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By Tyler Holt

Taobao Vs. eB ay China. By Tyler Holt. Outline. At Glance Ebay China Taobao Major Issues Case Questions Quiz. CEO- Jack Ma May 2003 launched Taobao Ebay held 70% of market share 2008 eBay bowed out of market Taobao held 80% of market share. At a Glance. Slow start due to

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By Tyler Holt

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  1. Taobao Vs. eBay China By Tyler Holt

  2. Outline At Glance Ebay China Taobao Major Issues Case Questions Quiz

  3. CEO- Jack Ma • May 2003 launched Taobao • Ebay held 70% of market share • 2008 eBay bowed out of market • Taobao held 80% of market share At a Glance

  4. Slow start due to • low Internet penetration rate • Lack of norms and laws supporting online exchange • Technological and financial infrastructures needed for online auctions not in place The Birth of China’s Online C2C Market

  5. Fraud was rampant • Lacked comprehensive online payment system • Mainly debit cards specific to each city • Lack of credit system • Banks hesitant about issuing credit cards The Birth of China’s Online C2C Market

  6. In 2001 Bank of America and China Construction Bank issued credit cards through online application • China UnionPay- single card processing system • 1995- 14 million bank cards • 2008- 1.6 billion bank cards

  7. 1999 many internet B2C shopping sites started: • Yabuy.com • Netease.com • Sina.com • Eachnet.com The Rise of Eachnet.com

  8. The Rise of Eachnet.com • Founded in 1999 by Bo Shao and Haiyin Tan • MBAs inspired by Ebay • Major difficulty= customers trading in person

  9. Problem- payment processing • Cash-on-delivery system • Partnerships with major banks to encourage credit card use • Escrow and “paypal” used but abandoned early on The Rise of Eachnet.com

  10. Attempted to earn profits- • Switch from free service to pay for listing • Auctions dropped dramatically • Ebay approached in 2001 • A new approach to Asian expansion • Used eBay market principles • eBay paid $180 million in 2003 for Eachnet.com The Rise of Eachnet.com

  11. 1995 as experiment by Pierre Omidyar • 1998 went public, worth billions • By 2001 expanded to Europe, Latin America, Australia, New Zealand, Singapore, Korea, Japan • Lost Japan in 2001 • Announced entry into China eBay China

  12. Use world-wide capabilities to compete • High-ranking executives to lead eBay China • Servers moved from China to Silicon Valley • Long-term sustainability • Regional layer- eBay Asia Leveraging eBay’s Global Strategy and Organization

  13. Jack Ma- founder of Alibaba.com, B2B • College english teacher-China’s earliest Internet pioneer • No Knowledge of computers • Found out about internet during visit to US • 1999 founded Alibaba.com • 2002 leading B2B Chinese website Taobao Rivals eBay China

  14. Saw eBay as serious threat early • Lots of government support • Launched Taobao as a way of cutting off eBay • Secretly started Taobao “searching for treasure” • $12 million investment from Alibaba to Taobao Taobao Rivals eBay China

  15. Worker ant mascot- unite and fight to the end • 2004 eBay still saw Taobao as a fledgling company • “….shark in the ocean, but we are a crocodile in the Yangtze” • Help from Masayoshi Son of Softbank from Japan Taobao Rivals eBay China

  16. eBay bought exclusive ad rights to major websites • Taobao used grassroots computer bulletin board services (BBS) • “They have deep pockets, but we will cut a hole in their pockets” Competing for Customers

  17. Fee-free service • Used typical Chinese department store structure • Sense of community • Instant messaging service, full contact information Competing for Customers

  18. “An Fu Tong”- Secure Pay, built on Eachnet payment and escrow services. Similar to Paypal • eBay bought Paypal in 2003 • Paypal scrutinized by government- no international transactions or flexible credit • An Fu Tong and Paypal led to confusion Competing in Payment Services

  19. “Alipay”- provided escrow and help with transportation • 2005- • 79% of listings for Taobao accepted Alipay • 21% of listings for eBay accepted online payment Competing in Payment Services

  20. Taobao partnered with Sohu (leading portal website) • MSN China chose Taobao rather than eBay for shopping channel • eBay partnered with Global resources (international trade information provider) Competing for Partnerships

  21. Market flooded with counterfeit products- clothing and accessories • Government defended Taobao from seller fraud • eBay vulnerable to sellers committing fraud The Problem of Counterfeit Merchandise

  22. Taobao flexible and fast to respond to users • eBay bogged down by global platform complexity • 2005-2006 eBay replaced CEO several times • Tried several partnerships The Endgame

  23. Paid $40 million to Tom online to take control of eBay • China • Renamed Eachnet and entirely cut off in 2007 • eBay.com.cn designated to international trade • Eachnet.com domestic C2C The Endgame

  24. 2006 Fee-based service • New product PR disaster • Asked for vote from customers • 2008 “Mall of Brands” B2C • Entirely fee-based Becoming a Profitable Company

  25. Taobao- • 2009- advertising revenues $220 million • 2010- advertising revenues >$765 million • eBay- • Partnered with three Chinese manufacturing giants • Breo- professional healthcare products • Kwong Pontus Telecom and Techno Company- communication electronics products • Aigo- digital and electronic equipment Where they are now

  26. Fraud • Lack of integrated banking system • Competition for customers • Competition for payment services • Competition for partnerships • Counterfeit merchandise Major Issues

  27. Would you have started Taobao as non-fee based? • What factors should eBay have paid more attention to? • What were the critical errors that eBay made?

  28. What profession was Jack Ma when he started Alibaba.com? Quiz

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