Scaling our proven Internet-services business globally

Transcription

1 Scaling our proven Internet-services business globally Rakuten s business model is more comprehensive than many of our global peers. Rakuten is not an online retailer, instead, we provide a marketplace, applying our advanced systems to benefit both online customers and our merchants, resulting in gross merchandise sales (GMS) of over 1 trillion (US$12.9 billion) in fiscal In Japan, our brand recognition approaches 100%, and some 70% of online individuals have used one of our services, which extend from general e-commerce to travel, credit card, banking and other services. We are now expanding our services via this unique business model to new markets around the world. We see 2012 as the opening year of true globalization. It means greater empowerment for all, by fulfilling more of the Internet s true potential. Contents Message 01 To Shareholders 02 An Interview with the CEO Strategies 06 Domestic E-Commerce Business 10 Worldwide Expansion Operations 12 Financial Highlights 13 Review of Operations Backbone 16 Social Responsibility 20 Board of Directors and Company Auditors 21 Corporate Governance Performance 25 Financial Section 32 Consolidated Subsidiaries and Affiliated Companies 34 Corporate History 35 Corporate Information

2 Message Strategies Operations Backbone Performance To Shareholders Creating New Value around the World In the current recessionary trend around the world, Rakuten intends to pursue growth through investing in fast-rising services and fast-growing markets. We will strengthen our dominance in Japan and, by creating a single global management platform, accelerate our expansion into new geographic markets. marketplace business approach is expected to bring more services to more consumers in the near term and higher returns to shareholders over the long term. Hiroshi Mikitani Chairman and CEO 1

3 An Interview with the CEO The most important point in taking this type of international expansion to a succession of countries is how quickly we can implement the Rakuten Shugi. Q1. How were the Rakuten Group s results for fiscal 2011? A1. In fiscal 2011 (the 12 months ended December 31, 2011), the Rakuten Group swiftly implemented measures directed at enhancement of added value and user convenience in domestic Internet services. In domestic financial services, we restructured the segment centering on a reorganization of the credit card business and had to take an extraordinary loss as a result. But this move enabled us to put in place a solid platform for launching into a new growth stage. Overseas, the Group carried over its expansion from 2010 and sped up its pace, as well as moving forward on augmenting its marketplace business and developing technology for overseas. We also got started in the e-book business. The results of these efforts are Rakuten Ichiba annual GMS that topped the 1 trillion mark, accompanied by consolidated net sales of 379,901 million (9.8% growth from the previous fiscal year), operating income of 71,344 million (an 11.9% annual increase) all record high results. Q was a year of great changes for the Japanese economy. What kind of business environment did you face in the domestic market? A2. In fiscal 2011, the Japanese economy went into a temporary stall from the effects of the Great East Japan Earthquake but then gradually picked up speed. Meanwhile, in the Internet shopping market, many residents rediscovered the necessity and convenience of the Internet. In the aftermath of the earthquake, the Tohoku and Kanto regions saw shortages at physical stores, so many consumers purchased daily consumables like rice and water through the Internet. This started a trend that continues to today of users who are not accustomed to Internet shopping becoming repeat purchasers as a result of its convenience. In addition, the worldwide spread of smartphones has created an environment in which goods can be purchased on the Internet anywhere and anytime, which has been a positive force for our Group. Due to these reasons, I believe that the shift in consumer purchasing behavior from real stores to the Internet will continue its upward trend. 2

4 Message Strategies Operations Backbone Performance Q3. What is your next target for Rakuten Ichiba s GMS? A3. Rakuten Ichiba has shown rapid growth since our founding. We now stand shoulder to shoulder in size with the large department stores. But we aren t finished yet. We have raised our target for annual GMS to 10 trillion. Today, the total retail market accounts for roughly 174 trillion, according to the Ministry of Economy, Trade and Industry. This means that we have grabbed only a 0.5% share of the total retail market in Japan. In the future, e-commerce will evolve from all angles, including the purchasing process, product lineup and logistics. As the market grows, prices will fall and shipping fees too. And a dedicated logistics platform may also come into place. To have their we need it now demand taken care of, households could shift a large part of their spending to e-commerce. We intend to set out diverse strategies in our quest for the 10 trillion milestone. Q4. In just a few years, Rakuten has moved rapidly into overseas markets. What will you turn your attention to in order to ensure that Rakuten s business techniques are firmly in place in a number of countries? A4. The Group s overseas expansion started out with our e-commerce business moving into Taiwan in 2008 and Thailand in 2009, followed by the U.S. and France in Then in 2011 we acquired Tradoria in Germany, Play.com in the UK, and Ikeda in Brazil and made these leading local e-commerce operators into subsidiaries. We also opened the Rakuten Belanja Online Internet shopping mall in Indonesia. We are prioritizing implanting the same B2B2C (business-to-business-to-consumer) marketplace model as Rakuten Ichiba in all of these acquired businesses. Companies like Buy. com and Play.com who follow a direct-sales model of selling goods out of their own inventories are changing their model to the same marketplace model of Rakuten Ichiba. Naturally, we are also rolling out a variety of measures to support our merchants in the same way we do here in Japan at Rakuten Ichiba. We will add to this by introducing our most effective marketing tool, the Rakuten Super Points program, in each country. From our experience in Taiwan and Thailand, we have learned that introducing points programs boosts customers purchases. The most important point in taking our international expansion to a succession of countries is how quickly we can share the philosophy we call Rakuten Shugi (Rakuten basic principles). These steps will not be limited to thorough sharing of KPI management and know-how by the business segments; they will extend to nurturing a corporate culture that allows the formation of highly agile teams capable of achieving their goals. 3

5 In January 2012, we completed the acquisition of Kobo Inc., a company that deals in e-book readers and content, an essential growth area. Q5. Could you tell us about your entry into the e-book business? A5. We had thought that we must enter the e-book business with its high worldwide growth potential. In January 2012, we completed the acquisition of Kobo Inc., a company that deals in e-book readers and content. Kobo has taken its business into a dozen countries in North America, Europe, and Oceania and offers e-book content in over 100 countries. We have plans to enter Japan s e-book market in Kobo is constructing a leading edge e-book business model that includes installation of their own social network feature and support for a wide range of devices and languages. In addition, Kobo is building win-win alliances with major retailers and book stores in numerous locales. Since their business concept and direction are remarkably similar to Rakuten s, they will be a new arrow in our quiver for extending our worldwide expansion. On top of this, there are certain countries we wish to enter with e-books faster than with e-commerce. This is significant in that we foresee a role for Kobo as a trailblazer for some countries. Q6. What major initiatives does Rakuten have in mind for 2012? A6. The Rakuten Group in 2012 will take on the following initiatives that emphasize the strengthening of our dominance in Japan and putting a global management platform in place. 1. Strengthen Dominance in Japan Internet innovation and the Internet revolution will move forward in 2012, even if the global economy stays challenging. So we need to strengthen our presence in Japan. We have the largest market share in the major business verticals of e-commerce, travel, online banking, etc. 2. Create Single Management Platform Globally To make more progress in our globalization project, we need to change the way we think. To do so, we need to create a single management platform globally. Irrespective of our 4

6 Message Strategies Operations Backbone Performance Englishnization success, global management is a little bit segregated, so in 2012 we would like to encourage more communication amongst our global management to share best practices. We will create a new corporate governance structure with regional headquarters and openly discuss matters within our global management team was the completion year for the first step of the global Rakuten Group will be the opening year for our true globalization. Q7. What is Rakuten s outlook for 2012? A7. In the year ending December 31, 2012, we anticipate further expansion in the use of our services in Japan including e-commerce and travel, resulting in continued high growth. In financial services, we expect the unsettled market conditions to persist, but nevertheless anticipate sustained earnings growth created from synergies within the Rakuten Group. We will also continue to make strategic allocations of resources and active investments in high-growth areas such as e-books in order to open up more mid- and long-term earnings opportunities. While making these advance investments, Rakuten intends to surpass the financial results of In addition to our activities in the rapidly changing environment of Internet-related business in Japan and overseas, Rakuten, Inc. and our group companies are also involved in the securities business and other finance-related business activities, with the result that business performance is affected by financial market trends and other factors. This precludes us from making earnings forecasts. Q8. Could you explain Rakuten s policy on shareholder returns? Dividend per Share A8. basic policy on returns to shareholders reflects our commitment to the maximization of shareholder value. Healthy growth in income is a core management priority for the Rakuten Group, and we continually strive to maximize business performance and strengthen our financial fundamentals. For this reason, our policy to maintain stable dividends runs alongside our desire to retain sufficient income to build the reserves needed to develop our operations and maintain a sound financial structure. On this basis, we have sought to maintain stable dividends. In keeping with this basic policy, we paid a dividend of 250 per share for fiscal 2011 (versus a dividend of 200 per share for fiscal 2010). (Yen) FY