Hiroshi Mikitani: “Marketplace 3.0” | Talks at Google

Hiroshi Mikitani: “Marketplace 3.0” | Talks at Google

DANIEL ALEGRE: Good afternoon. Thank you all for coming. It is my incredible pleasure
to welcome Hiroshi “Mickey” Mikitani to Google yet again. He’s been here on numerous,
numerous occasions, usually to negotiate as hard as he possibly
can against me. But this time actually
we’re going to talk about this his book. But Mickey is one of the most
worldly executives you’re ever going to come across. I’ll give you a little bit
of background on him. He was born in Kobe in Japan. He is roughly my age,
though he looks about 15 years younger. He attended Hitosubashi
University, graduating in 1988. While working for the Industrial
Bank of Japan, Mickey was transferred
to the US. And in 1983, studied at Harvard University, earning an MBA. Correct me if I’m saying
anything wrong here. He worked at the Industrial Bank
of Japan from ’88 to ’96. And his entrepreneurial
bug took hold. And it was in 1997 that he
decided to leave what was going to be a very illustrious
career at the IBJ and founded Rakuten, which is now the
third largest e-commerce marketplace in the world, with
operations in over 12 countries across Europe, the
Americas, and in Asia. He’s been president since
its founding. In 2001, became chairman. He’s also the head of the
e-commerce and banking business units, head of
the development unit. He is director of Kobo, chairman
of Rakuten Card Company, chairman of
Rakuten Travel. His acquisitions throughout the
globe, including here in the United States,, Kobo
in Canada, PriceMinister in France, and recent
investments in Pinterest. He has more than– I know this number is now
outdated, more than 430,000 Twitter followers. Hiroshi Mickey Mikitani, and
welcome to Google, Mickey. HIROSHI MIKITANI: Thank you. So am I supposed to
introduce myself? DANIEL ALEGRE: Yes, please do. HIROSHI MIKITANI: OK. So thank you for a great
introduction, Daniel. He has been my friend for
a long, long time. The first time I acknowledged
him was at the business conference in Singapore. And I was on the stage
as a panel. And so I basically described
as my future potential competitor. And somebody raised
their hand. And he said, he’s very, very
disappointed that I said Google can become
our competitor. But I think the internet is
evolving so rapidly and the dynamics is so strong. As Daniel introduced, I finally
left there in 1997 and with five other younger
partners. The difference between most
of the American start-ups, internet ventures, and Rakuten,
is we started from our own capital of
200,000 USD. Never raised any
money from VC. So if you’re interested in
starting your company without raising money from VC,
please email me. And went public in April
of year 2000. So we were the very last company
to catch the first internet bubble to go public. And the initial capitalization
of the market cap was about the 3.7 billion USD. We raised about $500 million
and immediately it crashed. So we went public right
after the first internet bubble crash. But we managed to go public
and raise $500 million. And then our market cap went
down to $5 million. And it’s now back to, I don’t
know, $13 or $14. It depends on the
exchange rate. It’s changing so fast
these days. The initial thinking of Rakuten
was how to help small to medium size shops to sell
their product all over Japan. Because there is a huge trend
of centralization of the economy through [INAUDIBLE] in Asia to Tokyo. And it was very disappointing
to see all these small shops in local town being shut down. And we came up with the idea of
empowering small merchants with what we call
the [JAPANESE] of internet shop and create the
big marketplace, without the deep knowledge about
the technology. And we opened that store
on [JAPANESE] in May of 1997. And the first months our GND
gross transaction was about 3.7 USD, out of which
I was buying $2,000. So there was just $1,000
of the transaction. Now in Japan, we do about, how
much, about $16 to $17 billion US dollars of transaction. We have about 40,000 unique
shops, selling over 150 million SKUs. The market share of e-commerce
in Japan is about 30%. Our biggest competitor
over the company now does about 13%. And other than e-commerce,
we do internet travel– we’re number one– online banking, and credit
card, online brokerage. And more than anything, we have professional baseball team. So one of the biggest
differences in Rakuten, than the other internet companies, we
do the media, e-retailing, including travel. And we also have online
finance business. So we use a balance sheet, not
just tracking the behavior of the people. We use all these data to analyze
the credibility of the individuals. We have about 81 million
members in Japan. So about 90% of internet populations are Rakuten members. And now we use your program
very effectively to retain the customers. I decided to go global five
years ago and aggressively building own business or buying companies or creating JV. I am very thrilled to be here
and looking forward to have a deep discussion with you guys. Thank you very much. DANIEL ALEGRE: Great. Thank you. Please have a seat, if you
don’t mind, Mickey. So I’ll ask a few questions. And then if anybody has any
questions, please do interrupt if you have any follow-ons
to the first question. For those you haven’t had a
chance to read “Marketplace 3.0” that Mickey wrote, it has
some incredible nuggets of wisdom and I think a lot
of similarities to the way Google works. But particularly for a Japanese
company that has been so successful in your home
country, for you to be able to have such a global vision as
quickly as you did, as you said in the last five years
you’ve made some very significant not only
acquisitions, but also start-ups throughout all of
Asia, what really got you to think outside of Japanese
borders? You’re doing very
well in Japan. Why not stop there? HIROSHI MIKITANI: Well first of
all, of course the economy is globalizing. And I think mainly because of
the advancement of information technology, the world has
become really flat. And Japan used to have like 15%
of entire consumer market in the world. Now, it’s down to single digit,
close to 6% or 7%. And I’m sure that regardless of
how well we do, [INAUDIBLE] the share of the Japanese
consumer market will go down to somewhere between 3% to 5%. So more 95% of the market will
be outside of Japan within 10 to 20 years. That means since I still own a
large portion of my company, I better globalize my company. That’s one. Two, becoming global will give
us more global perspective about where e-commerce
is going. And I’m strong believer of the
diversity because there is so many different views
and business models all over the world. And to compete against them
and to be exposed to them, will give us higher
perspective of where we should go. DANIEL ALEGRE: Well. I was talking to Karim, who runs
Asia Pacific at Google, just before you walked in. And we were talking about one
of the most difficult tasks that we have in Japan is to find
a Japanese executive who speaks English well and who can
actually do well within the Japanese business
environment. And you took on something a
couple years ago that was radical and maybe some people
would find somewhat offensive to the Japanese culture, which
is to Englishize your office. HIROSHI MIKITANI: Yes. DANIEL ALEGRE: Everybody
switched from being able to speak Japanese, to the very
next day every business meeting has to be
held in English. What was that like? HIROSHI MIKITANI: Well,
it’s like US stocks. It began [INAUDIBLE] the case study of Harvard
Business School, now being taught in the first year
[INAUDIBLE] class of most of the major business
schools globally. So the language is not just
Japan specific issue, but I think it’s a very globally
shared issue. But as you know, Japan is a very
advanced country in terms of education. But the English level of
Japanese is not that good. We are second from the
bottom in Asia. This is kind of a shame. And then the reason why we have
been so successful in Japan is we have been
cross-sharing our expertise and key success factors across
the business units. Although it looks very different
from one business unit to a different business
unit, like online brokerage, online travel, online shopping,
I think they have so much similar ideas. And the reason why Rakuten has
been successful is we are extremely open internally. We share almost everything,
KPIs, the performance. This is very different from
American company, I think. But I was trying to do the same
thing, but I couldn’t globally because of
the language. And the only solution I thought
it may work is just speak one same language. DANIEL ALEGRE: Who was more
reluctant, the French or the Japanese to speak English? HIROSHI MIKITANI: The Japanese,
unfortunately. The Japanese are more stubborn
than French. DANIEL ALEGRE: Than French. HIROSHI MIKITANI: But I am
strong believer of Japanese service mind. So that things about the
connections, creating new connection of the Japanese
service mind. But it’s based on technology. DANIEL ALEGRE: You must have
gotten a lot of criticism within corporate circles
in Japan for doing this, or did you? HIROSHI MIKITANI: Well,
you were there. DANIEL ALEGRE: Well, I
was speaking English. I didn’t speak the Japanese. But how did that impact
your decision? What was your thought
process behind it? HIROSHI MIKITANI: Well, I just
tolds them to leave us alone. It’s none of your business. Some CEOs really attacked
me on the media, that this guy is stupid. But now, everybody support it. As a matter of fact, I proposed
to the Prime Minister Abe that we should change
English entrance exam of universities from
Japan-specific translation-based grammar
oriented exam to the global test, which is TOEFL. And basically, they kind of
agreed that they’re going to change within several years. And I also asked them to we
should have a TOEFL for the bureaucrats as well. And they also agreed. So Japan is changing. DANIEL ALEGRE: That’s a great
way to change the bureaucrats. Here at Google, we have
the concept of eating your own dog food. If you launch a product, then we
have to test it ourselves. Did you eat your dog food? Did your write this book in
English or in Japanese? HIROSHI MIKITANI: I
wrote in English. And I think it’s really
easy reading. Of course, I had
a great editor. DANIEL ALEGRE: Okay. You have a very interesting
story about a rice farmer in Japan using the marketplace
and how you got started. And if you don’t mind sharing
that story, I mean what that made you realize about the
power of the marketplace? HIROSHI MIKITANI: Well again,
initially, this is about 1977. Even this is before ADSL. Many of the people didn’t
know how to get connected to the internet. And many of the Japanese people didn’t know how to type. So what we did is we installed
a PC, you know sign up with ISP on behalf of
our merchants. And told them how to type
and create a shop. So one of the shop which
we had a contract was the rice shop. And his business obviously
was not integration, but he got into this. He was so intrigued about the
PC, although it didn’t look that great initially, but
he kept working on it. And of course his rice
was very good, so he get really popular. And then his son decided to come
back to his home town. DANIEL ALEGRE: Now, it’s really
fascinating when you’d meet Japanese with such a global
mindset and then more importantly such an
entrepreneurial mindset. You seem like you were on a
very well-written, done before, but successful
career at the Industrial Bank of Japan. And something in you made you
turn away from corporate life and essentially start something
from scratch with no venture capital funding, which
is somewhat rare in Japan. To what do you attribute that
virus of entrepreneurship that’s inside of you? HIROSHI MIKITANI: Well, I think
from the beginning, Japanese was very
entrepreneurial. After World War II, Sony,
Panasonic totally took off. And they are extremely
entrepreneurial. But through the
hyper-development period of our economy, they became really
conservative and big company mindset. And IBJ, that’s the Bank of
Japan, was playing a leading role in order to strategically
grow certain industries, such as steel, automobile, chemical,
and so forth. And I really liked the job. But I was kind of feeling
something is wrong and we are kind of left behind. And I went to business
school, Harvard Business School, in 1991. And before that, I didn’t
even thought about starting my own company. But I was influenced by the
true commitment to the entrepreneurship at Harvard
Business School and came back to Japan. DANIEL ALEGRE: Can
you describe what is the Rakuten Shugi? HIROSHI MIKITANI: It’s basically
the Rakuten way. And it defines the mission. So where was the year I
was trying to buy TBS? It was like six, seven
years ago. DANIEL ALEGRE: Yes. HIROSHI MIKITANI: So I thought
we should change TV industry. And we did a hostile takeover
action against the most prestigious TV station
in Japan called TBS. And I got a huge backlash
from the media. The media really hated me. And they tried to
really crash up. And at that time, my father gave
me like five principles that you need to stick in order
to make a big change. And it became the sort of a
corporate brand, sort of a definition of the
corporate brand. And it increased something
like you needed the big mission and the sense of high
integrating, a sense of teamwork, and so forth as far as
we define some of the very basic practices we share. DANIEL ALEGRE: So I’ll highlight
a few of them that you talk about in the book. One, always improve and always
advance; be passionately professional; hypothesize,
practice, validate, shikumika, which is systematize; maximize
customer satisfaction; and speed, speed, speed. I’d like to touch on one of
those, always improve and always advance. There’s a quote in the book that
I love, which is myself of today will triumph over
myself of yesterday. Can you tell people in
the audience what the Mikitani curve is? HIROSHI MIKITANI: So especially
on the internet, there are so many similar
services, right? In terms of search, you had
Yahoo, you had Inktomi, and you had Google. So what made the difference is
immediately the very last effort and adhesive– the commitment to the
details to improve. And we’re in the retail
business. Our core business is
internet shopping. And all these small details
really matters. And the beauty of internet is
that you can always improve. Even if the first launch, the
big launch is not perfect, but you can constantly improve. So it’s really important for us
to make this final 0.5% of last effort to make it as
perfect as possible and keep improving it. DANIEL ALEGRE: So the concept
is do your best, then do 0.5% more. HIROSHI MIKITANI:
I suppose so. DANIEL ALEGRE: That’s the
Mikitani curve, right? I had never heard of that,
but I like the way you think about it. But would you say that
throughout all of Rakuten globally, this concept of I am
constantly needing to improve myself, and what I did yesterday
is not enough and I want to prove myself today from
the Daniel of yesterday, how do you turn that into a
culture, into a living, operational way of
doing business? HIROSHI MIKITANI: That is why I
felt we need to convert the internal communication language
in Japan to English because I felt there is a big
cultural gap between Japan and other countries. And it was kind of difficult to
really create the same kind of the culture. As you know, Japanese people
are extremely hard working. And they have a extremely high
level sense of teamwork. But we couldn’t really transfer those to other countries. And now, I think we’re in a
process of gradually basically transferring those culture
to other countries. DANIEL ALEGRE: We’ve got
Francois here, who runs our small and medium-sized
business globally. And one of the areas that we’ve
been focused on is how to increase service, service for
our customers, whether the largest, all the way down
to the smallest? What is omotenashi and what
does it mean to Rakuten? HIROSHI MIKITANI: Well,
omotenashi is really the Japanese hospitality. You care about Japanese
people. And Japanese society has a
embedded culture of a high level of hospitality. We’re not talking about going
to the Mischelin three-star restaurants. Even if you go to the
convenience store or the discount store, or you get onto
the bus or get into taxi, you feel the high level
of hospitality. And I felt the internet is a
tool which we can amplify those hospitality to the mass,
instead of trying to standardize everything
and make it just convenient and efficient. Well, as for internet shopping,
of course price and convenience and product line-up is very, very important. But I feel shopping is
not just about that. It’s a very important
part of your life. And that’s why people like to
go to the small boutiques or go to a small shop
to buy stuff. And I thought we can basically
scale those experiences to the mass by using the internet. So that’s why I think kind
of omotenashi, Japanese hospitality mindset is going to
be more and more important for internet. And I just don’t want to bring
the convenience and efficiency to you. But I would like to create
richness to you life through internet shopping. DANIEL ALEGRE: What I found
fascinating again about your book is how focused you are on
building that culture that embodies omoetenashi, that at
every single level of the organization people do believe
in the mantra of service, servicing your customer,
service other Rakuten employees. Would you say that if I were to
go to France or to Canada or here in the US, where you’ve
acquired companies, that there is that level of
attention to service that you see in Japan or do you do
Americans expect a different level of service than you would
in a country like Japan? HIROSHI MIKITANI:
Well, maybe not. But that is why we can bring
more how to go– emotional surprise
to the consumer. The Japanese people– as you know, the Japanese
consumers are extremely picky, not only for the service, but
for the quality of the product and the quality of
the service. And so I’m sure that Google
people feel the same way. Consider the service, if you
can become successful in Japan, you can become successful
in other countries because Japanese consumer
is so picky. And that’s why if we can bring
a Japanese level of the high hospitality and high service
to other countries, we can differentiate ourselves more. DANIEL ALEGRE: How do you
differentiate or how do you characterize a successful– because you’ve been very
aggressive in acquisitions recently at a global pace– between a successful
acquisition and a non-successful acquisition? I think Tokyo Broadcasting is
an example of something that has not worked out. What have you learned from your
failures and what have you learned from your successes,
as you go around the globe in acquiring
companies? HIROSHI MIKITANI: Well, of
course, after all you need to have a financial
positive return when you buy the company. So the primary measurement
should be your financial performance, either
through the gain or through the synergy. Or sometimes you can hire more
talented people in the team to [INAUDIBLE]. But I think more than that, the
cultural fit is extremely important for longer term. Because if you have a different
culture in one organization, I think you are
going to lose the balance in the future. DANIEL ALEGRE: As again
part of the cultural fit, one of the– I learned this through
the book– having pride in your own
company and in your own business, how every Tuesday
everyone has to completely clean out and clean above
and below their desk. And no matter how low under the
desk you have to go, it has to be completely clean
and completely spotless. Do you clean your desk? HIROSHI MIKITANI: Yes. DANIEL ALEGRE: You do. HIROSHI MIKITANI: Thank
you for asking. DANIEL ALEGRE: I’m going down
the dog food questions. And is this something
that you have now instituted across the globe? HIROSHI MIKITANI: Yes. In some countries, we’re in
still the process, because there is a culture gap. But I just feel that I want
everybody to feel your company and your office is your
daytime house. And if you have dust on your
floor in your house, you’re going to pick it up. So I think we need to remind
ourselves that this is our house for daytime. But whatever, please do not
misunderstand, we hire professional cleaners as well. It’s just a five or 10
minutes practice. DANIEL ALEGRE: But as a result,
do you feel that it gets people to feel ownership
over their job, over the happiness and fulfillment that
goes with their job, and also the service that they’re
delivering, not only to the person sitting next to you, you
don’t want someone with a dirty desk next to you, but also
it manifests itself in the way they interact with
customers as well? HIROSHI MIKITANI: Well, the
different way to look at this is whenever I go to the company,
which is dirty, they tend to be not very
successful. DANIEL ALEGRE: Sorry. There was a piece of
dirt on the ground. HIROSHI MIKITANI: I’m
not talking if it’s one or two desk. But in general like in single
office, there’s lots of dirt on the chair and a lot
of dirt on the desk. And I just feel very
uncomfortable. I haven’t got to talk
about this, so this is the first time. So let me try. There’s one Japanese, how do you
call, auto parts retailer, which the CEO cleans up the
bathroom by himself every single day. DANIEL ALEGRE: Very good. HIROSHI MIKITANI: And the
company is very extremely successful. I don’t know just
because of that. I’m not following that. It tells how the
CEO is serious. And many Japanese company, not
only in clean up jobs, we clean up the areas around
our building. Every quarter, we have the
volunteer clean up. And I feel that it’s just
five, 10 minutes. If somebody kind of disagree
with spending five minutes to clean up your desk, I feel
uncomfortable working with that person. Because again, we’re hiring
professional cleaners as well. DANIEL ALEGRE: And what you do
if I don’t have my desk clean? HIROSHI MIKITANI: I will
teach you how to clean. DANIEL ALEGRE: OK, good. You have a comment here
that the internet is not a vending machine. And you show the difference
between the Amazon model, which is all about efficiency
and cost, versus e-commerce as a joyful experience,
as having fun. What do you mean by that? What do you mean by
the internet is not a vending machine? HIROSHI MIKITANI: Well if you
come to Rakuten, for example we have a minimum level of
standardization for these experience. But at the same time, each
shop can create a totally different touch and
feel and design. And we let them get connected
to the end customer. So they can create
a mailing list. Of course, they can do
a straight basket. They can do private sales. They can do couponing. That they can do auction. We enable them to do build a
Facebook store, for example. So we are trying to really
facilitate the connection between the merchant
and the customer. And the reason why Rakuten
is so strong is we are an aggregation of 40,000
merchants. And those merchant are
the best curators. Because if you want to buy for
example a tennis racquet, do you want to ask your friend who
is good at tennis or do you want to ask the staff
at the pro shop? I’m a reasonably good
tennis player. But I don’t know about the
female racquet at all. But we have professional
curators. And again, they have a very
high level of hospitality. Sometimes they handwrite
the letter and put it into the box. And those kind of sort of a
human touch to the internet shopping experience is what we
feel very, very important. DANIEL ALEGRE: So when you’re
looking at acquisitions, I think one of the things they
say is learn from local success stories. And here in the United
States, a local success story is Amazon. Why do you think Amazon has been
so successful here in the United States and how are you
going to be able to compete against Amazon? HIROSHI MIKITANI: Well, first of
all, I don’t think there is going to be one single company
dominating 100% of e-commerce. I think there will be several
different models. And this is so large and it’s
too complicated to simply generalize with one single
business model. And the reason they have
been so successful is they are very good. They are very good at– again, a very efficient user
experience, the price competitive, and they’re
very good at logistics. So for internet shopping, there
is three components which I think is critical,
product selection, the price, and logistics. And on top of that, we have some
capitalist factors, such as the user experience
and the sense of security and so forth. So [INAUDIBLE] because you have competitive
price, competitive product line now, and competitive
logistic service. But this is going to
be a commodity. I know Google is
working on it. Other companies are
working on it. And in the future, this will
become the shared commodity service I think. So what’s going to be the
biggest differentiator is the user experience and the other
practice I think. DANIEL ALEGRE: So what
is discovery shopping for you then? What does that mean? HIROSHI MIKITANI: Discovery
shopping, again– so the e-commerce community has
been really focusing on the transaction process
of the shopping. You know what you want to buy. Of course, you have the
recommendation and the search and other many things. But mostly, everybody focus on
check-out process and delivery of the product. But more and more, as you can
see the Pinterest, of course Google is working on it, but the
creation of the demand, or the creation of the trend will
become more valuable and more important from now on I think. DANIEL ALEGRE: I completely
agree. So I’d like to open it up for
questions, if there are any questions from the audience? Is there a microphone that
we’ve got going on? Sorry. Do you might identifying
yourself and asking you question? AUDIENCE: Sure. My name is Momousa and I work
with Google Enterprise. One thing I noticed while I was
in Japan, there is very low tolerance for things that
get started that are not excellent from the get-go. And while in the US and
especially at Google, we have a culture of launch and
iterate, you just keep improving over time until it
becomes excellent, but that’s not really usually what gets
accepted in Japan, especially in the consumer market. So how can you be competitive
if you’re not doing this experimentation and not getting
to excellence from the get-go, because it saves
you a lot of time if you just keep improving? HIROSHI MIKITANI: I completely
agree with you. And I would like to know the
secrets of how to overcome those issues. And yes, Japanese people are
extremely critical against the initial launch of the
service as well. In the past, we made several
failures to be very honest. And it’s kind of difficult
to come back. But you need to be patient. And I think in these days you
need to be open about all these, how do you call it,
shortcomings and the mistakes and very candid about it. So some US company says this
is better service. Why are you criticizing us so
much, kind of mentality. But I think in Japan, I
don’t know why, but it doesn’t work that way. I think you need to be, how do
you call it, closer to the final perfect service
before the launch. AUDIENCE: I guess as a quick
follow-up, in collaboration with international acquisitions
and things like that, so at Google for example,
we share a document with other team members
and then we keep improving on that document. I especially pay very special
attention when I’m sharing with a Japanese co-worker
because they expect a super-high level of quality,
not something that is growing over time. So I guess how do you enforce or
enable better collaboration between the Japanese employees
and the international counterparts? HIROSHI MIKITANI: So the first
step was this language, the project to communicate
in English. And two, I think not only just
sharing online, but really having a face-to-face
interaction is a very, very important I feel. That we need to build
the sense of team. And at the same time, I think
what is important is to educate, knowing the Japanese,
the engineers and the product managers in Japan has a
different expectation for level of the service. DANIEL ALEGRE: Do you reward
smart failure? HIROSHI MIKITANI: Of course. Of course, yes. DANIEL ALEGRE: How do you
do that in Japan? HIROSHI MIKITANI: Well first of
all, we have never punished the failure, unless it’s the
intentional misconduct. Of course, we had some
system down. We had a big fraud [INAUDIBLE] in the past. But we never really punished
the mistake. But I think encouraging– we have the sort of
award every month. We give the [INAUDIBLE] award to many, many people. And we encourage
the sort of new innovation and new creation. AUDIENCE: Hi, Mickey. My name is Tony Kam. I’m responsible for working
with the US team. So I’m with [INAUDIBLE]
and [INAUDIBLE]. They have been great to us. I have a request and
a question for you. HIROSHI MIKITANI: Request, OK. AUDIENCE: The rumor is that
you’re talking to the Dodgers for potential ownership. We love the Giants here. Would you consider perhaps
a different team? We don’t want them to have
better ownership there. My question is where do you
find your inspiration? You have some very different
idea, not very conventional ideas. How do you find your inspiration
along the way and how do you test them
along the way? HIROSHI MIKITANI: Well, it’s a
difficult question because I never been the other person. And this is a very
natural for me. But I think it’s all about
applying something you’ve seen in a different environment
to other fields and cross-applying the same
theory to it. And if you think about like
shopping, you need to step back and think why people buy
product, instead of thinking about how we can
compete against Amazon in terms of price. I think stepping back, standing back, and having this– holistic? DANIEL ALEGRE: Holistic. HIROSHI MIKITANI: –view
of the scene is very important I think. I don’t know why, but
I have that kind of the habit and tendency. AUDIENCE: My name is Joel. I work on Google’s new
product and service. So product listing ads is one
product that we’re supporting. So I guess my question
has two part. One part is about the general
challenges for Rakuten itself. Like what do you think is the
main challenge for Rakuten, especially for example we talk
about competitions, like Google has its product
listing ads. I’m looking at the revenues
growing very fast. And what is other like
sorts of competition you can think of? And my second question is about
the opportunity for e-commerce. Because we know e-commerce has
been there for a long time, like I don’t know, over
15 years probably. So what is new opportunities you
can think of e-commerce in general, for all
the companies? Like I really like to talk about
like taking for example, like in personal, more customer
service like the purchasing experience. And also you keep [INAUDIBLE]
more experience to personalize the way that they
sell products. But are there other
opportunities you can think of for e-commerce in general? Thank you. HIROSHI MIKITANI: First of all,
I think there are so many rooms for improvement
for Rakuten. And basically now we
are building our own logistic network. And we are building our last
one-mile delivery. I think we will be able
to do this in Japan. The question is whether we
can do this in other countries or not? Japan is relatively
dense country. It is a little bit larger the
size of California and we have 130 million population
and delivery network is reasonably good. So we can do it. But if you go to other
countries, can we do as good logistic service, including in
the future last one-mile delivery or not? I think it’s totally different
scale of story and we need to consider that. For the future opportunity,
I everybody talk about social shopping. And whether we can figure it out
to really how we can scale the social shopping or
not is really the opportunity and challenge. That is the reason why we
invested in Pinterest. AUDIENCE: Thank you. AUDIENCE: Thank you so much
for your time and your openness to talk to us here. I’m Manny. I work in our global team. I’m from Europe and is one of my favorite websites. And I think what’s amazing about
it is that it has free deliveries wherever
you are in Europe. And really, it has been a reason
to not buy anywhere else just because of this, even
though potentially it can be more expensive. How come the global [INAUDIBLE]
still haven’t sold this delivery issue yet?s I
mean, it’s maybe a follow-up on the previous question. But it’s incredible that some
companies and some sites can offer completely free delivery
to wherever you are in the world, whereas you can pay
almost 30% to 40% of whatever your price is for the same
delivery in another company. I mean how come that this is
still such a big issue in the e-commerce world? HIROSHI MIKITANI: Well, so even
if you say free shipping, the question is is it really
shipping or not, right? Unless you find some arbitrage
opportunity by bundling or some creative way to make
your cost structure more competitive than
against other– it’s really automation, for
example, or something– then you can absorb the
cost into your gross margin of your product. And that has not been
proven yet I think. So if you just keep buying
toothbrush, one toothbrush every single day, you’re going
to be extremely unprofitable. So I think we need to
find a way to make economically work for that. And I think that’s very,
very challenging. Because it’s not free
as a matter of fact for the service provider. That means it’s not
fundamentally free for the end customer. You are either paying the
membership fee, annual membership fee, like
Amazon Prime. Or your are basically paying a
higher price fundamentally speaking or maybe you are
getting other sort of a profit source for the service
provider. And that’s all about
I think arbitrage. AUDIENCE: Hi, Mickey. My name is Jerry. I work in People Ops. I’m from Indonesia. And in the last couple years,
I’ve seen a lot of start-ups in Indonesia who tried to
provide online shopping service in Indonesia. And there hasn’t been
much success. I mean there are a couple
of big ones. But a lot of the small ones
are trying hard, but they haven’t been very successful. How do you envision Rakuten’s
plan in Southeast Asia in the next five to 10 years? HIROSHI MIKITANI: I think the
Southeast Asia has opportunity to leapfrog the development
of the physical retail infrastructure. Like if you go there, they
leapfrog the fixed line internet and just jump
onto the smartphones. And the same thing can happen
to the retail as well, because it still– of course, there are massive development going on in Jakarta. But if you go to newer areas,
it’s relatively weak. So for them, probably internet
and retail will become their primary shopping channel, rather
than building the very expensive shopping center. And for that, my strong belief
is in Southeast Asia from 15, 10 to 20 years from now, the
share of e-commerce will be higher than the mature
countries. But still the internet
infrastructure, including wireless, is very weak. And also the physical
transportation infrastructure is relatively weak. That’s a challenge, but we can
call it opportunity as well. DANIEL ALEGRE: Well Mickey,
thank you very, very much for taking the time to talk to us. I know it’s been a very
busy book tour. HIROSHI MIKITANI: Thank you. This the last one, by the way. DANIEL ALEGRE: This
is the last stop. HIROSHI MIKITANI: Yes. DANIEL ALEGRE: Wonderful. OK. So we look forward to– for all of you to read
this great book. Easy reading, but actually very
in-depth and some really good nuggets of information. And I look forward to
Marketplace 4.0, whenever that comes out. But I want to leave you with
one parting gift for you to remember this last stop
on your book tour. There you go. HIROSHI MIKITANI:
Oh, thank you.

Comments (6)

  1. I love it when he talks about hospitality. Google could learn a lot. They could start by allowing the user to contact them directly with email. Google hides their email so they won't be bothered by us "little people."

  2. I would say he is the most innovative person in Japan at the moment. It is incredible that he could manage to Englishize the company. I know it was tough but really think changing the company's language is the fastest way for Japanese companies to stay innovative.

  3. Most people care about kardashians but the PURE GOLD of youtube its THESE talks

  4. Is he still in a good relationship with the prime minister?

  5. Great video. Thanks!

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