E-BAY IN CHINA

Hong Kong Group: Rex Kathy Suki Leocean

OVERVIEW

Introduction Why e-Bay failed its business in China? TaoBao versus e-Bay Pitfalls and Challenges for re-entry to China Discussion: What if you were the new e-Bay Chinas manager?

A VIDEO INTRODUCES EBAY

http://v.youku.com/v_show/id_XNDc4MjE1 NTQ0.html

INTRODUCTION
Basic Information of e-Bay Why e-Bay wanted to enter China initially? About e-Bays failure e-Bay is going to re-enter China now.

HISTORY ABOUT EBAY

In 2003, eBay entered Chinas C2C market by acquiring EachNet EachNet, founded in 1999, was Chinas No.1 auction with peak market share of more than 90%

Alibaba invested in 2003-4 to enter C2C market (Taobao.com)

In 2004, Taobao occupies over 50% of Chinas C2C market; eBays EachNet about 35% In 2006, eBay sold 51% of its China division EachNet to Tom Online

WHY E-BAY FAILED ITS BUSINESS IN CHINA?

1. Failure to recognize the Chinese market & consumer 2. Not suitable format for Chinese consumer 3. Slow reaction to competitor 4. Movement of technology platform to U.S. 5. Bad relationship with Chinese government

FAILURE TO RECOGNIZE THE CHINESE MARKET

Neither one spoke Chinese or understood the local market among the top management team. Ex) Chinese consumers prefer private deals, as private transactions between buyers and sellers can build trust. eBay buyers and sellers are not allowed the direct contact, while Taobao have allowed real-time direct communication through an instant chat program between the two sides.

NOT SUITABLE FORMAT FOR CHINESE CONSUMER

EachNet focuses more on price information and product listings, similar to eBays style in the U.S. Taobaos Web page provides much more than mere product listings. It actively makes product recommendations and provides suggestions and tips, promoting a sense of social community. Ex) entertainment news, fashion trends, product reviews, practical tips for online shoppers

SLOW REACTION TO COMPETITOR

eBay blindly indulges in its global first C2C brands and neglects innovation. Taobao's success was that it did not charge any transaction fee from sellers on the website while eBay had listing fees for its sellers.

MOVEMENT OF TECHNOLOGY PLATFORM TO U.S.

terminated EachNets homegrown technology platform and moved all EachNet users to the eBay US platform in October 2004

It made loading speed of eBay Chinas webpage slow. Three months after the platform moved, eBay Chinas market share had dropped to the almost the same level as Taobao

VEDIO - CEO EBAY

http://v.youku.com/v_show/id_XMTg1MzkxNDc y.html

TAOBAO BEATS EBAY

Ebay
Posting fee

Taobao

Transaction commission

Picture posting Free fee Searching fee Yes Free

As the posting free or commission may highly transferred to the consumers, Taobao is more attractive than EBAY for both consumers and sellers.

WHY TAOBAO IS MORE ATTRACTIVE?

Instant communication tools Aliwangwang Buyers and sellers can directly communicate with each others (e-Bay is banned this action) Better relationship and long-term costumers are formed.

Trustful payment method ALIPAY () 3rd party is involved to manage the payment process TaoBao has great cooperation with the local banks (ICBC) The mode of payment or settlement on online bank is born

PROCESS OF ALIPAY ()

FOR THOSE DONT HAVE ONLINE BANKING SERVICE

FOR MAINLAND CITIZENS convenience store / post office/ drug store an banking account Use mobile phone add-valued card FOR OVERSEAS USERS CREDIT CARDS PPS () for HK

WELL-STRUCTURED CONSUMER SUPPORT

TAO-BUYER FORUMN Allow buyers and sellers discuss on the forumn Exchange for Information and own experiences TAOBAO UNIVERSITY Training courses and platform for the users Better understanding of the operation

After-sales and helping center (officially) 24 hours online consumer service center

PITFALLS AND CHALLENGES FOR RE-ENTRY TO CHINA

1. Low income in lower tier cities/rural areas 2. Direct competitors(i.e.TaoBao) 3. Low nternet coverage in some regions

LOW INCOME IN LOWER TIER CITIES/RURAL AREAS Very big market in developed/first tier cities Income distribution drastically varies among city classes Most of the wealth and consumptions power are possessed by first class cities such as Beijing and Shanghai Rural areas purchasing power is pretty low Only economically established regions can be the major market

URBAN VERSUS RURAL REGIONS

INCOME GAP BETWEEN URBAN AND RURAL AREAS

Since 1978 income gap has kept widening Growth rates of rural income was much lower Slightly alleviate, but not eliminate poverty in rural

DIRECT COMPETITORS
Direct competition on e-commerce market in China Examples: TaoBao.com, Baidu.com, etc. Keen competitions facing e-Bay

Although China is now perceived as a very sizable market for online selling industry Its demand is shared by other competitors Whose competitiveness and business are even better and greater that e-Bay in China Example: TaoBao News http://www.chinadaily.com.cn/bizchina/201109/20/content_13739102.htm

EXAMPLE: TAOBAO

LOW INTERNET COVERAGE IN REGIONS

Network connections are not elsewhere in China Only 137m people online (according to the China Internet Network Information Center) Especially for poor provinces and rural regions where lack internet coverage and even computer

IMPLICATION FOR E-BAY

1) The potential online purchasers of e-Bay could have been over-estimated despite Chinas extremely large population size 2) The expansion of business to lessdeveloped areas is less likely and handicapped by insufficient internet users

CHINAS INTERNET USAGE VERSUS U.S.

MOST OF THE REGIONS IN CHINA ARE RURAL AREAS, BUT ONLY 27.3% CHINESE INTERNET USAGES ARE FROM RURAL AREAS.

Discussion:
IF YOU WERE THE NEW EBAY CHINA CEO, WHAT WOULD YOU DO DIFFERENTLY THIS TIME FROM THE LAST TIME?

JUST FOR REFERENCE

1. Have good relationships between related c2c companies (Alibaba, TaoBao)

2. Adapt Chinese culture and buyer behaviors

3. Focus on Consumer needs first

EBAY

http://v.youku.com/v_show/id_XNDc4MjE1NT Q0.html