In my previous posts, I talked about the challenges of e-commerce in China, and the competition between local Chinese e-commerce site Alibaba / TaoBao and global online auction site eBay China / EachNet. Six months later, the competitive landscape has changed dramatically. e-Commerce is clearly picking up momentum in China.
According to Jack Ma, founder, chairman and CEO of Alibaba, that owns TaoBao which has now over 15 million users, the most critical factor for TaoBao being successful at C2C e-commerce in China is its payment system AliPay, the PayPal equivalent in China.
One of the key issues that hindered e-commerce in China in the past is the under-developed payment systems that resulted in the settlement risk – the risk of ensuring the goods are delivered and payments are made between buyers and sellers. AliPay, different from other payment systems in the market, solves this problem by escrowing cash until the goods are delivered. In a way, AliPay acts as a temporary bank between buyers and sellers. In the meantime, it increases the liquidity in the TaoBao marketplace. AliPay is a key driver of the company’s success and e-commerce in China.
Ambitious Ma is also aiming to make Alibaba the No. 1 search engine in China, taking on Baidu and Google. He plans to take Alibaba IPO in the near future. His vision is to make his company one of the world’s top three most powerful Internet companies and a Global Fortune 500 company a decade from now.