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Business. Amazon Jp and Rakuten, two leading e-commerce giants, are chasing market dominance in Japan, a country obsessed with online purchases.

Amazon, Rakuten battle for Japan

In this country of economic decline, there’s one economic sector that in recent years has expanded rapidly and continues to grow. E-commerce, and online services generally, in Japan is the new battlefield among the biggest players in the industry. In one corner are local companies, with some of the richest men in the country at the helm.

The leader is Rakuten, which by the early 2000s was the dominant force in the Japanese market. In the other corner is Amazon and other foreign firms constantly on the prowl for new markets to expand.

One of the keys to the success of e-commerce here is the high rate of connectivity: In a population of just over 127 million people, more than 109 million have access to the Internet.

In fact, Japan leads the world in transactions conducted on smartphones or tablets. South Korea is second.

In general, today, Japan is the third-largest market for online shopping in the world, with a total sales volume around $120 billion and growth of 7 percent a year. (That’s moderate, actually, compared to China’s 51 percent growth in the same industry.) Rakuten has a market share of 25 percent, double that of its nearest competitor, Amazon.

The growth of e-commerce is the flip side of Japan’s economic recession and rapid population decline. Since the collapse of Lehman Brothers in 2008, the prospects for growth in e-commerce have become more attractive to Japanese companies. According to some surveys, the Japanese go out less and are increasingly turning to the Internet to find business.

The ascent of Rakuten is a good example of the paradox of growth in times of generalized crisis. Founded in 1997, the year of the Asian financial crisis, the company has over the years become the leading square for purchases and sales of digital products online in Japan.

The growth of Rakuten became more evident after 2011, when the triple disaster struck Northeast Japan — earthquake, tsunami and Fukushima nuclear meltdown — deepening the country’s economic difficulties.

Nevertheless, Rakuten sales hit 2 trillion yen (about €15 billion), with company profits of 100 billion yen (€750 million). Encouraged by the results, the company consolidated its leading position at home with customer loyalty initiatives and by diversifying its products.

Now Hiroshi Mikitani, CEO of Rakuten and the third richest man in Japan, wants to make the company the largest in the world.

Even older segments of the population, particularly those over 65, are involved in the dot com explosion. Statistics released by the Interior Ministry in Tokyo at the end of 2014 give an idea of ​​the growth of e-commerce since 2002: In 2013, about 10 percent of families with a member over 65 (approximately 2 million households) had shopped online. The possibilities of growth among this type of customers are high: According to government statistics from 2014, the Japanese population has fallen by 273,000 over the previous year, and they estimate a decline of 40 million individuals by 2060.

It’s a tempting market for Amazon, the world e-commerce leader, though with its lagging market share in Japan, the company will be playing catch-up. According to statista.com, however, sites tied to Amazon Japan, the local subsidiary of the company led by Jeff Bezos, collect more than 31 million unique page views per month, more than Rakuten. Amazon Japan has also expanded its scope: It started with books and now offers clothes, accessories, houseware, sporting goods and even automobiles. This year, Amazon Japan has also launched its own payment service and opened a brick-and-mortar supermarket from which to buy food and alcohol.

“Amazon Japan is literally killing everyone in terms of growth year after year,” says an e-commerce employee in Japan, who asked to remain anonymous. “Amazon is, to its competitors, the model of e-commerce: nice, clear, with the best user experience.”

However, as demonstrated by a lengthy report in The New York Times, the Amazon model has a dark side: what The Guardian this summer dubbed as “the Amazon regime.” Namely, Japan has come under the scrutiny of Amazon’s PIP, or Performance Improvement Plan, a special three-month program in which employees who do not have satisfactory results according to the objectives set by management are either fired or demoted. In an ever-changing industry such as e-commerce, increased attention to employee performance is essential.

Yet some workers at Amazon Japan have decided that the situation is no longer sustainable and have created a union under the wing of the Tokyo Kanri Union — a group of auditors related to the service sector. The union, explained secretary-general Takeshi Suzuki, has filed at least 20 complaints of wrongful termination and abuse of power. “We want the end of PIP,” Suzuki said at a press conference, “and a work environment where they can continue to work without any worries.”