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Retail

Rakuten acquires Play.com for 25 million

Wed 21 Sep 2011 9:47am GMT / 5:47am EDT / 2:47am PDT
Retail

Japanese e-tailer buys 100 per cent of online store's stock

Rakuten, a Japanese online retail concern, has announced the purchase of 100 per cent of stock in Play.com for approximately 25 million, making it the third European e-commerce site acquired by the company.

Rakuten acquired French business PriceMinister in 2010 and German online retailer Tradoria in July of this year. As a whole, Rakuten operates online business in ten countries globally.

"The UK market is one of Europe's largest and most mature e-commerce markets. Play.com is not only a pioneer in the market, but also one of the UK's most successful e-commerce businesses," said Rakuten CEO Hiroshi Mikitani.

"We aim to leverage our e-commerce strength and experience to further expand and develop Play.com's business model and channel its loyal user base, merchants, and deep product offerings into Rakuten's global e-commerce network."

The UK has the largest e-commerce market in Europe, with a value expected to exceed $58.0 billion and 55 million users by 2014.

13 Comments

Matthew Hill
Head of Recruitment

75 26 0.3
I don't have any knowledge of Play.com

FT Link http://www.ft.com/cms/s/0/6bc99342-a270-...

Posted:2 years ago

#1
Could have been a good M&A on the cheap, for a group looking to enter the mail order/online biz

Posted:2 years ago

#2

Glen Elliott
Partner/Head of Sales

57 2 0.0
Agreed Matthew, it does look like they bought it on the cheap, It was only in April that play.com hired Lazard to explore a capital increase as it wanted an "aggressive" European expansion (bloomberg)

Considering play.com is the UK's 6th biggest e-retailer, I think there is more to this deal then they have published, maybe some equity in Rakutan for the shareholders?

Posted:2 years ago

#3

Terence Gage
Freelance writer

1,288 120 0.1
I definitely agree Matthew that this seems like a very low valuation of what must be one of the country's top online entertainment retailers - I wouldn't be surprised if in their specific field they were second only to Amazon.

Bit sad to see yet another good British business bought out by a larger overseas company, but such is the nature of capitalism.

Posted:2 years ago

#4
In fact the GI.bizPlay.com

Posted:2 years ago

#5
As long as this doesn't affect prices of items on the site, this news doesn't bother me too much, But i was never aware how strong our british E-commerce business model was.

Posted:2 years ago

#6

Matthew Hill
Head of Recruitment

75 26 0.3
Nick - good points, in absence of further details it's hard to draw any definitive conclusions. Intrigued to see how Rakuten will impact on the business. At the very least I'd anticipate some "rationalisation"/centralisation of back end systems across their back end systems and processes for their various online brands.

Posted:2 years ago

#7
do we even know how successful or what rakuten does well?

Posted:2 years ago

#8

Glen Elliott
Partner/Head of Sales

57 2 0.0
Dr, their stock value has increase 50% over the past year, so investors feel they are doing something right, I'm not 100% on what they do in Japan, but they have been buying similar sites in Europe over the past 12 months. Company description:

"Rakuten, Inc. operates and manages business to consumer electronic commerce
site, Rakuten Ichiba, and consumer to consumer auction site, Rakuten Freemarket.
The Company generates sales from system service fees and advertising fees from
electronic commerce companies listed on its web site."

Posted:2 years ago

#9
@ Glen - looks like Rakuten are actually a behemoth in japan and as you say doing extremely well

"Rakuten's 2005 revenues exceeded US$1.1 billion with operating profits of approximately $320M. The company is publicly-traded (JASDAQ: 4755) with a market capitalization ranging from $5B+ and more than 3,700 employees. Rakuten is among the top 10 largest Internet companies in the world "

Posted:2 years ago

#10

Ben Simpson
CEO & Co-founder

8 36 4.5
Nick, Matthew, right on the nail I think. The valuation points to a failing business model, an inability to maintain market traction in challenging times and perhaps little to no market growth. Play and the Jersey advantage no longer drives the company, their pricing model is no longer the most economic on the web and bigger players consistently price below Play. Clearly we are not party to all the information so we can muse about why the valuation is so low but having no facts its difficult to say.

Posted:2 years ago

#11

Raf Keustermans
CEO, co-founder Plumbee

28 2 0.1
Based on this article in Guardian, it looks like it's all about change in legislation which will stop them from using a current VAT loophole - that's most likely the reason behind the low valuation: http://www.guardian.co.uk/business/2011/...

Posted:2 years ago

#12

Matthew Hill
Head of Recruitment

75 26 0.3
Hi Raf = thanks for the link.

Personally I think closing of the VAT loophole is a factor but not necessarily the most important. Assuming the loophole is closed Play will remain competitive against bricks & mortar retailers and also have more buying power & customer intelligence than many online retailers.

My gut instinct is compared to other online retailers Play may be overdependent on physical sales of DVD, Games & Music which are declining or moving to alternative models - F2P etc.

Posted:2 years ago

#13

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