SUMMARY OF CASE STUDY

Taobao Marketplace timeline summary

2003 2008 2010 2011

Establishmen Launch of Tmall.com Taobao

t of Taobao online launched Marketplace
Marketplace platform, independent splits into
by Alibaba Tmall.com by web domain three
Group Taobao different
Marketplace companies;
Taobao
Marketplace
(C2C),
Tmall.com
(B2B) & Etao
(shopping
search
engine)
Facts & figures of Taobao Marketplace

 800 million product listings on offer at any given time

 48,000 items sold per minute
 Tmall.com features products from more than 70,000 multinational and Chinese
brands
 Big business are also making presence on Taobao such as Xinhua, China Eastern
Airlines and Uniqlo
 87 million Chinese made purchases on the website in the first half of 2009
 Taobao Marketplace GMV was $2.3 billion versus eBay’s $150 million
QUESTION 1

Why has Taobao marketplace succeeded online when eBay has failed?

There a few aspects that Taobao marketplace succeeded online while eBay failed to do so.

1. Taobao successfully adapted on Chinese culture

Taobao launched a new online B2C platform in April 2008, which is ‘Tmall.com’ for eligible
major domestic and overseas brands and retailers to sell directly to consumers. Tmall.com
was established to become an online retail destination for consumers to purchase authentic
and quality products and Tmall.com is the most visited B2C online retail website in China.
There are over 570 million monthly active users in 2016. Tmall would offer more than $50
million worth of vouchers to encourage the consumers to share the gift coupons with their
friends in order to allow more participants at its annual shopping spree on Alibaba’s Single
Day (November 11th). The uniqueness of Tmall is all member of Tmall’s administration team
had to choose a nickname and these nicknames are from fictional characters from Jin Yong’s
famous ku fung novels. Hence, the message about Taobao become Chinese platform was
transmitted through the Chinese kung fu writer’s which believed that their reference is very
clear and important to the Chinese people since most of them are very nationalist. China is a
collectivist country, they feel proud to be Chinese and this kind of identification is stronger
than identifying themselves as individuals. So this is the reason of why the Taobao’s
manager desire to delivers a strong Chinese culture reference to the platform such as
Tmall.com.

Besides that, Taobao’s website is in red and orange colour which symbolizes prosperity and
festivity in Chinese culture. It gives a very positive perception for online consumers
especially for Chinese consumers. To operate a business in China, symbolic is very important.
Furthermore, life in China give an impression a country which fullfill with a lot of people,
signs and information at everywhere, and no free time mostly. China is a collective, noise,
moving and wonderful environment unlike western countries. Taobao’s website is also well
charged for a lot of information everywhere and its design reflect this environment.
Consumers from China prefer website which has strong colours design and filled in with
more information, unlike western countries that more prefer website like as Google which is
simpler in design. The design of Taobao’s website page was perfectly adapted to the
Chinese spirit because it reflects on how Chinese consumers think.
Meanwhile, eBay failed to identify Chinese business market and environment is hugely
contrast from the Western market. For instance, eBay sent a German manager as
representative to lead the China operation and even hire a chief technology officer from
United States to handle the China market. This thoroughly showed communication
breakdown will happen between the western and Chinese due to communication barriers.
Without a right communication, messages failed to receive and transmit to both side of
individuals which will lead to workplace failed to work smoothly. Without a Chinese
spokesperson from the western side, definitely they can’t understand the local market. Aside
from that, due to the failure of top management team of eBay understand on the local
market, they failed to do market situational analysis. In fact, eBay team just wasted their
money on spending advertising using the internet technology in a country where small
businesses rarely use on internet. Lastly, eBay is adapted with their own comfort zone of
business back in their western countries where they are more into handling ‘global platform’
unlike the Chinese their preferences are more tend to products and services for local
customers. So this shows eBay and the Chinese shows different preferences which lead to
the failures of eBay in China’s marketplace.

2. Safe and delightful shopping experiences provides by Taobao

Aside from offering a wide array of products for purchases, Taobao offers their consumers a
safe and satisfying shopping experience. A lot of people do not trust on the online payment
when they do online shopping. To solve the problems, Taobao employs Alipay which is a
third party payment method to process the payment. The consumers put their money on
Alipay which then will inform the seller the money was given. Then, the seller will send their
products by the post. Only when the consumers receive their products purchased, Alipay
allows the seller to take the money. Through this method, it can reduce the transaction risk
for online consumers. In addition, Taobao also provided consumer protection programs
which can help allay fears of fraud among a population unaccustomed to make a purchase
in cyberspace.

On the other site, eBay’s system is lack of instant communication system. EBay has the mind
set that Chinese market can brought the similar approach as the US market, which they
expecting customers to contact customer service through email and take part in online
discussion forum. In fact, Chinese used to reach customer service through direct make
phone call to the sellers. Unlike Taobao which helps in filter seller characteristics, eBay failed
to create delightful experience. Taobao creates filters such as the activeness on online
period by the seller, wall of reviews from customers who made a transaction before plus
providing star rating of product and services rated every customers itself. This feature are
not available in by eBay yet, so this actually drive customers more engage with Taobao
platform because chinese believe more on transparent communication channel.

QUESTION 2

What is unique about Taobao Marketplace channel management process? What

Component can other online shopping sites borrow or implement?

There a few uniqueness of Taobao shown in marketplace channel management process,

1. Launched a new system to complemented the existing public site

Tmall.com was established to become an online retail destination for consumers to purchase
authentic and quality products. While Taobao Marketplace has no listing or commission fees
but only charges merchants a transaction and annual technology service fee as well as a
security deposit. In 2010, Tmall.com launched an independent web domain, www.tmall.com
the reason being is to enhanced focus on product verticals and improve shopping
experience. The site mostly composed of direct-sale flagship stores and authorized stores of
well-known brands. Unlike online sales on marketplaces such as Amazon, operation of a
TMall shop requires a specialized and dedicated cross-functional team. Such a team can
either be employed by the merchant inhouse or, as in most cases, is managed through a
certified Tmall Partner[15] Agency ("TP") which operates the store on an ongoing basis on
behalf of the shop owner.

2. Provided safe and satisfying shopping experience by using Alipay and

Consumer protection programs

Alipay, an escrow-based online payment platform owned by Alibaba Group, is the preferred
payment solution for transactions on Tmall.com. In 2012, Taobao Marketplace and
Tmall.com began to accept international Visa and Mastercard credit cards payment
processed Via Alipay, which means those oversea consumers can direct buy products on
Taobao or Tmall by using their credit card. As on Taobao Marketplace, the C2C e-commerce
platform under Alibaba Group, buyers and sellers can communicate prior to the purchase
through AliWangWang, its proprietary embedded instant messaging program. It has become
a habit among Chinese online shoppers to “chat” with the sellers or their customer service
team through AliWangWang to inquire about products, engage in bargaining and so on
before purchase.

In addition, to allay fears of fraud and guarantee the quality of products and services for
consumers, Taobao Marketplace and Tmall.com cooperate with millions of merchants to
meet rigorous customer satisfaction and consumer protection measures such as seven day,
no questions-asked refund policy. For corporate clients also they offers the infrastructure for
complete management of their own brand and online retail channel while providing access
to consumers situated in second and third-tied regions across China, in addition to Urban
centers Such as Beijing and Shanghai.

3. Separate their business model into 3 companies

 Taobao Marketplace (a C2C platform)

 Tmall.com (a B2B platform)
 eTao (a shopping search engine)

Taobao Marketplace split into 3 different companies will be more flexible and better respond
to the quick changing internet and e commerce landscape.

Aside from it, there a few components that other online shopping site shall borrow from
Taobao or implement on it.

1. Unique and crazy stuff

There a lot of product in Taobao which are creative, unique and also crazy stuff. For
example, customer can get pet stuff, animal shaped pillow or some cuties socks from
Taobao. Customer also can put their name or words desired on the products.

2. Super Deals, sales and events

An idea of a great way to save more money of customer exist when Taobao making a
promotion. Customer can stay tuned for Taobao sales and events. When Toobao making a
super deal, consumer can either get a huge discount on purchasing a products or get a gift
vouchers from Taobao. Every year’s on event of single day, Taobao will give a huge discount
to the consumer and Taobao will get the sales amount approximately of 1 million on that
day. One day sales of Taobao can exceed many of other online shopping sites monthly
sales. Not only single day, Taobao also have others promotion day such as Double 12,
Taobao daily sales and Clearance sales.

3. Handle issue concerning the product(s) and transaction

Consumer can return the product to Taobao if there have any mistake. Sometimes the
computer system will have problem when consumer getting the wrong product or the
product are longer in good condition, consumer can exchange the product. Consumer also
can get refund from Taobao if there have any mistake by Taobao or the product is broken.
This kind of service provides by Taobao helps them to gain more consumer.

Question 3

What is next for Taobao Marketplace? Should it go into cloud computing? Where
else it can grow?

Cloud computing is the practice of using a network of remote servers hosted on the Internet
to store, manage, and process data, rather than a local server or a personal computer. It
remains to be seen if Alibaba will be as successful in the cloud as it has been in e-
commerce. People are happy that Chinese consumers are still spending in the e-commerce
sector but they are waiting to see how (Alibaba’s) other businesses, such as cloud
computing, will play out. Another problem that weighs on Alibaba has been its problem with
the counterfeit goods sold on its e-commerce platforms. The U.S. Trade Representative
office placed the company’s C2C platform, Taobao, on a blacklist that reflected the names of
companies that sold counterfeit goods. This has not negatively affected consumer
perceptions of shopping on Alibaba’s e-commerce platforms, which saw gross merchandise
volumes for its Single’s Day shopping event increase by higher than 32 percent on year to
reach $17.8 billion. However, this dents the company’s reputation among brand merchants
and could potentially be a stumbling block for overseas expansion.
In other hand, Taobao collection should offered in other countries and cooperate with other
e-commerce market leader to cater to more customers than ever before. For example,
Taobao collection is available in Lazada for customers in the Philippines, Indonesia and
Thailand. Taobao shall shift away from being a pure play e- commerce company to focus
on cloud computing. As we know, cloud computing is a relatively new sector in China so
there are many players trying to get in early to grab market share. Therefore, Taobao go
into cloud computing is right in order to compete with internet companies such as Baidu and
Tencent in the cloud computing space in China. By using the cloud computing, the
collaboration efficiency of Taobao will be increase due to collaboration in a cloud
environment can give Taobao the ability to communicate and share more easily outside of
the traditional methods. If they are working on a project across different locations, they
could use cloud computing to give employees, contractors and third parties access to the
same files. The cloud computing system also could help Taobao to reduce the cost of
managing and maintaining your IT systems.