Taobao free essay sample

Alibaba Group’s motivation for diversifying into the consumer business with the launch of Taobao was mainly because of the rise of eBay in China. Jack Ma, the founder of Alibaba, observed that the entry of eBay through EachNet, which held an 85% market share, was a threat to Alibaba. He was especially concerned that the rise of eBay would encroach their existing B2B business. Jack also noted that the line between individuals and small businesses are blurry, meaning that he knew that once eBay had hold of the individual sellers or consumers in the market, it would be easier for them to get a foothold and transition to the SME segment. Additionally, Alibaba has experience in the B2B market, which helped SME expand their businesses online. Alibaba has Alipay, which they have experiences in handling the Chinese business culture and payment method that helped Alibaba diversify into Taobao. The external environmental factors also did have an influence in the launch of Taobao. The increase of internet and broadband users penetration rate, increase motivation by both sellers and consumers, high technological growth rate are few of the factors that influence Ma’s decision. Moreover, since eBay had not start moving towards B2B yet, Alibaba’s group decided to be proactive and moved to capture the C2C segment. 2. How did Taobao beat eBay? There are many aspects to how Taobao moved ahead eBay with factors: Familiarity with Chinese aesthetics and preference Jack Ma being a Chinese and serving the Chinese market for a long period knew what the (chinese) consumers wanted. He wanted to imbue Taobao with a strong local culture that reflected a deep understanding of Chinese consumers and an attitude of informality. When it came down to the little nuances, he wanted to differentiate it as much as he can. For the website interface, they took into account that Chinese consumers like busy web designs with strong colors whereas compared to the westerners who prefer sparse sites like Google’s, but Chinese customers want their sites to be noisy, with lots of links. Taobao’s Trust Alibaba Group knew the Chinese business culture, which is different from the western’s culture. One of the difference was trust, which Chinese affect- and cognition-based trust are highly intertwined unlike westerners that keep it separate. Thus, Taobao developed mechanisms to help create trust. Registration using national identity card and bank account Distinguished the person’s reputation as a seller and a buyer Facilitate communication between seller and buyer through instant messaging Alipay’s paying system was the most critical to Taobao’s success. It is an escrow service designed to eliminate settlement risk among customers and sellers. It lets customers to make online payment and only when the items are received and acknowledged by the buyers, the sellers then receive payment. Such secure transaction tools and the other mechanisms Taobao has developed allowed them to forge trust between buyers and sellers. While Alibaba group was focusing on the expansion into the C2C market with Taobao, Eachnet was focusing on global expansion. Moreover, the listing on eBay costs up to 3RMB and transaction fees up to 2% of the item value, compared to Taobao where they are free, which helped them secure a large and growing loyal customer base. 3. Should Ma implement Zhao Cai Jin Bao? Why or why not? Zhao Cai Jin Bao service offered the opportunity to bid on keywords to influence the order in which search results for listed items would appear. They also offered pay-for-performance contracts. Sellers would have to pay their bid only if a customer actually bought the advertised product. In my opinion, Ma should not implement Zhao Cai Jin Bao. This is because Taobao prided them by the notion of free service. If by implementing Zhao Cai Jin Bao, users might feel this service is a hidden service fee that go against Taobao’s promise to provide e-commerce services for free. The buyers were also concerned that sellers would pass on the cost to them through increasing prices of the items. Additionally, some sellers had misused Zhao Cai Jin Bao service to attract customers to their storefront. This is done by aggressively bidding on keywords but listed the relevant products at unreasonably high prices. This attracted buyers to their website where they would find other products that were more competitively priced. At the same time, the seller did not need to pay Taobao for their bids because no one would buy the overpriced items. 4. What do you think is the most appropriate way to monetize Taobao? To maintain its original free e-commerce services and diversify from it, Alibaba launched Tmall, which is similar to an offline mall, where different categories are on different virtual floors. The difference between Taobao is that the merchants must be authenticated, pay both registration and transaction fees. This allows Alibaba group to monetize the traffic from Taobao. Many branded suppliers have set up their official stores on Tmall. Secondly, since Taobao is the largest retail website in China, with the number of transactions they have daily, Taobao has been collecting massive amounts of data on all of its transactions. This data set could provide a gold mine of information on the shopping habits of its customers. With the huge amount of information, there are many advertisers who are willing to pay for these consumer data. Moreover, there are many merchants on Taobao selling the same items, there needs to be a way for the merchants to improve their placement or display their items. One way is making use of advertisements on the webpages on the side or below the search results.