Why Taobao Succeeds in China Unlike eBay?

China has the largest online population in the world: 538 million users by the end of 2012, versus 141 million in the USA. internet users Want to know more about Chinese e-market, click here

The Chinese e-market is huge today, and this evolution was predictable from years. That is why eBay chose to begin the leader of this market in 2002 by investing US$ 30 million in EachNet, a Chinese online auction founded in 1999. But the American giant eBay failed in China.

On the contrary, the local competitor, Taobao that was created in 2003 had and still has a big success in China. Even more, Taobao is the biggest e-tailing platform in the world today.

Taobao is an e-tailing platform created by Alibaba group in 2003, one year after the coming of eBay on the Chinese market. The managers of the American e-tailing platform considered that this Chinese version of eBay was not a danger for the company. But obviously, they were wrong. In March 2002, after doing a joint-venture with EachNet.com, eBay had about 80% of the e-commerce market for $30 Million and 33% of shares. In May 2003, Taobao went online. At the end of 2006, eBay cut its losses and shut its website because of Taobao’s success. Today, Taobao is the global leader of e-commerce with 80% of the Chinese market shares.   

Why Taobao has achieved commercial success and not eBay?

This is the “going first going fast” American e-tailing giant’s strategy that made it lose its Chinese bet. In fact, the ethnocentric management of eBay has not allowed it to adapt its services and logistic to the new target culture: the Chinese one.

Chinese culture is very different than occidental ones, than American’s in this case. Then, consumers’ expectations and needs are different too. While eBay didn’t want or think to adapt its strategy, Taobao is perfectly adapted to the local culture. You could tell me “of course, it is a Chinese platform!” and you would be right. Let’s have a look on the Taobao’s particularities that allow it to win the war against eBay for the e-commerce in China.

• The platform’s design To compete with eBay, Jack Ma (Taobao founder) has decided to give a strong local identity to Taobao.  Many aspect of the platform’s design are concerned.

First, every member of the administration team had to choose a nickname, and all of them are “from fictional characters from Jin Yong’s famous kung fu novels” (Sun Tongyu, Taobao’s president). The message transmitted through the famous Chinese kung fu writer’s reference is clear: Taobao is a Chinese platform. This message is important because Chinese people are very nationalist. They are proud to be Chinese and as China is a collectivist country, this kind of identification is stronger than identifying themselves as individuals. That is why Taobao’s manager chose to give a strong Chinese culture reference to the platform. Another reason for this is to ensure consumers their understanding of their behaviours and needs. The second thing is choosing nickname is giving an informal attitude, which is the key to allow people to feel welcoming and being a member of a community.

Secondly, Taobao’scolors are red and orange, which symbolize festivity and prosperity in Chinese culture, a very positive message for online customers. Symbolic is very important to doing business in China unlike in the occidental world.

Moreover, Taobao’s website is well charged with a lot of information everywhere. Life in China is like that: a lot of people, information and signs everywhere, no empty space mostly of the time. It’s a noisy, collective, moving and colourful environment. That is why Taobao’s design is reflecting this environment: it is what Chinese people are accustomed to.  Zhang Yu, vice president in charge of C2C marketplace operations at Taobao, explains: “Chinese consumers like busy web designs with strong colours. Westerners prefer sparse sites like Google’s, but Chinese customers want their website to be noisy, with lots of links”. taobao-homepage-aug-2009 Taobao homepage with red and orangecolors and filled info

Overall, the design is adapted to the Chinese spirit. As Porter Erisman (the vice president of International Corporate Affairs) said,Taobao’s “design was much more usable for Chinese eyes [than eBay’s]. It reflected how Chinese shoppers think. Even some small details, such as including a men’s navigation tab and a women’s navigation tab, made the navigation more suitable to Chinese online shoppers. It was like being in a Chinese department store”. It is not in the occidental culture to create one separated navigation tab for men and women at all, even if differences of men and women thinks have been proved.

• The trust One eBay’s error was to ignore the importance of the trust in the Chinese culture. For American and occidental people in general the main motivation to buy a good it’s the price. Of course they need trusting the seller, as each people from any culture in the world, but the trust in China is much more than that. Paul Ingram, professor at the Columbia Business school specialized in social network explains:

In the West, we tend to reserve trust from the hurt (affect-based trust) for family and friends and trust from the head (cognition-based trust) for business partners. We see emotional concerns in business as unprofessional. But in China, affect- and cognition-based trusts are highly intertwined, even in business. It is important that business partners have an affective bond. Few Chinese business relationships develop without socio-emotional exchanges such as sharing meals, gifts and socializing with each other’s family.

That is why Taobao provides many aspects to facilitate confidence among sellers and buyers.

– The main one is AliWangWang, the Alibaba’s chat. Its function is to allow sellers and buyers to communicate. This tool has 2 main advantages. The first one is that Taobao proposes mostly fixed prices and only few auctions (on the contrary of eBay). It means that people can negotiate prices with sellers. It is interesting financially, but more than that, the bargaining is a part of the trust building between seller and buyer in Chinese culture. The second advantage is that people can directly ask their questions about the product to the seller or asking for assistance. aliwangwang AliWangWang interface

– Taobao sellers have to use their national identity card and their bank account to do their registration on the site. 

– A rating system of both sellers and buyers allows people to know who is trustable or not without taking the time to speak with the person. eBay offers a rating system for sellers only, but it is not enough in China. Moreover, in a collectivist society people like sharing and it is human trusting a person who has a good reputation. Thus, both buyers and sellers have to build and maintain a good reputation being honest if they want keep selling or buying on Taobao. taobao-seller-panel Rating info of a registered user

– Alipay, lauched in 2004 is an escrow service of Taobao. The buyer put the money on Alipay which inform the seller the money was given. Then, the seller send the item to the buyer, and only when the buyer tells the good is received, Alipay allows the seller taking the money. This service can be used for free.

– Another trusting idea is people can pay as they receive their item, mainly by cash on delivery. Indeed, the most usual way of payment in China is cash, and cash on delivery is like checking goods before buying, in retail shops. One more time, we can see that Taobao is perfectly adapted to the Chinese culture.

• Fees Listing and transactions are free of charge on Taobao. It is not the case on eBay.

In conclusion, we can say Taobao bested eBay for 3 reasons:

o It is perfectly adapted to the Chinese culture. It is a Chinese eBay especially made for Chinese consumers and consumers like to be considered.

o It provides very good services with low risks for online shopping.

o It is free.

Leïla Hatoum, SAOS Marketing manager & business developer.


Trackbacks / Pingbacks

  1. The Chinese social media landscape | Business in China - August 22, 2013

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: