Why Ebay Lost to Taobao in China - the Global Advantage

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technical opinion
DOI: 10.1145/ 1435417.1435450


Why eBay Lost to TaoBao in China: The Global Advantage
electronic commerce involves electronically-facilitated transactions between consumers through third parties.9 In China, a number of C2C platforms have emerged, such as eBay (China), TaoBao and PaiPai. TaoBao, established in 2003, has quickly assumed a dominant position in this market, underlined by the December 2006 decision by eBay to quit the C2C market in China altogether,4, 8 merging its China operations with those of telecoms provider TOM Online. In China, C2C platforms encourage buyers to contact sellers so as to build up the necessary trust and confidence to engage in online transactions, as well as negotiate product, financial and logistical details. In this article, we focus on the way C2C platforms compete and in particular how buyers are stimulated to be both aware and trustful of sellers through buyer-seller communication channels. CONSU M ER-TO-C O NS UME R ( O R C 2C )

Following this introduction, we present brief case descriptions of TaoBao and eBay (China). These descriptions are supplemented with information gleaned from interviews with active buyers and sellers from these two platforms. The significance of the competitive issues is then the focus of discussion, where we also draw in the literature on awareness and trust. Finally, we suggest how the C2C market is likely to develop in China. TaoBao TaoBao (www.taobao.com) founded in 2003, is a wholly owned subsidiary of Alibaba, China’s leading e-commerce company. As a C2C trading platform, TaoBao has the highest number of product listings, the highest volume of transactions (RMB43.3 billion in 2007, with a C2C market share of 83.9% in China) and, with 80+ million registered users, the highest penetration rate among the 253+ million Internet users in China.a Alexab ranks TaoBao as the 47th most visited Web site globally, 5th in China. TaoBao uniquely indicates the online status of all sellers with a bi-polar coloured icon and TaoBao’s internal search engine enables buyers to list only those items whose sellers are online (see Figure 1). This means that a prospective buyer can check if a seller is online, and if so, can use TaoBao’s integrated IM system, WangWang, to contact them. WangWang is an embedded, pseudonymous communications tool, sharing TaoBao’s user-ids, and so is the default IM system for all TaoBao users. eBay eBay (China) (www.ebay.com.cn) was the China arm of the U.S. headquartered eBay. Acquired in 2003 from EachNet (founded in 1999), this was the first mover in the Chinese C2C sector. Until late 2006, eBay (China) and TaoBao were regarded as key rivals, though since December 2006, with a www.cnnic.cn (Nov.2008). b www.alexa.com (Nov. 2008). 145

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technical opinion
eBay’s decision to quit the C2C arena in China, that situation has changed dramatically. EBay (China) is now ranked by Alexa as 49,474th globally and 2,438 in China. eBay (China) attempted a comeback, relaunching its EachNet site, but Alexa’s figures indicate that this has not succeeded, as EachNet is currently ranked 6,920th globally and 586th in China, with a C2C market share of 8.7% according to CNNIC. While the functionality of TaoBao and eBay (China) is similar, there are some notable differences. For example, eBay (China) does not indicate a seller’s online status, for instance. Also, although Skype is linked into eBay (China), it has to be downloaded and installed as a separate application. Furthermore, not many users have Skype IDs: we randomly surveyed 500 sellers in 10 categories and found that only 24.6% had a Skype ID listed. For those sellers who do have a Skype ID, there is no indication as to their online status, and in fact, of the 24.6% who do have a Skype ID, only 5.4% were actually online when we checked during the evening peak trading...
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