Rakuten buys Buy.com – Can it compete with Amazon?

Why would an online shopping company trade a domain name as memorable as Buy.com for something as difficult to pronounce as Rakuten? In February American online shoppers will get the answer, as Japan’s largest online retailer completes its re-branding of the perennial e-commerce underachiever, which it purchased in 2010.

Rakuten is often labelled an Amazon competitor, but its business model has much more to do with Amazon’s loosely affiliated “Marketplace” sellers. Like a brick-and-mortar mall its business isn’t retailing so much as real estate; it rents space in its database to a strange mix of resellers, well-known brands, and entrepreneurs. Rakuten is nothing if not bustling; it’s online shopping at its wildest, like eBay without the bidding.

Ideally, the resulting economies of scale benefit buyers—who get a consistent return policy, a trusted name, and a huge variety of products—and sellers, who get a ready-made storefront and the pleasure of outsourcing the riskier parts of customer service. In Japan that’s a wildly successful enterprise; it’s been a boon for the country’s tiny mom-and-pop shops, who still control large swaths of the country’s brick-and-mortar retail presence.

But Americans used to Amazon might find the whole experience a little bewildering; depending on what you’re looking for the experience is less “shopping mall” than “flea market,” with seemingly identical items piled on top of each other in slightly different configurations. And Amazon hasn’t taken the threat lying down; they’ve made significant inroads in Japan while Rakuten prepares to launch in America.

Rakuten has done the ground-work, expanding rapidly from its Japanese base; in addition to Buy.com they recently purchased Kobo, a Canadian company that competes with Amazon in the e-reader space. But now that they’ve shuttered Buy.com the real online shopping work begins: They have to figure out why someone should shop at Rakuten when her browser’s already pointed at Amazon.

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