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
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