Placed on Forbes’ Most Innovative Growth Companies list 2015, Kakaku provides internet services though its website kakaku.com, including price comparison and a range of products. Minoru Tanaka, President of Kakaku.com, explains how through innovation and diversification, the company (and its extremely popular websites) are now going global.
Since its founding in 1997, Kakaku has continually responded to the needs of the digital market and provided value-added and unique Internet services to its customers. Indeed, your sales increased over 20% last year, what would you attribute your impressive growth to?
When I joined this company back in 2002, the company was only being a price comparison website, mainly for the durable goods, like personal computers, cameras, and electrical products like refrigerators, microwaves etc. At that time and even now, the problem we have to resolve is a low frequency for the customer to visit kakaku.com. Because once you purchase an LCD TV or a microwave oven for example, the next time you would visit us to buy something at kakaku.com, would be three or six months after. We don’t need a TV everyday, so in order to augment the frequency of customers who visit the website, we created tabelog.com
For the same reason we acquired 4travel.jp as well as eiga.com, which is a comprehensive information site about movies. These two websites have higher seasons and attract more clients during longer times of the year than kakaku.com. This is why we diversified ourselves, to complement the weak seasons of kakaku.com.
In January 2016, Tablelog surpassed an impressive 5 million online reservations with 19,000 listed restaurants. Can you outline your ambitions, your expectations for the future for Tabelog, how you’re working to grow it even further? I know you’re in 11 states in America as well. So what are your international ambitions for Tabelog?
Yes absolutely. Currently, in terms of Tabelog’s sales, 100% of the sales are currently generated from the domestic services here in Japan. But we have opened an office in New York, so we are starting to provide service in the U.S.A. You mentioned earlier that kakaku.com is a very consumer-oriented media. This is also the case for Tabelog, because it is a consumer-oriented and consumer-generated type of content. Which means that, if you look at the restaurants point of view, in some cases, they might receive harsh comments which are tough for them to accept but it is very important for us to let our users express themselves freely to encourage or discourage others regarding the restaurant they have been to. It is possible that we will be going into a new geography, as long as in that region, the freedom of speech is guaranteed, and if the penetration of the internet is up to a certain level. Those two elements are essential to us, to provide the best services to our consumers.
Your latest quarterly results show that 13% of your sales are coming from new businesses or finance. So can you elaborate on these new business diversifications? What does the future of kakaku.com look like?
Well, travel rated business, and also the real estate, rated business, seems to be very very lucrative for the Group, I think. To tell you the truth, shopping is not so well fitted to the internet when it comes to be buying tangible products. You have to care about the delivery of the goods: the payment, the inventory, and such things that necessitate a lot of logistics. But in the case where we sell intangible things like finances services or travel, you do not have to worry anymore about such inventory or the delivery of the goods to the consumers. So I think intangible things, like services, is a business that is more suitable to the internet.
How do you keep up with such change and fluxes in customer needs and demands, and how do you always stay competitive in such a fast environment?
It needs a constant adaptation from our side. With the smart phone shift, there are some negative factors to our services. For example, if you use a PC and you want to buy something, it is very easy to input your name or your address into the retailer’s formatted registration. But if you want to use a smart phone, inputting this information in some cases can be very inconvenient.
In our case, every time you wanted to purchase something on kakaku.com you had to jump from our website to our registered retailers, which means that every time you had to input your name, address, and it was very inconvenient for the consumers. In order to change that, we have now developed a new system. Once you log in to Kakaku’s ID, you don’t have to input your name or address, your personal information could be relayed from the kakaku.com to the registered retailers. With such innovative technologies, we guarantee our website adapts to the new needs.
Another example of you adapting and innovating to market forces is the liberalization of the electricity sector. This is something we believe you are getting into, with price comparison and simulation services. What are your expectations for this sector?
Yes, we are currently preparing ourselves to provide content related to the deregulation of the electricity market. We have visited all of the current upcodes, and the foreseeable new entrants, like the gas companies. We have already confirmed their willingness to participate in this service.
I believe that in Japan, in two to three years time, the deregulation and the price competition that you saw in UK, as a result of the liberalization of the market, probably will be replicated in Japan.
People are becoming very very cost conscious, in terms of their day-to-day spending, and that goes for these utility costs as well. Due to that, we think that the price comparison service that we can provide to the Japanese household through our website will probably gain big popularity.
Arguably one of Kakaku’s most important competitive advantages is its corporate culture, which is quite Japanese, of having an almost obsessive focus on the customer. Can you outline how this translates into every day business practices and why it’s so important to Kakaku’s success?
The only factor I think which can differentiate our services from other competitors is the human resources of the company. This is why I pay the biggest attention to my employees. One thing I am attentive to is the turnover ratio of employees. This company, since I became the President, the turnover ratio of the employees is only at 8%, single digit. This is much lower than the other Japanese internet companies. The other things I want to emphasize is our employees are very passionate.
How do you cultivate that, or is that just a characteristic you look for when you hire people, or that’s something that comes with your corporate culture?
When I entered this company, there was only around twenty people working for this company. They were all geeks, or fanatics. After a while, very bright people started to enter the company too, but I think the important asset of this company will be this mixture of the fanatically very passionate people, and very bright people. This is the most important asset that this company has.
And of course, Kakaku enjoys a very strong brand here in Japan. It’s used on a daily basis among most of the Japanese population. But as you go abroad and continue to expand with Tabelog for example, how are you working to communicate and differentiate your brand from other similar websites?
When going into the overseas market, we think that it is important to capitalize on our strength, but at the same time we think that it is important to optimize the services that we provide, so that it will suit the culture of the people living there.
Let me give you an example. I think the shopping experience in a physical store and online shopping has great affiliation. If you look at the shopping behavior of the Japanese people, it’s basically chaos. It’s difficult to spot which shop has what you are looking for. But Japanese people find joy in digging and looking for things that they really want, and if they can find it, then that would be a humongous joy. I think that is reflected in the way they think about online shopping too.
But if you go to the US, it seems like the shopping behavior there is more efficient. You go to stores like Walmart, it’s well organized. And I think that is reflected in the website online shopping too. If you look at the website of kakaku.com, it still does have this touch of chaotic flavor, and if we just transplanted Kakaku’s service into the US, I don’t think it is going to succeed.
One of the main reasons we wanted to sit down with you is because you really are ahead of the game in terms of Abenomics. It aspires to make Japan’s economy more international and Kakaku has been doing this for years, as well as Tabelog. What advice would you maybe give to other Japanese chairmen and CEO who want to build globally oriented companies? What are the keys to going global in your mind?
In order to become a global company, some companies opt to try to use English as a common language within their company. But I have a slightly different opinion. I think that a global company is a company which can optimize and customize the service and products that they offer to the local markets. In order to achieve that, I think it is important to be reducing the numbers of expats from your home country as much as possible, and try to hire a lot of local staff. A company that can create that type of environment is a truly global company. So think globally, adapt globally.