How to Make Sarah a Millionaire?... Sarah's E-commerce Study

2010年12月1日星期三

Guest column: Taobao in prime position to dominate China's C2C market for foreseeable future

http://www.interfax.cn/news/8624

Shanghai. March 12. INTERFAX-CHINA - It was recently revealed that the total trading volume on Taobao reached RMB 99.96 billion ($14.62 billion) in 2008, up 131 percent year-on-year, and that by the end of 2008, Taobao's number of registered users reached 98 million.

This is in part due to the rapid increase in Internet user numbers, especially among the young. According to a CNNIC (China Internet Network Information Center) report issued on Jan. 13, 2009, by the end of 2008, there were 298 million Internet users in China, up approximately 42 percent year-on-year. The Internet's penetration rate was 22.6 percent of the population, higher than the figure of 16 percent in 2007.

Meanwhile, a report by Analysys said that the total trading volume of China's C2C market reached RMB 30.45 billion ($4.45 billion) in the third quarter of 2008, and is expected to reach RMB 112.1 billion ($16.39 billion) for the whole of 2008, up 140 percent year-on-year.

Taobao's business model, under which sellers do not have to pay commission to the site, and its online trading security and trust system, is driving the rapid development of China's C2C industry. Online trading is likely to be even more popular during the economic downturn due to the lower costs involved.

Established in 2003, Taobao became the biggest C2C company in China, thanks to its model that does not charge sellers and its large-scale advertising. It remains the market leader today, with around 80 percent of the share of China's C2C market.

However, Jack Ma, CEO of Taobao, thinks this is still not enough, as many rivals such as Tencent's Paipai.com and Baidu's Youa are eager to wrest away market share from Taobao.

International C2C giant eBay, Taobao's long-term rival, has had an uneven development in China. It purchased C2C site Eachnet.com in 2003, which once occupied 90 percent of China's C2C market share. However, Eachnet was overtaken by Taobao in 2005. This led eBay to sell Eachnet to TOM Online in 2006.

However, eBay does not want to give up the huge market offered by China. It kept a low profile in 2008 [editor's note: although it still operates in China at eBay.cn], preparing for a new battle. Its opening of a new office in Foshan City in Guangdong Province at the end of the year may signal that it is about to launch its challenge against Taobao.

Taobao's aggressive stance, practical strategy, huge marketing investment and understanding of the Chinese consumer have paid off. However, the platform itself is the essence of a C2C business and the deciding factor in a company's longevity.

So, how do Taobao and eBay's services in China differ?

Platform: Taobao's product display platform and billing platform are very good. Users are first attracted to Taobao by its advertising and its business model, but it is the platform that keeps them loyal. Meanwhile, eBay.cn's display platform and billing platform are not well tailored to the habits of Chinese users. In addition, the slowness of its Web site and the fact that it charges users to sell items have made people reluctant to use eBay.cn.

Charging: Taobao is dedicated to its policy of not charging its sellers. In October 2008, Taobao announced it would invest RMB 5 billion ($731.05 million) in a five-year "Big Taobao" strategy. Through this, it aims to occupy a larger market share while maintaining its business model. Rather than charge sellers, it aims to make money by cooperating with other subsidiaries of its parent company, Alibaba.

It is an almost unbelievable amount to invest during an economic downturn, and demonstrates Taobao's confidence and determination to maintain its leading position. It is doubtful that eBay will be able to regain its market share in China if it persists in charging sellers.

Communication: With regards to instant messaging tools, Taobao's free AliWangWang is more attractive compared to eBay's use of Skype, which charges for some services. AliWangWang's video and screen capture functions and mobile phone integration are better and more convenient than Skype's audio and video functions.

Customer service: Taobao has a dedicated customer service department, which offers all-day all-year non-stop phone and online services to solve sellers' and buyers' problems. In contrast, eBay.cn does not have an independent customer service department, although it has a hotline. However, it is more likely to leave its users to solve any problems by themselves.

Taobao has an online message-leaving system, which allows user to ask questions and complain directly and wait for a response from a member of Taobao's staff, while eBay answers customer queries via e-mail.

Security: Taobao has formed a trading security team made up of 50 members of staff to combat online fraud, whereas eBay educates people on safe trading practices through a security center page.

Consumer rights protection: This is a big factor that differentiates Taobao's from other C2C providers. Taobao offers compensation to people who make purchases through the Alipay payment service. If defective purchases are reported within 14 days, Taobao will ask the seller to compensate the buyer. If the seller refuses, Taobao itself will compensate the buyer. This is really impressive.

Complaints: On the upper right corner of all Taobao's pages there is a button that people can click on to complain about a particular listing, whereas eBay relies on e-mails and telephone calls to handle complaints.

So we can see that eBay still has a long way to go if it is to revive its prospects in China's C2C market. Taobao is not a sleeping giant. Rather, it is aware of the need to stay on its toes.

The above is a personal opinion piece by the author. Its publication in no way implies that Interfax shares the views expressed in the article.

About the author: Liao Jiannian has worked in the IT marketing department of several global companies including Cascade Corp. and Simon Electric (China) Co. Ltd. He is also the creator, partner and PR supervisor for several Web sites and forums. His blog is located at http://blog.sina.com.cn/shian

How Taobao beats eBay in China

http://www.thomascrampton.com/china/taobao-china-ecommerce/
Alibaba Group’s Taobao platform was a latecomer to consumer-focused e-commerce in China, yet has managed to dominate the sector.
When questioned how he could possibly beat eBay, Alibaba’s Jack Ma memorably said: “eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose—but if we fight in the river, we win.”
These are excerpts from an excellent report released this week by research and consultancy firm BDA looking at China’s e-commerce and Taobao’s success.
Taobao is now so big, that it has become a proxy for the entire e-commerce sector in China.
That was not always the case. Bo Shao, whose company eBay bought to expand into China, Eachnet, explains that eBay’s mistake was migrating Eachnet users onto a common US-based eBay platform.
The day of the migration, eBay China’s traffic dropped by half and the local team lost the ability to adapt to fast-changing China market.
“It took nine months to implement any major changes and nine weeks to even change a word on the website as everything had to go through the headquarters technology development team,” said Shao, in an article posted on the Taobao parent company website.
Chinese e-commerce heading to a scale of US
By mid-year 2009 China had an estimated Internet population of 338 million. Today almost one third of Internet users, or 105 million according to iResearch, are engaged in online shopping. This number is set to almost double by 2011. Sales generated from these shoppers are set to grow rapidly. iResearch forecasts the market to grow from RMB 190 billion (USD 28 billion) in 2009 to over RMB 400 billion (USD 60 billion) in 2011. By comparison the consumer e-commerce market in the US in 2008 totaled USD 178 billion.

More than 40% of all Chinese Internet users are registered on Taobao
Taobao’s massive lead is reflected in the number of goods offered on its site – over 200 million vs. less than 20 million items from its rivals. Mid 2009, Taobao claimed 143 million registered users or 43% of the Internet population, although a more useful datapoint is the number of active users – 30% of the total, or c. 47 million – which Taobao defines as those purchasing on their site at least once within the last six months. By comparison, eBay recorded 86.3 million active users worldwide at year end 2008.

Taobao’s top 10 products are thus a good proxy for China’s e-commerce market
there is a range of specific factors driving online sales. “China-specific” features need to be considered, which explain why some categories online thrive in China but not in the US or other developed markets.
For mobile phones, the availability of smuggled (for example iPhones with WiFi functionality not available locally, or “shanzhai” ‘bandit’ phones) or 2nd hand handsets drives sales on Taobao, which claims 10% of all handsets sold in China this year. For cosmetics, cutting out the cost of a physical retailer makes online goods substantially cheaper than offline. For apparel, consumers may choose to buy (knowingly) fake goods of decent enough quality, widely available in China given its massive manufacturing output, or look for niche clothing such as baby clothes not easily available in their local stores, especially in Tier 2 or Tier 3 cities.
In addition to Taobao and other general contenders, niche sites are exploiting growth in the above listed areas as well as other promising categories including health products, housing-related products and services (ranging from home improvement to apartment rentals) and food/dining related services.
Business model of Taobao vs eBay
In the case of eBay in the US transaction commissions represent c. 90% of the revenues of the company (USD 4.7 billion in 2008) with other items such as hosting fees or advertisements the remaining 10%.
In China, eBay had built a presence since 2002 through its investment and absorption of Eachnet. Taobao was a relative latecomer to the market – founded by Alibaba in 2003 – yet succeeded in rapidly taking on, and humiliating, eBay in this market by adopting a ‘free of charge’ strategy to compete with Eachnet’s listing fee model. How then to make money?
The answer is advertising. Taobao’s traffic makes it (according to Alexa.com) already the 5th largest website in China behind Baidu, QQ (Tencent), Sina and Google’s Chinese site. Over 80% of Taobao’s c. USD 300 million estimated 2009 revenues came from advertising, mostly ‘pay for performance’ ads as well as ‘pay for transaction’ and brand advertisements. The remaining 20% of revenues were generated between commissions that Taobao charges on its new (launched in 2008) Taobao Mall – a B2C area within its C2C platform – and value added services for merchants. Of course not (yet) charging transaction fees means that the “take rate” of Alibaba – the revenue generated for the company vs. the GMV – is only c. 1% vs 7.9% in the case of eBay, but this also explains the rapid increases in the GMV and the barriers for other contenders to take on Taobao.

2010年11月30日星期二

CRT Extra: More on New Taobao “Mall” Site

http://blogs.wsj.com/chinarealtime/2010/11/02/crt-extra-more-on-new-taobao-mall-site/
A plan to re-brand and expand the business-to-consumer platform of Alibaba Group’s online retail platform Taobao.com could lead to higher profits for the company (see yesterday’s story in The Wall Street Journal here ).

: Tmall.com

Taobao is re-branding its B2C platform Taobao Mall, giving it an independent web address, Tmall.com, and spending $30 million in an advertising campaign to attract more users. The move is meant to differentiate listings by Taobao Mall merchants, who are either brand owners or authorized distributors, from Taobao.com’s consumer-to-consumer, or C2C, merchants, who are mostly individuals or small to medium sized businesses that don’t have to go through the same verification process to open a store on Taobao’s platforms.
Daniel Zhang, Taobao’s CFO, said at a press conference on Monday that the company intends to launch more sales categories, such as a category for groceries, and to create unique features for each category, like a price guarantee for air tickets.
Taobao Mall currently has more than 20,000 merchants who sell products from more than 30,000 brands, Zhang said.
Expanding the Taobao Mall product could translate to higher profits for Taobao, which charges fees to B2C merchants for listings while allowing C2C merchants to list products for free (revenue on C2C listings comes from advertising and additional services value added services–see below). Taobao’s free listings have made it difficult for other companies including eBay to compete in the Chinese C2C market.
With Taobao Mall expanding rapidly (the company expects to quadruple its transaction value this year), Zhang said fees will be one of four main sources of income for the company going forward. The others: Keyword advertisements so merchants can advertise their listing when users search for related products, other types of advertising, and value-added services such as aiding merchants with warehousing and other logistics issues.
So far, Adidas, Lenovo, Uniqlo, and Procter and Gamble products are all sold in Taobao Mall.
Zhang reiterated that the company has no plans for an initial public offering, and told reporters during an interview that the new plans for Taobao Mall are not an indication of any plans for a listing.
– Loretta Chao. Follow her on Twitter @lorettac

2010年11月21日星期日

http://lz.taobao.com data manangement tool

2010年11月19日星期五

How has Taobao.com grown so rapidly?

By TONY JIN
Published: January 29, 2008 01:00 AM

source from: http://thechinaperspective.com/articles/howhastaobaocomgrownsorapidly3539/index.html

Turnover at Taobao.com grew 156% to US$5.98 billion last year, putting it ahead of all major retailers bar Bailian Group. Yang Guoqiang of the China Business News takes a look at the growth of China’s most popular online shop, and the challenges ahead

Can Taobao.com, China’s most popular online shop, outsell domestic retailers like Bailian Group and global giants like Wal-Mart, or even the entire traditional merchandising sector? We do not have an answer. But one thing for certain is that Taobao needs to improve its quality control and logistics systems and build its credibility.

According to Taobao, online throughput rocketed 156% last year to US$5.98 billion (RMB43.3 billion), putting it ahead of domestic competitors VanGuard (RMB37.9 billion in turnover) and Dashang Group (RMB36.1 billion) and its biggest foreign competitor, Carefour (RMB24.8 billion). Its turnover was second only to Bailian Group’s RMB77.1 billion.

Taobao’s rapid success began just five years ago, since when its sales have expanded at least 100% a year, well above the 15% increase in sales throughout China’s retail sector and the 40% annual gain posted by large retailers in China. Taobao estimates that China’s online spending totaled US$8.16 billion (RMB59 billion) last year.

According to Taobao, the company took just five years to reach a point (RMB40 billion in turnover) that took Wal-Mart 29 years. However, Yu Yang, the president of Analysys, a leading Internet-focused business consultancy, disagreed with Taobao’s 4-versus-29 claim, claiming the trend towards online shopping made comparison with a store-based retailer meaningless.

“They are doing business with two totally different modes,” he said. “Wal-Mart does all the things itself, including sourcing and distributing. It even has its own plants. But Taobao is just a distributor.

“From a market perspective, Taobao’s turnover is collective while Wal-Mart’s is individual,” he added. “Wal-Mart represents the highest level of the retail sector whereas Taobao represents the newly emerging online shopping sector.”

Taobao is, however, still stacking up well with store-based retailers, as a comparison with cosmetics giant Avon shows. Avon collected RMB1.7 billion in revenues last year from its 7,000-plus stores across China, far lower than Taobao’s RMB2.6 billion collected from cosmetics.

Taobao’s revenue from nursery products surged 361.5% year-on-year to RMB1.2 billion in 2007; revenue from SIM card and recharge card sales surged 427.7% to RMB1.76 billion; revenue from clothing surged 970% to RMB5.78 billion, more than the revenues from clothing sales in all shopping malls in Beijing combined.

Taobao.com is also becoming increasingly attractive to the white collar community. Statistics show nearly nine million people visit the website everyday. Super centers in China, like those owned by Wal-Mart and Carefour have 15,000 visitors on average everyday, meaning it takes 600 large supermarkets to match the number of visitors to Taobao.com. At the end of 2006, there were just 600 large foreign-owned retailers in China.

The red hot website had 53 million registered users as at the end of 2007, up 76.7% on 2006, 24.4 percentage points higher than the 53.3% increase last year in China’s online population.

However, for e-commerce, creditability, logistics, security and tax collection remain a problem. Beijing introduced a rule on May 30 2007 requiring vendors to have a license in order to sell their merchandises online. But the rule only applies to small and medium sized firms and is not applicable to big websites like Taobao and eBay.

Taobao is currently diversifying its revenue sources as it looks to stop charging customer-to-customer sellers transaction fees. Much like its rival Sina.com, Taobao is looking to sell advertising space to name brands, and it also plans to sell advertising space on the right column of its search page, in imitation of Google shopping.

It also plans to offer a range of value-added services to help sellers. “If you do business yourself you can earn 100 dollars,” Taobao president Lu Zhaoxi said. “With the help of Taobao’s vast platform and network, you can earn 1,000 dollars. I’m sure you are willing to give me 20 to 30 dollars out of the extra 900 dollars, aren’t you?”
Lu said some of Taobao’s big private vendors had become fully-fledged businesses so were shifting from a customer-to-customer model to a business-to-customer model, and some name brand companies were also looking to sell their goods online. Taobao will broaden its revenue sources and emerge as a platform offering both customer-to-customer and business-to-customer services, he said.

This article originally appeared in Chinese in the China Business News on January 25, 2008. The China Perspective takes no responsibility for the accuracy of the original article