CHINA BREAKOUTS

[*MARINE 1*]

BIDU
TOKYO—Japanese e-commerce company Rakuten Inc. on Tuesday opened an online shopping mall in China with China's Baidu Inc., attempting to tap the nation's burgeoning Internet sector.

Rakuten will provide e-commerce expertise, while Baidu's marketing presence as China's dominant Internet search engine will help generate traffic, Rakuten Chief Executive Hiroshi Mikitani said at a news conference in Tokyo.

Baidu Chief Executive Robin Li said that more than 60% of Chinese Internet users use search engines to find information for shopping. Baidu had 70% of Chinese search-market revenue in the second quarter, according to Beijing research firm Analysys International.

Rakuten and Baidu are investing $50 million over the next three years in the new website, called Lekutian to resemble the Japanese pronunciation of Rakuten. The site has about 2,000 registered merchants, including many well-known local brands, Rakuten said.

Though the venture could benefit from exposure on Baidu.com, China's top search engine and most popular website, Lekutian competes with China's dominant e-commerce website, Taobao.com. The Alibaba Group site had 75% of all e-commerce transactions in China in the second quarter, according to Analysys International. And Baidu's past attempt to enter the e-commerce market through a consumer-to-consumer platform called Youa hasn't gained traction.

Rakuten executives said that, given the huge growth potential of China's e-commerce market, there is plenty of room for e-commerce companies to grow. Rakuten has been buying businesses in the U.S. and Europe this year and has units or partnerships in six overseas markets. Mr. Mikitani's long-term goal is to take the company to more than two dozen countries.

China could play a key role in Rakuten's ambitions, as the nation's Internet industry is still growing, with only about 30% of the population online. Users of e-commerce services account for about one-third of China's total Internet users.

Although Mr. Mikitani declined to give revenue targets for Lekutian, he said the Chinese site will likely overtake the Japanese Rakuten site "in the not-so-distant future." Transactions on Rakuten's e-commerce site were valued at about 800 billion yen, or roughly $10 billion, last year.

Rakuten and Baidu in January announced their plan to start an e-commerce business together in China. Rakuten owns 51% of their joint venture, Lekutian Co., while Baidu owns the rest.

The opening of the Sino-Japanese site coincides with rising political tension between Japan and China fueled by competing claims over islands in the East China Sea. Mr. Mikitani said political tension didn't change Rakuten's Chinese business plans or schedule.
—Loretta Chao in Beijing contributed to this article.

Write to Juro Osawa at [e-mail]


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