On the other side of the globe, the situation is very different. Sitting in the hotels in Beijing and Shanghai, I noticed the ads about Taobao popping up on TVs almost every 15 minutes. Since its name “??” means “digging for treasures” in Chinese, it gets a lot of attention very cleverly.
Fierce competition between eBay EachNet (eBay China) and Alibaba / Taobao is apparent (see this). Morgan Stanley analysts estimated Taobao’s market share increased from 9% to 40% in 2004. For the first quarter of 2005, eBay EachNet reported 100 million in gross merchandising value while Taobao reported 120 million.
I believe that understanding the customers’ preferences and tastes gives the local players an upper hand against their global counterparts. Taking Taobao and eBay EachNet as an example:
- With most users not sophisticated for auction, auction accounts only 10% of Taobao’s listings, while eBay EachNet has about 40% of its listings for auction.
- Taobao offers free listings. As a result, its listings reached 10 million in September of 2005, almost 10 times more than eBay EachNet’s.
- Taobao also offers longer listing periods (14 days) and let customers extend for one more period automatically. eBay EachNet does not have this flexibility.
- Taobao’s listings appear to be more customer-centric while eBay EachNet’s listings more product-centric. For example, Taobao’s listings are organized into several categories, such as “Men,” “Women,” etc., while eBay EachNet sticks to its “global platform” grouping users into “Buyers” and “Sellers.”
- Taobao has higher customer satisfaction than eBay EachNet. According iResearch, the user satisfaction level was 77% for Taobao versus 62% for eBay EachNet.
I have to say I am impressed with Taobao’s performance. I remember only about a year ago, I was having a conversation with a senior executive of Alibaba at its headquarter in Hangzhou, I couldn’t help asking:”Aren’t you afraid that eBay will buy you out?” To my surprise, the answer was:”No, we will buy eBay.”