For young Chinese consumers it must be hard to imagine a life without Taobao – China’s biggest C2C e-commerce portal. Taobao completely changed the way Chinese shop and it has become so dominant that it now accounts for an estimated 80% of online transactions in China.
Launched by Alibaba Group in 2003 to combat EBay’s entry into China, Taobao has come to define e-commerce in China. According to Alibaba, as of June 2012, Taobao boasts more than 800 million product listings and more than 500 million registered users. The site is listed by Google as the 14th most visited website in the world
Special Features of Taobao
A critical element to understand about Taobao is that it has allowed everyone with a factory or manufacturing facility in China a channel for selling direct to consumers. As things have funny ways of finding their way out of factories in China this also means that, like it or not, your brand’s products will be sold on Taobao.
Taobao managed to conquer Ebay (who closed its China operations in 2006) by initially offering their service for free, but more importantly by tailoring the platform specifically to the needs and behaviour of Chinese (young) consumers. (To see the inside story of how Alibaba took on Ebay in China see this Crocodile in the Yangtze Documentary.)
To ease purchasing decisions, Taobao was quick to create an instant messaging services within the platform that allows buyers and sellers to communicate directly in real time about the products being offered. Taobao also create a seller-credibility rating system that gives consumers confidence in making online purchases where a long history of shady operators in China had previously created a culture of distrust.
Taobao has also been quick to enhance their offerings with other unique services such as their very own online model database. To date over 40,000 young women have registered for Tao Girls to connect with Taobao merchants for fashion modelling work. Taobao ranks the girls according to their popularity and vendors can search for particular looks, body shapes, sizes and age etc. As this article sums up nicely some models can rake in up to USD 1600 per day thanks to the site.
This is what Alibaba Group does best. They have created an entire e-commerce ecosystem where all needs of the industry can be found within its multiple platforms.
Brands on Taobao
Because it controls such a massive share of the e-commerce market in China, understanding the Taobao phenomenon is vital for all fashion brands with current or future operations in China.
The most striking difference between Ebay is that on Taobao most products sold are brand new. Search Taobao for any brand fashion brand or product and you are likely to uncover thousands of results.
Most fashion companies, including those not even operating in China yet, will be alarmed at the amount of their products being sold in China through Taobao. A healthy portion of these may be genuine products being resold through unauthorized vendors, yet a large percentage will be outright fakes.
Although China’s growing middle class and large numbers of rich have no trouble with buying genuine products, there is still millions of people who don’t mind buying fake goods at all, and Taobao caters to these customers with ease.
Controlling the online trade in fake products is one of Taobao’s biggest problems and is a taint to its international reputation. Since December 2011 Taobao has been listed on the US Trade Representative Office’s list of companies notorious for selling fake brand goods. Alibaba has taken note of this and is taking steps aimed at improving its image including prison terms for merchants selling fake goods.
To rectify consumer mistrust over fake products on Taobao in 2008 Alibaba Group set up TMall – a B2C market place where brands can operate with proven legitimacy. Brands such as Gap, Uniqlo and Nike have all set up official pages on TMall. (TMall to be covered in a separate post soon.)
The Future for Taobao
Earlier this year Taobao begun their international expansion into Hong Kong and Taiwan and also enabled the use of Visa and Mastercard for payments on the site.
Taobao is currently only available in Mandarin limiting the service to Greater China and the Chinese speaking outside world. While the company certainly has its sites set on the international market its likely to be a few years yet until Taobao is available in English and starts to operate in earnest around the world.