Rakuten shutdown: End of e-commerce as we know it?

This week Rakuten made an announcement to shut down its operations in Singapore, Malaysia and Indonesia.

In a conversation with Marketing, a spokesperson from Rakuten explained that this was in line with its vision 2020 and global strategy of transformation of e-commerce.

“In SE Asia, as the market itself changes and adapts, we are looking toward C2C and mobile business models for e-commerce and other businesses,” read an added statement given to Marketing.

While e-commerce continues to grow in the region, today consumers are flooded with options as to which online marketplace service to use. Most of these players offer similar deals with very little areas of difference from competitors. So is this just a natural consolidation of e-commerce as we know it?

Linda Locke, previously marketing consultant at Club21 certainly deems it to be. She says today, too many e-commerce retailers think “build it and they will come” when they should be saying “make it special and they will come”.

There is a fallacy that e-commerce is a cheaper way to reach more customers but, in truth e-commerce is surprisingly expensive to run.

She added that going forward, more players will look to exceptional customer service and omni-channel presence, as well as omni media, to remain top of mind and be seen as exciting.

“Unique and differentiated product is still a must have and is far too underestimated. There also needs to be clever tie- ups to stimulate traffic and desire,” said Locke

"It is alarming and unfortunate that Rakuten is shutting its B2B2C e-commerce operations in the region,” said Prantik Mazumdar, managing partner of Happy Marketer. However in the long –term, this might be a good move.

This is an early indication that a market correction is in the reckoning.

Moreover, there is talk in the market and media about the overvaluations of companies in the tech and e-commerce space.

Given the availability of "easy money", many companies are now pushed to focus purely on exponential customer acquisition growth at the cost of profitability - which is not sustainable.

As the Federal Reserve increases its rates, growth slows down in China, and tech companies like LinkedIn see their stock prices slashed, there will be more uncertainty among investors. They might soon be pulling back from subsequent rounds of investments, forcing many more ventures without profitable business models to scale down.

This is a cyclical nature of the market and it was bound to happen sooner or later. Rakuten won’t be the last e-commerce player to shut or scale down operations in the region.

Moving into the next phase

Neeraj Gulati, managing director of Ingenuity at IPG Mediabrands said this is just the evolution the digital business model. E-commerce model evolved around taking an offline product and selling it online thereby making discovery and transaction easier and faster.

"Somehow it became synonymous with discounting for the customers and a race for transaction numbers(valuation) for the companies," he said. Like Mazumdar he added these are signs of the next revolution in the commerce space where shopping will take a more contextual face.

In the near future, data from chat apps such as Viber and Whatsapp will blend seamlessly into services and products for sales.

"The new face of e-commerce is not just taking offline products and selling them online but using the data from the online space and customising the products and services for the user and making it relevant to that moment. It will become 'data-commerce'," he said.

Rajeev Bala, co-founder and CEO of Predator Digital Holdings added that smaller players will quickly see themselves squeezed out. He explained Rakuten has been a fringe player to date.

Quoting statistics from analytics site SimilarWeb, Bala added Rakuten’s Indonesia site barely managed 300,000 visits in August 2015, compared to 48 million for Lazada Indonesia – spelling out a crushing difference between the two.

Nonetheless, the future of e-commerce as an industry in Southeast Asia continues to look bright, with significant room for growth. Moreover, the rapid adoption of mobile will also catapult the trend.

“The large players have moved quickly in terms of acquisition and advertising. Serious players need to work on getting scale quickly and focus needs to be razor sharp execution on all fronts from merchandising, acquisition, marketing to data,” said Bala.

He added:

Going forward, there will be a few niche players, but this is a game where scale is probably the only differentiation factor over time.

(Photo courtesy: Shutterstock)