MNC and Rakuten: Why the Sudden Break Up?

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Last night’s news of Rakuten (JSD:4755) breaking up its joint venture with MNC in Indonesia sent shockwaves through the entire tech ecosystem. It could spell the end of Rakuten’s e-commerce business in Indonesia. But why the sudden break?

So far there’s no clarification from either Rakuten or MNC – and no response to our queries to Rakuten Asia – so we can only speculate as to what happened to its dismantled joint-venture. But there is surely only one explanation that makes sense: that its e-commerce project, Rakuten Belanja Online (RBO) isn’t meeting its expectations and goals in Indonesia. We’ve seen it before with Rakuten’s joint venture with search engine Baidu in China, which was shut last year.

Back in November, Ryota Inaba said that RBO’s growth was “good and promising.” The company managed to surpass its first-year expectations, and when it comes to sales, RBO was recording double-digit sales growth from month to month and triple-digit annual growth. It all looked good, right?

Victory for Blibli and Lazada Indonesia

But according to Alexa’s web rankings, RBO is sitting at 599th in terms of visitors in Indonesia – that might be a clue to the online shop’s struggle here. As we’ve seen with the popular online stores in the country, a lot of Rakuten’s rivals are already ranked higher than 100 in terms of local web visitors. One of its biggest competitors, Blibli – which was launched around the same time as RBO – is ranked 231st, and newcomer Lazada Indonesia rocketed its way up to 41st position in less than one year. RBO’s one-and-a-half year impact here seems weak in comparison to those sites.

We can also take a look at its marketing. Back when we interviewed RBO head of marketing in 2011, they said that through the company’s partnership with MNC Media, they would go all out on advertising. The same strategy was put into action by its rivals like TokoBagus, Blibli, and Rocket Internet’s Lazada Indonesia, and it looks like RBO can’t beat them on that front. And even if the Japanese company can, it doesn’t look like its back-end operations are keeping pace.

Rakuten’s problematic services

We also need to take a look at RBO’s execution. A few customers are a bit upset about the company’s services and made their complaints on RBO’s Facebook. A few said that they weren’t receiving their refunds or that there isn’t any confirmation made after they’ve wired in the money.

A particular Facebook conversation last week between a disgruntled customer who had trouble ordering products and RBO is a good example about the company’s problems from the back-end. The customer only learned that the product he ordered was out of stock after the merchant – not RBO – contacted him directly. In fact, the merchant said they were never given confirmation by RBO about the sale. The customer then explained that RBO never replied to his emails and his repeated calls to customer services didn’t solve the problem.

In fact, there are quite a number of complaints being thrown on RBO’s Facebook page, with other customers joining in on the conversation and sharing their frustration too. Rakuten’s Japanese expertise in the e-commerce industry shouldn’t be facing these common problems, but it does. So the question is how much of a team did Rakuten dedicate to the indonesian venture?

This isn’t Rakuten’s only venture into Southeast Asia. In 2009, Rakuten acquired Tarad.com, Thailand’s leading e-commerce platform, and it’s been quite successful. But the difference between Thailand and Indonesia can be attributed to Tarad’s pre-existing foundation of back-end operations and customer services prior to Rakuten’s acquisition. Something MNC didn’t have.

The road forward for Rakuten

There could be other reasons behind this split. Perhaps there was an internal dispute at PT Rakuten-MNC, or because MNC couldn’t plough in any more extra cash as the company is now committed with Chinese company Tencent to promote the China-made WeChat app in Indonesia through another joint venture.