Taobao vs. Ebay China
CASE: IB-88 DATE: 01/04/10
TAOBAO VS. EBAY CHINA
Ten to 15 years from now, I think China can be eBay 's largest market on a global basis…. We think China has tremendous long-term potential and we want to do everything we can to maintain 1 our No. 1 position. — Meg Whitman, eBay CEO, 2004
By 2008, Jack Ma, CEO of Alibaba.com Inc., was in a position to consider how to fortify Taobao’s dominant position in China’s online consumer-to-consumer (C2C) market. Ma and his company had come a long way since May 2003, when they first launched the Taobao website. Back then, eBay China dominated the fledgling market, holding over 70 percent share. It had entered China with its acquisition of the start-up EachNet, and was actively building upon that company’s first-mover advantage. But by 2006, Taobao would overtake eBay China. As Taobao grew explosively, eBay China’s market share would fall dramatically and it would bow out, transferring its operations to a joint venture partner. 2 Although eBay would nominally continue to operate in China, it was no longer a concern in Ma’s plans for Taobao―which by 2008 held over 80 percent of the market. How had this upstart company overwhelmed the world’s most formidable player in the online C2C space? THE BIRTH OF CHINA’S ONLINE C2C MARKET 3 Online auctions got off to a slower start in China than in some of the world’s more developed economies. China had a low Internet penetration rate, lacked norms and laws to support online exchange, and had not yet developed the technological and financial infrastructures needed to
1
“eBay Expects Great Things of China,” CBS News, April 13, 2004, http://www.cbsnews.com/stories/2004/04/13/tech/main611598.shtml (February 6, 2008). 2 “eBay JVs with Tom Online,” People’s Daily Online, December 21, 2006, http://english.people.com.cn/200612/21/eng20061221_334655.html (February 1, 2008). 3 Unless otherwise noted, this section is based on information from “EachNet.com,” GSB Case No. SM-91,
TAOBAO VS. EBAY CHINA
Ten to 15 years from now, I think China can be eBay 's largest market on a global basis…. We think China has tremendous long-term potential and we want to do everything we can to maintain 1 our No. 1 position. — Meg Whitman, eBay CEO, 2004
By 2008, Jack Ma, CEO of Alibaba.com Inc., was in a position to consider how to fortify Taobao’s dominant position in China’s online consumer-to-consumer (C2C) market. Ma and his company had come a long way since May 2003, when they first launched the Taobao website. Back then, eBay China dominated the fledgling market, holding over 70 percent share. It had entered China with its acquisition of the start-up EachNet, and was actively building upon that company’s first-mover advantage. But by 2006, Taobao would overtake eBay China. As Taobao grew explosively, eBay China’s market share would fall dramatically and it would bow out, transferring its operations to a joint venture partner. 2 Although eBay would nominally continue to operate in China, it was no longer a concern in Ma’s plans for Taobao―which by 2008 held over 80 percent of the market. How had this upstart company overwhelmed the world’s most formidable player in the online C2C space? THE BIRTH OF CHINA’S ONLINE C2C MARKET 3 Online auctions got off to a slower start in China than in some of the world’s more developed economies. China had a low Internet penetration rate, lacked norms and laws to support online exchange, and had not yet developed the technological and financial infrastructures needed to
1
“eBay Expects Great Things of China,” CBS News, April 13, 2004, http://www.cbsnews.com/stories/2004/04/13/tech/main611598.shtml (February 6, 2008). 2 “eBay JVs with Tom Online,” People’s Daily Online, December 21, 2006, http://english.people.com.cn/200612/21/eng20061221_334655.html (February 1, 2008). 3 Unless otherwise noted, this section is based on information from “EachNet.com,” GSB Case No. SM-91,