• Table of contents

    • [+]Preliminaries (3)
    • [+]Introduction (4)
    • [+]Latin America (13)
    • [+]Sub-Saharan Africa (9)
    • [+]Arab World (11)
    • [+]Russia (11)
    • [+]India (11)
    • [—]China (9)
    • [+]Conclusions (6)
    • [+]Appendix (1)

China

The new giants of online transactions

The extraordinary flow of goods towards foreign and domestic markets has enabled the emergence of major players in electronic commerce in China. Around 1999, the Chinese entrepreneur Ma Yun – Jack Ma –, a native of Hangzhou, created the site Alibaba, in partnership with 17 co-founders, as a trading platform for importers and exporters of all kinds of products.[1] The company gradually became a formidable network of Internet firms, including Taobao – a C2C retail sales site –, Alipay – an online payment system –, Alibaba Cloud Computing and Yahoo! China – acquired by Alibaba in 2005. To give some idea of the magnitude of these platforms, as of November 2010, Alipay had already overtaken the US giant Paypal, with regard to both the number of users and the volume of transactions.[2] In addition, Taobao has been outperforming EachNet, the local brand of its competitor eBay, for almost 5 years in the Chinese market. According to Bo Shao – EachNet’s founder and a consultant for the firm after it was acquired by eBay in 2003 –, Taobao’s success can be explained by the disastrous decision taken by eBay to migrate its platform to the US, given that the resulting drop in the quality of the service due to the Chinese firewall filters[3] caused local users to migrate en masse to Taobao.[4] But the truth is that even before this unfortunate measure, Taobao showed greater dynamism, owing to the fact that it had a better understanding of local buyers and sellers; for example, it advertised the site on the main television channels and offered instant messaging services via mobile phone, knowing full well that Chinese users preferred using mobile phones to computers.[5] EachNet thus went from controlling 85% of the Chinese market to possessing just 7%. Jack Ma’s comments on the subject of his confrontation with EachNet/eBay say a lot about the opportunities for autochthonous digital projects in developing countries:

eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose; but if we fight in the river, we win.[6]

In addition to Taobao and its C2C business model, there are a significant number of players with a B2C strategy. One of the prime examples in this field is DangDang, founded in Beijing in 1999, which – like Amazon – began by selling books through the Web. The company later diversified its range of products exponentially to offer a catalogue of 100 million different items.[7] In November 2010, Dangdang announced its intention to sell e-books that can be read on computers, e-readers and mobile phones. The company has chosen not to distribute its own device for the time being, owing to the large number of models already in existence.[8]

The other giants in e-commerce in China are Paipai – owned by the technology consortium Tencent – and 360buy – which has recently been given a considerable injection of capital by Wal-Mart.[9]

It is interesting to observe that these portals are going through the same price war that is affecting hardware manufacturers. The relentless competition even forced the local Amazon subsidiary – which in China operates under the brand Joyo – to offer a 20% discount on all its books in December 2010.[10]

Peggy Yu, the founder of DangDang, justifies this price war phenomenon on the basis of a local idiosyncrasy:

Chinese consumers are extremely price sensitive. People like my mom would spend 40 minutes riding a bus to get a bottle of Coca-Cola for 40 cents less. It’s a national sport, and we respect that sport.[11]


Notes    
  1. Cf. “History and Milestones”, AliBaba.com.
  2. Cf. Shen Jingting: “Alipay snatches online payment crown from PayPal”, China Daily, 24th November, 2010.
  3. Colloquially referred to as the ‘Great Firewall of China’, this is a government-imposed control over the content circulating on the Internet. Cf. for example “What is internet censorship?”, Amnesty International, 28th March, 2008.
  4. Cf. “Shark in a River: How Taobao Beat eBay in China”, China decoded, 27th October, 2010.
  5. Cf. Wang, Helen, The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You, Bestseller Press, 2010, p. 165.
  6. Originally quoted in Doebele, Justin: “Standing Up to Ebay”, Forbes, 18th April, 2005.
  7. Cf. “Introducción”, Dangdang.
  8. Cf. Hille, Kathrin: “Chinese outlet to launch e-book service”, The Financial Times, 10th November, 2010.
  9. Cf. Chao, Loretta: “360buy Attracts Investment”, The Wall Street Journal, 29th December, 2010.
  10. Cf. “3 online book stores battle on low-prices, regular shops suffer”, Global Times, 16th December, 2010.
  11. Cf. “Dangdang’s Yu On Piracy, E-Books And Taobao”, The Wall Street Journal, 27th December, 2010.

1

  1. thierry quinqueton

     /  27/08/2011

    Le requin et le crocodile

    La façon dont est présentée l’histoire de Taobao et de Ebay est riche pour nous éditeurs membres de l’Alliance.

    Reply

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