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MNC and Rakuten: Why the Sudden Break Up?

Enricko Lukman
Enricko Lukman
6:31 pm on Mar 22, 2013

break up rakuten mnc

Image source credit: imgix.8tracks.com

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.

Whatever the case may be, there is one big question that’s being asked by a lot of people today. “Will RBO be closed?” Rakuten and Baidu’s joint venture e-commerce Lekutian was closed after the two companies announced the break-up. The same could happen here too, but for the moment the e-commerce store is still alive.

It’s going to be interesting to hear the thoughts from Rakuten Asia’s director and assistant chief marketing officer Shin Hasegawa about the company’s efforts to stake its claims in Asia when we interview him during our Startup Asia Singapore event this April 4th. The team is eyeing growth and expansion in Southeast Asia, but will Indonesia remain on the Japanese company’s radar? We’ll have to wait and see.

Hit the comments with your theories on RBO’s fate and performance in the market.

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Have Your Say
  • Soyh

    Don’t think it’s cash problem. Mnc didn’t support Rakuten enough. U don’t see many ads on tv. But u see Zalora alot

  • Andi Sukiman

    Blibli and Lazada are online retail company. Rakuten is the marketplace model. Equivalent rival for Rakuten in the country should be (adopting your Alexa comparison): Tokopedia (#53), Multiply (#60), Bukalapak (#182), Qoo10 (#343).

  • Low

    Blibli, Lazada, Rakuten, Qoo10 = b2b2c / b2c. Tokopedia, multiply = c2c. All still EC so they all compete for users who go online buy things!

  • Andi Sukiman

    @Low: As business owner, you can’t just sell your product or open your store in Blibli or Lazada, but you can do so in Rakuten or Qoo10. And I just browse around, and find some big brand merchant open on Tokopedia and Multiply, so they are not pure C2C.

    Using Alexa approach from Enrico, it is quite surprising for me that Rakuten is below Top 500 most visited website in Indonesia. Another surprise for me is come from Tokopedia that already surpassing Multiply, and Qoo10. Never really saw their ads compare to others.

    Back to the topic, I checked rakuten site, still both logo on the footer. One thing that I am curious will Rakuten withdraw the service totally or will continue to fight in Indonesia market or find a new partner? Or just acquired some local marketplace like what they did in Thailand?

  • John

    Well,The answer could be here http://www.techinasia.com/rakuten-southeast-asia-startup-fund/ very make sense in this case

  • Ari

    This is a tremendous setback for RBO in this competitive space.
    Sounds like MNC didn’t live up to Rakuten’s expectations in terms of execution, support and back-end provision. Rakuten is buying back its stake in the joint venture, so I think Rakuten still wants to continue and go it alone. The question is, can Rakuten do it without a local partner? Or are they going to acquire a competitor with a better market position?

  • Farianti Ika Putri

    As a Rakuten customer myself, I have to agree with the article. There was one time when I ordered, and the merchant contacted me that there is some problem with their (Rakuten)’s system, so they didn’t accept my payment confirmation. Now it’s been about a month since I ordered, and I kept sending them email to refund my money, but no reply at all. The only reply I got was from the facebook page admin, and he/she only told me to call their customer support.

    I see 2 main reason here for Rakuten’s (maybe) failure:
    – Not enough advertising
    I see a lot of Indonesian e-commerce online ads these days, like Lazada, Berrybenka, or Zalora. I don’t think I have seen Rakuten’s ads.
    – Irresponsive customer service
    They only have 1 phone number for customer support, and an email for payment confirmation. I find contacting them very hard, since I from outside of Jakarta, calling them would be very expensive. And with emails, so far with payment confirmation or asking for refunds, there never was any reply. It would really help if they have maybe a Yahoo Messenger account or Blackberry PIN.