been growing at an average annual rate of 34% since 2009. This report also reveals travel operators were expected to account for 71% of this, while sales of other goods remain accountable for the rest.

Rakuten has diversified businesses in the area of e-retail, travel and financial services. Its 100% subsidiary Rakuten Travel operates an online hotel reservation website with a huge business and access to an incredible number of domestic and international hotels. It has also spread its presence in South Korea and China.

While explaining the rationale for Rakuten’s interest in India, Mukul Singhal, principal at Saif Partners, a private equity firms said the opportunities in the business of hotel bookings is very high. Almost every company in the traveling industry is looking to invest in hotel bookings and packages as airline ticketing is not much profitable.

Rakuten was founded by Hiroshi Mikitani in 1997 which now runs Rakuten Global Market, a multi-category shopping portal and host of other portals namely Rakuten Coupons and TicketStar, and many more. But now it is aggressively eyeing global growth markets to fight out stagnating Japanese economy and weak consumer sentiment.

As an outcome of this principle, teams from Rakuten have been consulting investors, companies and industry experts for the past few months as it explored the Indian market. Company spokesperson Minori Nakayama said in an emailed response to Mint that they are not making any comment on inquiries in markets in which they don’t have direct operations. Dhruv Shringi, co-founder and chief executive at Yatra.com said, if Rakuten enters the travel category it will have to focus on an India solution. He also added that running a business in India is not a simple task as the market can only absorb a maximum of three players. But he admitted the fact that the prospects of the online travel market had improved and growth is back in this sector.

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