TaoBao vs eBay (China), the winner: The social networking tool used...?

‘TaoBao’ (http://www.taobao.com/index_global.php) was created in 2003 and is a leading ecommerce company in China. The company acts as a Consumer-to-Consumer business, the Chinese equivalent to eBay. According to (Carol Xiaojuan Ou 2009), the company with the highest number of product listings combined with the highest volume of transactions is ‘TaoBao’ with RMB 43.3 billion in 2007. ‘TaoBao’ is currently controlling the Chinese market within this industry with a market share of 83.9%. They have over 80 million registered users. There impact within the Chinese e-Commerce market is astonishing, but it has not always been this way.

Let’s roll back the years for a minute, back to 2003 when ‘TaoBao’ was created. During this year ‘eBay (China)’ was also created (www.ebay.com.cn). “eBay completed its acquisition of the country’s dominant auction player, ‘EachNet’, for $180 million in July 2003. ‘EachNet’ at the time had more than 2 million users and about 85 percent of the market” (Sherman So, 2009). The American giant that is eBay decided to venture into the Chinese C2C Market hoping for the same success that it currently has in various other countries. From 2003 to 2006 ‘TaoBao’ and ‘eBay (China)’ were serious rivals. By the end of 2006 eBay decided to pull out of the e-Commerce market in China, which in turn lead to the overwhelming success of ‘TaoBao’. 

One must wonder why eBay would decide to pull out the Chinese market against their almost identical rival. After digging a little deeper, I found out that the unique factor which made these two multibillion dollar industries different, was their social networking tool used to engage with their customers. 

On one side, you had 'eBay (China's)' social networking tool used to engage between buyer and seller ‘Skype’ (an all American non-integrated program), where buyers and seller can see each other and communicate via video. This was compared to the social networking tool in which ‘TaoBao’ used, which was ‘Wang-Wang’. “Wang-Wang is an indigenous, embedded, pseudonymous communications tool, sharing TaoBao’s user-ids, and so is the default Instant Messenger system for all ‘TaoBao’ users.” An example of the benefit of ‘Wang-Wang’ is if a seller is online on ‘TaoBao’, a blue orb would alight next to his name, This Blue orb will illustrate to the user that they can be engaged and talk about the product in which the seller wanted to buy instantly.

The fact that the users of ‘TaoBao’ could remove some barriers of fear and fraud issues by engaging with the customers through Wang-Wang led to the success of ‘TaoBao’ and the downfall of ‘eBay (China)’. Whereas, on ‘eBay (China)’, it was difficult for users to communicate due to user’s unawareness and unwillingness to communicate via ‘Skype’.

From (Carol Xiaojuan Ou's, 2009), study he found that “Some buyers and sellers have moved from ‘eBay (China)’ to ‘TaoBao’ because of the convenience provided by the embedded IM. For instance, from an interview with a participant they stated that ‘Wang-Wang’ is the most critical determining factor for me to switch to ‘TaoBao’ from ‘eBay (China)’. I can save the products and the sellers in my Wang-Wang bookmark list. I can directly select sellers in Wang-Wang and communicate with them”.”

What do you guys think? Would the influence of a social networking tool impact your decision to shop on e-Commerce sites. Are you surprised by the fact that the communication tool of ‘Skype’ did not work out in this scenario. What other aspects do you think social networking tools contributes to an organisation? 

References - More info on this blog can be found below:

http://news.alibaba.com/article/detail/business-in-china/100151761-1-how-ebay-lost-china-market.html

http://delivery.acm.org.v-ezproxy.brunel.ac.uk:2048/10.1145/1440000/1435450/p145-ou.pdf?ip=134.83.1.243&acc=ACTIVE%20SERVICE&CFID=72940951&CFTOKEN=39755831&__acm__=1323687080_0022c4adff182ea1a354be9ee7ff5c34