I. Overview
eBay is an online provider of marketplaces for the sale of goods and services. It also provides commerce, platforms, online payments services and online communications. It offers products and service to individuals and businesses. Established in 1995, the company operates in the US and other international markets with employs 16,400 people. eBay keeps its leadership position in the new industry – C2C (consumer to consumer) (Ou and Banerjee, 2005) market with the recorded revenue of $87 billion (datamonitor).
It owns lots of websites including the auction websites and online payment websites under its brand name across the world.
In China, There are a lot of C2C platforms in the new emerged market, such as TaoBao, PaiPai and eBay (China).
Taobao is a China based local C2C platform which Founded in 2003 by Alibaba Group after Ebay acquired Eachnet in China. It mainly caters to consumers in mainland China, Hong Kong, Macau and Taiwan. Within short 3 years, it has quickly developed the leadership position in the e-commerce industry in China.
As described by Moss (2006), however, during the year of 2006, eBay quit its C2C market because of the pressure of local business competition. In China, in order to build a trustful relationship and a kind of confidence to take into the activities of online buying and transactions, C2C platforms encourage buyers to contact sellers. Also, buyers will negotiate the price and products detail with sellers through the communication. China is a big population country with 1.3 billion people. It is a big source for the C2C e-commerce market.
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As one Beijing-based Western commentator has said: ”The road to internet riches in China is paved with corpses of American giants, and the body count continues to grow.” So in this research paper, I will address the problems that restrain eBay to develop in China and find the ways for eBay to make its success in China.
II. Problem Statement
With the strong leadership and power in US, however, eBay lost to TaoBao in China which is a wholly owned subsidiary of Alibaba – China’s leading e-commerce company. Taobao has the highest volume of transactions (RMB 43.3 billion in 2007, with a C2C market share of 83.9% in China) and with more than 80% million registered users. It is the highest penetration rate among the 253 million internet users in China. In the website Alexa, it ranks TaoBao as the No.47 most visited web site globally, the No.5 in China (Ou, Davison, 2009).
Grey flashing icon indicates offline sellers
Grey flashing icon indicates offline sellers Blue flashing icon indicates online sellers Blue flashing icon indicates online sellers Taobao not only has its positive leadership in China, it has its unique features to attract Chinese buyers. On the Taobao’s user interface, it use a bi-polar colorized icon to indicate the statue of the sellers: you can see the picture below, a blue flashing icon indicates that the seller is online, and you can talk with the seller immediately; the grey static icon indicates the seller is not online.
That means an intended buyer can check if a seller is online, and if so, the buyer can use the TaoBao’s embedded IM tool which is Aliwangwang to contact the sellers. Aliwangwang, which is an instant messenger, embed in the Taobao website, and it allows buyers to take Pseudonymous communications, share the user IDs with sellers. Moreover, Aliwangwang is a default and free-of-charge IM system for all Taobao users. eBay Inc. has its Chinese online auction website called eBay (China) (www.ebay.com.cn).
eBay (China) was built in 2003 from EachNet (1999 )before the found of Taobao. It was the first Chinese C2C online auction platform at that time. Until 2006, the situation was changed dramatically; eBay lost to its rival Taobao and quit its C2C arena in China. After several months, it cooperated with a new partner TOM Online and reappeared on the market as a new online auction platform.
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The website Alexa rank eBay (China) is the 49,474 over world and 2,438 in China now. Alexa also indicate eBay can’t get its success in China because the market share is too low (Ou, Davison, 2009).
Indeed, there are some significant differences between Taobao and eBay (China) in spite of the functions of their system are similar. For example, eBay (China) doesn’t have the function of indicating the statues of sellers and the instant messenger.
Although eBay China invited Skype to join its system, but users need to download and install the Skype as a separate application. According the research report of Ou and Davison (2009), they randomly surveyed 500 sellers in 10 categories and found that only 24.6% had a Skype ID, and in the 24.6% Skype users, there are only 5.4% users were online when they check during the evening peak trading hours. As a result, this indicates most of the sellers are not accustomed to use the Skype. Without the indication of online statue of sellers, most of buyers still use email or the way of leaving an online message to contact sellers.
III. Constraints
As researched, eBay is hardly to expand its scale to China, Taiwan, and Japan although it acquired many of local auction websites like EachNet, ubid, PChome Online and TOM. The main reason that eBay were beat by Chinese local C2C trading platform is eBay is ignoring the local cultural norms and preferences in its interface design, customer relationship management facilities and business models. An interview data (Ou, Davison, 2009) shows that many buyers like to know whether the sellers are online or not. They hope to have an immediately communication with the sellers about the potential questions of transactions. Moreover, buyers or sellers also prefer to have an easy way to communicate with each other, like an embedded communication tools so they don’t need to switch among different channels.
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At present, Taobao provides both of these two features free of charge. In contrast, eBay China operates a disjointed model which means it has not the indication of sellers’ online statuses and it doesn’t offer any of immediately communication channels for buyers except the online message board that eBay provides which only waste buyers’ buying impulse. Perhaps, buyers have to use non- integrated channels such as email and Skype to contact sellers. Buyers or sellers can’t get an instant response after the email send. The problem is existed in all of eBay’s other international online auction websites includes eBay in the U.S.. Furthermore, the interview data also showed that customers think the interface design of Taobao and eBay is very different.
All of buyers who interviewed by researchers indicate that eBay doesn’t look like an indigenous platform at all. It has a more international fell, replicating the international eBay model in China, without significant adaptation to the Chinese context while Taobao applies all Chinese features on its interface design as a local online auction platform. More importantly, customers declaims that the key determinant of Taobao’s success is its free-of-charge business model including the third party of billing company Alipay is free-of-charge as well. Alipay is the same function company as PayPal. It is China-based e-commerce business allowing payments and money transfers to be made through the internet. It also protects buyers and sellers’ online transaction security.
On 2004, Alipay became a wholly owned subsidiary of Taobao. Alipay is an acquirer, performing payment processing for online vendors, auction sites, and other commercial users, for which it charges no-fee for whatever receiving money or send money (Alipay.com).
In contrast, PayPal as the subsidiary of eBay, implement the same functions with Alipay, however charge a fee for receiving money which proportional to the amount received. In addition, eBay purchases made by credit card through PayPal may occur of extra fees if the buyer and seller use different currencies. Over the last four years, many Alipay users have already been locked in the Alipay system because of its free-of-charge policy. Even if Taobao is going to charge fees for Alipay users, the change of business model is not anticipated to have a negative impact on Taobao’s position as market leader.
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IV. Decision options
According to the constraints of eBay (China), they directly indicate the reasons why eBay can’t expand its scale into China. Therefore, I have some options to help eBay to break into China. The first option is eBay need to develop a new creative network technology, like the embedded instant messenger within the online auction platform so that buyers can check the online statue of sellers for their immediately communication. For example, we know in China, Chinese buyers like to have a direct communication with sellers. Because not only through the communication, buyers can check the product availability, the discount availability, the size, the color, the delivery terms and the payment methods, it also increases the chances of potential transactions; if buyer are not sure what exact product they want to buy, they will stroll on the auction website and find some sellers to communicate.
Sellers can provide some similar products for buyers’ interests. The buying impulse, which is the main reason, will cause buyers to complete a potential transaction. So making an icon that can show the sellers’ online statues and develop an application of instant communication channel with buyers is necessary for eBay (China) to continue developing in China, as well as other countries all over the world. Grey static icon indicates offline sellers
Grey static icon indicates offline sellers The advantages of this option are: the embedded communication channel provides buyers a chance to get more information about their products; for sellers, it increased the chances of potential transactions. Third, the embedded communication largely enhances the engagement of buyers’ communication with sellers and reduces the rate of online auction fraud. The only disadvantage of this option maybe is it will increase the cost of eBay to develop the application of IM. But the investment of technology development is necessary if eBay want to explore a piece of market to belong itself.
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The second option for eBay is changing the interface design with creative thinking. Except the language is changed to Chinese, the interface of eBay online auction in China is the same as the eBay online auction in U.S without local value and characteristics. I believe the interface is consistent with other international eBay online auction websites as well. Why Taobao made a big success in China C2C market and pushed out its existing major competitor? That is because Taobao learned its rivals’ experience, and adapted them to local preferences which reflecting the specific characteristics of the Chinese context. So if eBay integrates the local culture design with its global design, it will be a new bright point as an international online auction website.
The advantages of this option are it increases the favor of local buyer toward the website; it also increases the page views that more and more buyers like to visit the website and it increases potential transactions. The disadvantage of this option is it will increase the cost of interface design, and it may be hard for an international company to find another country’s local value. The third option for eBay is to quit its Chinese online auction website and continue to develop its international online action website with the global standard.
Because I found more and more Chinese and other international sellers like to put their list on the eBay U.S. website (www.ebay.com).
eBay offers auction or non-auction listings to many countries intentionally. On the left side of its auction website page, we can see eBay sort the listing with different countries. That means buyers around the world can make transactions with sellers in different countries, even the Chinese sellers. Nowadays, more and more Chinese sellers intended to list their products on ebay.com and do business with international buyers. As a result, eBay can dedicate itself into this part.
The advantages of this option are: it reduces the investment of Chinese website, and it can centralize capitals to develop new technology. Also, it may increase some Chinese buyers who want to buy international products. The disadvantages are: it will lose many Chinese buyers who want to buy products at a cheaper price or it will lose some Chinese sellers who think international business is difficult for them. Actually, international business is still complicated for most of Chinese sellers and buyers.
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V. Preferred option
My preferred option for eBay to develop its scale in China is integrating the option 1 and option 2. eBay (China) still has its position in China e-commerce market. Because eBay is a strong and powerful company in the U.S., and China is a country which advocates brand loyalty; Chinese people rely on the reliability of a big company and brand. If eBay develop the technology by offering an indication of online sellers’ statues and the application of embedded instant communication for buyers, and combine specific characteristics of the Chinese context with creative thinking on the interface design, eBay will soon grab the leader position in China market in a short time. Companies that wish to succeed in its e-commerce ventures in China must pay attention to local cultural norms and preferences in their interface design, buyers’ relationship management facilities and business models if they are to realize the fabled riches as said by Martinsons (2002).
VI. Implications
Banerjee and Ou said in China there is propensity to distrust unknown others, such as C2C transactions. In this respect, it is useful to build an embedded instant messenger for buyers and sellers to get first communication with each other in China. According to a consumer reports study (2007) found almost half of eBay buyers encountered deceptions. Gavish and Tucci cite a VeriSign study (2003) that reports 6.25 percent of e-commerce transactions in the U.S. were attempts at fraud. That means the fraud problem is very significant in the U.S.. In the article of Online auction Fraud and eBay, Bauerly (2009) said, given the extremely high risk of fraud internationally and buyers’ desire of reducing uncertainty, the embedding of an IM in the C2C platform can help eBay to perform a better and safer online transaction environment based on the trust between buyers and sellers.
