Why Ebay Lost to Taobao in China - the Global Advantage
technical opinion
DOI: 10.1145/ 1435417.1435450
BY CAROL XIAOJUAN OU, ROBERT M. DAVISON
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
DOI: 10.1145/ 1435417.1435450
BY CAROL XIAOJUAN OU, ROBERT M. DAVISON
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
References: 1. Davison, R.M. and Ou, C.X.J. Guanxi, knowledge and online intermediaries in China. Chinese Management Studies 2, 4 (2008), 281-302. 2. Martinsons, M.G. Electronic commerce in China: Emerging success stories. Information & Management 39, (2002) 571-579. 3. Meyerson, D., Weick, K.E., and Kramer, R.M. Swift Trust and Temporary Groups. In R.M. Kramer and T.R. Tyler (Eds.), Trust in Organizations: Frontiers of Theory and Research. Sage Publications, Thousand Oaks, CA, 1996, 166-195. 4. Moss, W. eBay eJects from China. CNET Asia Blogs (2006); http://asia.cnet.com/reviews/blog/ littleredblog/0,39056119,61976678,00.htm. 5. Ou, C.X.J., Sia, C.L. and Banerjee, P.K. What is hampering online shopping in China? Journal of Information Technology Management 18, 1, (2005) 16-32. 6. Quaddus, M., Xu, J. and Hoque, Z. Factors of online auction: A China study. International Conference on Electronic Commerce, Xi’an, (2005) 93-100. 7. Twedt, D.W. How does brand awareness-attitude affect marketing strategy? Journal of Marketing 31, 4, (1967) 64-66. 8. Vara, V. and Chao, L. eBay Steps Back from Asia, Will Shutter China Site. Wall Street Journal, Dec. 19, 2006. 9. Wikipedia (2007) Consumer-to-Consumer, http:// en.wikipedia.org/wiki/Consumer_to_consumer Carol Xiaojuan Ou (cscarol@net.polyu.edu.hk) is a lecturer of computing at the Polytechnic University of Hong Kong. Robert Davison (isrobert@cityu.edu.hk) is an Associate Professor of Information Systems at the City University of Hong Kong. © 2009 ACM 0001-0782/09/0100 $5.00 148 COMM UNICATIO NS O F T H E AC M | JA NUA RY 2009 | VO L . 5 2 | N O. 1