What: Rakuten is investing heavily in AI technology, including semantic search and generative AI features, as part of its strategy to drive growth in Japan's online luxury market, where virtual experiences must match the country's exceptional brick-and-mortar service standards.

Why it is important: This development represents a significant shift in how Japanese retailers are adapting to changing consumer behaviours, using AI to recreate the exceptional in-store experience in digital channels while driving online luxury adoption.

Under the leadership of fashion head Ryo Matsumura and chief AI officer Ting Cai, Rakuten has implemented a suite of AI tools to enhance both merchant and consumer experiences. The company's semantic search technology has achieved a 93.5% reduction in zero-hit searches, leading to increases in search sessions and overall sales. For merchants, a natural-language user interface facilitates data insights access. While Japan's online luxury sales have grown from 9% in 2019 to 13% in 2024, the market still lags behind other regions, making technological innovation crucial. Rakuten's strategy includes partnering with brands like Maison Margiela and Marc Jacobs while focusing on AI-driven personalisation to match Japan's renowned hospitality culture.

IADS Notes: Rakuten's AI investment reflects broader retail transformation in Japan. While the company reports significant improvements in search functionality, traditional department stores are also embracing digital innovation. The focus on semantic search and generative AI aligns with changing consumer behaviours, particularly as Japanese retailers seek to match the country's renowned in-store hospitality with enhanced digital experiences.

Rakuten is betting big on AI