TaoBao Undeveloped technological and financial infrastructures, which are
TaoBao vs. eBay China Why did eBay succeed in the US but fail in China? What could eBay have done to avoid defeat? Unlike the US, China did not have the infrastructure necessary for eBay to enter and operate successfully. Therefore, eBay was before its time in China and failed because: * Low internet penetration rate – eBay needs high traffic.
* Lacked the norms and laws to support online exchange – trust is a key success factor in internet based businesses, and the lack of rules and means of recourse makes transacting on eBay risky. Undeveloped technological and financial infrastructures, which are necessary for online auctions – if people can’t pay or receive payment, there is no business. In order to avoid defeat, eBay should have implemented changes that would have “glocalized” its US model to China (i. e. “taken a case by case approach”). They were too focused on long-term sustainability and failed to realize that if they could not survive the short-term, then there would be no long-term to be worried about.
Please see following suggestions on what eBay could have done. * Focused on developing eBay China in the domestic market instead of trying to integrate it to the international market. * Localized its platform to fit China’s market instead of its global platform in terms of its listing categorization, interface styles, and technologies.
* Maintained its servers in China in order to be flexible and faster in making changes so that it could better compete in China’s highly competitive and dynamic market. Focused more on the preferences of its customers in China instead of trying to conform to the global network through its “eBay formula” of generating revenues through insertion fees, final-value fees, and features fees. * De-centralized the company structure in Asia and form separate business units in each of the Asian countries instead of the single headquarter known as eBay Asia, which was located in Korea. China, Japan, and Korea are all very different countries at very different stages of economic development. By grouping them all into one unit, it made it very difficult, if not impossible to meet the needs of each unique market.
Implemented a single, unified payment system instead of using both An Fu Tong and Paypal. * Partnered with a local, Chinese company that did business with other Chinese people and companies. By partnering with Global Resources, eBay opened a proverbial “can of worms” that it could not manage due to the restrictions China placed on international businesses.
Do you think eBay should continue developing its business in China and competing against TaoBao? If yes, how? If no, why? Yes, eBay should continue to develop its business in China and focus on expanding their B2C market while sustaining their C2C platform.Ebay has a comparative advantage over TaoBao due to its global customer base. As China continues its transition from a planned economy to a market economy, eBay China will be well positioned to take advantage of the opportunities that arise in China’s more free and global marketplace. What sustainable revenue models can you suggest for the C2C business of TaoBao (note: TaoBao Mall is considered as B2C instead of C2C)? Because TaoBao’s unprecedented growth was based on free services, it is difficult for them to transition to a fee-based model.Some suggestions for sustainable revenue models are: * Fees for additional services other than the basic listing and delivery services offered.
* Charge for listing more expensive items. Different fees of each price point. * Create a brand and sell TaoBao products. This would bring about higher fixed costs, but could prove to be profitable in the long run. * This last one is a bit of a long shot, but TaoBao could be severed from Alibaba and transformed into a hybrid non-profit organization whose mission is to promote the economic welfare of the individual by creating a space where goods can be bought and sold seamlessly.Non-profit organizations that participate in economic activities may generate a surplus (profit), but instead of distributing them to share holders, they must be re-invested in the company. Many NPO’s maintain key employees by using the funds to pay high salaries and benefits and pay employees.
By becoming an NPO, the businesses and consumers who utilize TaoBao to generate income can make “charitable donations” that are tax deductable, thereby motivating them to make charitable contributions to the company in order to keep the site in operation.TaoBao could take advantage of the tax breaks to charge lower fees than those charged by the competition. This would require sophisticated tax planning systems to ensure compliance with regulations, but could be feasible if they reached out to sources beyond their client base.
Also, as an NPO, they could leverage the positive relationship that they have with the government and become eligible to receive benefits and tax exemptions from the government.