INTERVIEW-UPDATE 1-Baidu, Rakuten virtual shop to open in Oct

Tue Aug 31, 2010 6:14am EDT

* Has attracted more clients than expected -CEO

* Headcount expected to jump tenfold in 3 yrs

(Adds quotes, details, background)

By Michael Wei and Ken Wills

BEIJING, Aug 31 (Reuters) - An online shopping joint venture between China's Baidu.com (BIDU.O) and Japan's Rakuten 4755.Q may start operations in the first half of October and is aiming for a tenfold jump in headcount over three years, its top executive told Reuters.

China's biggest Internet search engine and the Japanese online mall operator formed the company, named Lekutian, for $48 million in January this year.

The Chinese language website hopes to become the top player in China, which has the largest number of Internet users in the world, estimated to be more than 400 million and growing rapidly.

"We have attracted more clients than expected and by the time we launch, there should be thousands of merchants on our website," Koichi Nakamura, the firm's chairman and chief executive officer, said in an interview on Tuesday.

Web commerce in China has surged in recent years, as buyers in the world's second biggest economy switch to the Internet for better deals from more reliable suppliers and reasonable price.

Last year, online shopping totalled 258.6 billion yuan and accounted for roughly 2 percent of the country's total retail sales, according to the Ministry of Commerce. The ratio is likely to grow to 5 percent in the next three to five years, the ministry said.

Taobao, a unit of China's largest e-commerce company Alibaba Group, was the forerunner in the market with an estimated transaction volume of more than 200 billion yuan last year. Taobao has also teamed up with Yahoo! Japan (4689.T) to start cross-selling into each others' markets since May.[ID:nTOE64506U]

Nakamura said Lekutian hoped to expand the existing online shopping market.

Rakuten, which recently made a couple of acquisitions in the United States and Europe, has been revving up efforts to set up shop overseas, as Japan's declining population dampens prospects for growth across a broad spectrum of industries.

Nakamura, who has worked for Rakuten since 2001, declined to provide a target of transaction volume or a timetable for Lekutian to reach break even levels.

(Additional reporting by Huang Yuntao; Editing by Valerie Lee)

((michael.wei@thomsonreuters.com; +8610 6627 1003; Reuters Messaging: michael.wei.reuters.com@reuters.net))

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