Sinobytes

Owning a Taobao.com shop: A new national hobby

Sep 14, 2009 15:37

eBay brands itself as "The World's Online Marketplace", but one big chunk of the world map that it has embarrassingly failed to conquer is China.

Taobao.com, the Chinese consumer e-commerce site, won its battle against eBay back in 2006 when the American site acknowledged defeat and instead invested US$40 million in a Chinese auction site named Eachnet, which first started up in 1999 as--oh, dear--an eBay clone.

Such is Taobao's success in China these days that running a "Taobao shop" is a national pastime, sort of like a second job, or hobby, for tens of thousands of Chinese office workers, housewives and university students.

So, let's focus on why Taobao is so popular in China, which runs all those "Taobao shops", including a chat with one typical young "shopkeeper", and where they source the items that they sell.

The site, the stats
Taobao sells pretty much everything, from cigarettes to panties, from iPhone 3GS (real) to Channel sunglasses (fake). Taobao is a regular part of daily Web use for many of China's Netizens. In its latest semi-annual performance report, Taobao revealed that as of the end of Q2 2009, it has now up to 145 million registered members, which accounts for 43 percent of total Netizens in China.

This year, Taobao is seeing growth of 184 percent over the previous year in transaction numbers. However, perhaps because of the global economic crisis, the amount spent in each transaction has fallen. This year, the average Taobao transaction is down to 51 yuan (that's US$7.50).

Using Taobao
The 10 main tabs across the Taobao front page reveal the core sections of the site, which include "mall", "global", "second-hand", and "plane tickets". Much of what is sold, however, are brand-new products from its legion of hobbyist shopkeepers.

The search box is prominent just above the tabs and allows you to search across the site or within certain categories. Upon searching for anything, you get a list with thumbnails and descriptions, from a variety of sellers across the country. It doesn't really matter where the seller is, as regular- and express-mail options cover the country.

Taobao's payment method is Alipay, created by its parent company Alibaba, the business-to-business e-commerce site which also runs Yahoo's China operations. Alipay has been vital to their victory over eBay and its unfamiliar Paypal. For regular users, Alipay (Chinese name: 支付宝--Zhīfùbǎo) is the payment method and safety intermediary. It accepts payment on a wide variety of bank-issued debit cards and Visa.

The buyer first pays money--using an Internet shopping-enabled bank card--to Alipay, which then holds the money until the buyer has received the goods. If satisfied with the items, the buyer logs back into Taobao, and with a few clicks, can allow Alipay to pass on the payment to the seller. This eliminates the possibility of card fraud and items that don't get sent. Though for the shopkeepers, there's still the possibility of some wantonly dishonest customers damaging the goods themselves and sending them back.

Shops and shopkeepers
Similarly to eBay, there's an emphasis on shopkeepers being rated by buyers to display who can, and can't, be trusted. The same, too, for buyers. In the screenshot to the right, you can see one shopkeeper's stats, displayed on its shop home screen. After every transaction, both parties can optionally rate each other; but it has become polite to give a good rating where one is due. The more "crowns" and "hearts", the better.



Text reviews can also be posted under every product. Interestingly, running a Taobao shop has become a national pastime, with even office workers on a good salary running shops, chatting online with potential customers--perhaps even during office hours--and sorting out the mailing of items in the evenings and on weekends. University students, too, provided they have a laptop, have taken to being sellers to give themselves a bit of an income during the semester. Setting up a Taobao shop requires no fees be paid to the site. So it's just a matter of sourcing for some products from a wholesaler--an easy thing to find and do in China, which is the "world's factory" after all--for a fairly small outlay. And then you'll hopefully be able to sell the goods at a competitive price which slightly undercuts the bricks-and-mortar stores with their huge overheads.

To learn more about why so many young Chinese Netizens want to have a Taobao shop, I talked to one such shopowner, Song Yu Xiang. She works as a purchaser in the purchasing department of a Chinese-Taiwanese electronics manufacturing company, and runs her Taobao shop in her spare time:

What kind of stuff do you sell in your shop? Where do you buy the things from?

Song: Female underwear and cosmetics that I get direct from a Taiwanese factory near where I live.

You already have a busy full-time job, so how can you find time to run the Taobao shop? How many hours a week do you spend running it?

Song: Only in my free time. I find a lot of time after work because I do not like shopping outside or going out much in the evenings. It takes up about 3 hours everyday. After work, when I get home, I always open my laptop immediately to check any messages customers send to me during the day. That normally takes me about 10 minutes. Then I just leave the laptop open and logged into Taobao until bedtime. During that time I update some news in my shop, reply to some new messages and deal with buyers.

Have you heard of the Web site eBay.com and ebay.cn, which are also Web sites where people can sell stuff?

Song: Yes, I've heard of that Web site, but never used it. It's also a good Web site which many people use a lot. But in China, Taobao is more common.

Does the Taobao Web site work well? Any problems with people not paying, etc.?

Song: Yes, it works very well and very conveniently. When I started running my shop I did not have any idea about it, but just several hours later I found all the information. I have never encountered any people not paying because every seller gets a Taobao account called "zhifubao" [Alipay], which is controlled by Taobao. Buyers cannot get goods before paying and the sellers also cannot get the money before delivering.

Do you make good profit from your shop? Do you think young Chinese do this for fun as well as for making money?

Song: Profit is not too bad, but not great, because I do not pay enough attention to [my Taobao shop]. I just want to get some experience, make more friends, learn more about the goods. In my opinion, most young Chinese do this for fun--like me--because e-shopping is becoming more and more popular.

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Postscript
It has already been analyzed how eBay brought its very public humiliation in the China market on itself by insisting on charging user fees--when Taobao was already fee-free--and by offering too few payment options in a country where credit cards are still not commonplace. In fairness to eBay, there was also a lot of pressure from Chinese government regulations which prefer to see foreign companies in the Mainland set up joint ventures (see, for example, FAW-Volkswagen and Guangzhou-Honda) rather than allow overseas firms to operate independently.

But history is written by the winner. And so the history of e-commerce in China will be written by Taobao and parent company Alibaba.

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