Rakuten: Stock of the Week

Andrew Willis: For most of us in North America, Rakuten 4755/RKUNY is a cash-back platform that refers customers to online stores in exchange for a commission, which they share with customers. But the company does so much more, especially in its home country Japan, where it's called Rakuten Ichiba, and has become one of the largest e-commerce platforms.

From shopping to financial services, to entertainment and telecommunications, Rakuten has become the top e-commerce provider in Japan, according to equity director Kazunori Ito. It has cast a very wide net to capture the retail consumer in Japan, with services that include travel agencies, cellphone plans, and online brokerages. It also offers products like credit cards and life insurance, which make it one of the top e-finance service providers in Japan, reinforcing a moat-worthy network effect.

Rakuten does a great job of keeping customers in its network with an ecosystem of services. The cross-use of two Rakuten services in Japan, such as a Rakuten credit card used for a Rakuten phone bill, reached a high level of 74.8% in March of this year. And last year, over 90% of Rakuten loyalty points were used on multiple platforms.

After 20 years of building its empire, Rakuten is beginning to reap the rewards of its consumer web with rising revenues in recent years. The company’s mobile network rollout has understandably weighed on margins lately, but is expected to improve with an increase in market share. And the company shouldn’t have any issues finding ways to promote its new phone plans.

For Morningstar, I’m Andrew Willis.

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