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Japanese giant Rakuten enters India, but it’s not yet joining the ecommerce war

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Japanese ecommerce titan Rakuten (JSD:4755) has just announced its entry into India. To begin with, the firm has today opened a global unit called the Rakuten India Development and Operations Center (RIDOC) in Bangalore. A statement from the company says the center will focus on “infrastructure operations, processes, and resources.” For now, there’s no Rakuten India estore – instead it is working behind the scenes on developing talent in infrastructure automation, software development, and quality assurance.

Hiroaki Yasutake, Rakuten’s managing executive officer and director of development, explains in today’s announcement:

By developing resources at the RIDOC that will be used throughout the Rakuten Group, we will have the opportunity to develop best practices, standardize processes, improve the efficiency of our operations worldwide and build a truly global team.

There will be inevitable speculation, however, that Rakuten is eyeing the ecommerce market in India, which hit US$16 billion in consumer spending last year. Indian commerce group ASSOCHAM predicts it could hit $56 billion in India by 2023. Currently, only nine percent of Indians with an internet connection shop online, compared to over 30 percent in other BRICS countries. India’s ecommerce market is still 60 times smaller than China’s, which indicates its huge growth potential. The current number of online shoppers in India will double to 40 million by 2016, says an ecommerce report by Accel Partners.

Rakuten’s entry into India has to be seen from this perspective. The Japanese giant’s ecommerce platform is among the world’s largest in sales. The company has been on a global expansion spree, mainly through acquisitions and joint ventures. Most recently, it bought DC Storm, a British marketing analytics firm and Viber, the Cyprus-based mobile messaging startup. Earlier acquisitions included Buy.com (now Rakuten.com Shopping in the US), Priceminister (France), Ikeda (now Rakuten Brasil), Tradoria (now Rakuten Deutschland), Play.com (UK), Wuaki.tv (Spain), and Kobo (Canada). The company also has investments in Pinterest, Ozon.ru, AHA Life, and Daily Grommet.

Rakuten’s India foray comes at a time when investors are pumping in millions to fuel the ecommerce race here.

See: Is this Flipkart’s secret weapon to beat Amazon?
Two of India’s biggest ecommerce companies, Flipkart and Myntra, merged recently in a bid to shore themselves up against Amazon India, which launched its online marketplace here 12 months ago. Last week, Walmart launched a whole business-to-business (B2B) ecommerce platform in India, which is possibly a stepping stone to a consumer-focused online grocery store for India.

Even though the Rakuten statement today talks mainly of developing resources in “the Silicon Valley of India”, the company has made no secret of its aim to become the world’s largest internet services company. So you have to read between the lines when the statement goes on to say:

In the future, the RIDOC will expand into other areas complementary to Rakuten’s global business.

In short, Indian consumers can look forward to more wooing from the global ecommerce giants, while homegrown ecommerce companies, already jittery over the presence of Amazon, now have a giant from the east to worry about as well.

Editing by Steven Millward

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