Rakuten to close UK and Spanish operations

Online marketplace Rakuten last night contacted merchants selling on its UK (formerly Play.com) and Spanish platforms to inform them that operations in these countries will be coming to an end this summer.

Those marketplaces will no longer accept new purchases after the end of August 2016, and they will no longer be taking on new merchants. 

A statement from Japan-headquartered Rakuten said the organisation will focus its European eCommerce marketplace investment in France and Germany where it sees "scale and potential for sustainable growth". It added that the cost of growth relative to the size of the businesses in the UK and Spain has led to the plans for closure in those territories.

The decision will result in the closure of Rakuten UK marketplace and its Cambridge operations, as well as the Rakuten Spain marketplace and its Barcelona operations. Meanwhile, services to Austrian merchants and customers will be provided by the German operations HQ due to closure of the dedicated marketplace and operations in Vienna.

Over 100 jobs are expected to be lost by the restructuring in Europe.

Rakuten is a major business in Japan with ambitions to become the world's number one internet services company, highlighted by its diverse business portfolio that ranges from eCommerce marketplaces to Kobo ebooks, and Wuaki streaming services to Viber instant messaging. It is based on an ecosystem model, where customers can earn loyalty points by accessing a number of different services – in Japan these include banking, financial services and travel.

Lisa Byfield-Green, senior retail analyst at industry research group LZ Retail Lab, told Essential Retail: "Although its internet services business continues to perform well, eCommerce has become more difficult for the company in recent quarters.

"Even in Japan last quarter eCommerce only grew by 8.3%. Internationally the figures are likely to have been very challenging."

Byfield-Green argued that Rakuten's main weakness has been that "it is trying to do too many things at once and to apply a one-size-fits-all model across a range of diverse markets".

"Marketplace-only eCommerce models work well in Asian markets such as Japan, China and India but are not so well received in Europe," she explained.

"In the UK the Rakuten name and Superpoints [loyalty] system appears to have made little headway, with few sellers and a relatively narrow selection of goods. It could be that the name change from Play.com to Rakuten has been confusing for shoppers but the company is also fighting an uphill battle competing against market leader Amazon."  

Rakuten says it will continue to evolve the eCommerce business model in countries across Europe, including initiatives such as the launch of a new Price Club to enhance membership loyalty in France and Rakuten Pro in Germany, a low-commission model for merchants aimed at enhancing service quality.

There are also plans to target the European market with its Wuaki and Kobo products, as well as Viber and adtech business, Rakuten Marketing.

Rakuten has in the past spoken of its plans to differentiate itself from what it views as Amazon's online 'vending-machine' model by promoting the unique personalities of its individual merchants, but the growing strength of the US e-tailer in the UK and companies such as eBay has apparently provided too strong competition. At the same time businesses like Notonthehighstreet have gained traction in serving the small to medium-sized retail community online.