Taobao vs. Ebay China

8878 WordsOct 29, 201136 Pages
CASE: IB-88 DATE: 01/04/10 TAOBAO VS. EBAY CHINA Ten to 15 years from now, I think China can be eBay 's largest market on a global basis…. We think China has tremendous long-term potential and we want to do everything we can to maintain 1 our No. 1 position. — Meg Whitman, eBay CEO, 2004 By 2008, Jack Ma, CEO of Alibaba.com Inc., was in a position to consider how to fortify Taobao’s dominant position in China’s online consumer-to-consumer (C2C) market. Ma and his company had come a long way since May 2003, when they first launched the Taobao website. Back then, eBay China dominated the fledgling market, holding over 70 percent share. It had entered China with its acquisition of the start-up EachNet, and was actively building upon…show more content…
Debit cards were common in China, with about 300 million cards issued by mid-2001. However, each city had a separate payment gateway to process these cards, so a card from one city often could not be used at the issuing bank’s system in another city. 4 This lack of integration made it very difficult for auction sites to handle debit card payments online. The credit card option was even worse. Because China’s credit system was not developed, Chinese banks were cautious about issuing cards and the application process was complicated. By 2001, there were only about 25 million credit cards issued in China, accounting for less than 1 percent of consumer spending (compared to about 25 percent in the U.S.), and credit cards were accepted at only about 3 percent of China’s shops. As the need for better credit card services intensified in the early 2000s, various institutions responded. In 2001, Bank of China and China Construction Bank started accepting credit card applications online. At the same time, a large number of credit verification companies emerged to help banks work around the lack of a personal credit scoring system in China. These companies checked the backgrounds of applicants through various channels, including meeting the applicants in person. In February 2002, the People’s Bank of China, China’s central bank, announced a project to enable the four largest banks to process cards across cities and banks. In the wake of these changes, China’s
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