Japan’s Rakuten Ends B2C JV with Baidu Due to Ferocious Competition

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How tough is the competition in China e-commerce market? Just ask Rakuten. The Japanese e-commerce giant announced yesterday to close down China business Rakuten.cn with Baidu, a local search market dominator, a move also highlighting Baidu’s successive failure in stepping up its e-commerce effort following the shut-down of Youa Baidu’s approach to C2C in last May.

Rakuten.cn, or Lekutian in Mandarin, will be discontinued on April 27, according to the company’s announcement. Though Rakuten claimed that “following careful deliberation, both and Rakuten and Baidu determined that closing lekutian was in the best interest of all shareholders”, Baidu seems to be caught by surprise by the announcement, claiming the decision was made by the board of Rakuten. The two are now “hammering out the details on what to do following the decision.”

Rakuten ascribed the retreat to “Lekutian’s not-in-line-with-expectations performance in the face of intensified competition in the Chinese e-commerce industry”.

Baidu and Rakuten invested a combined US$ 50 million to set up Rakuten.cn, a B2B2C effort, in China in early 2010 to tap into the thriving yet competitive market. Rakuten owns 51% of the JV while Baidu owns 49%.

Rakuten said the Japanese company will continue to evaluate and explore opportunities in China e-commerce territory.