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Alibaba defeat eBay in China
Usually in our articles we focus on the current situation, what is happening at the present time. But today we are going to take a different angle. The web is still seen as something new, but it is over two decades old.
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The reason behind it, is that Internet is always reinventing itself with innovations. As a result, battles were waged, some of the early web empire are today only distant memories. And so it must be the case for eBay in China. But how could such a giant fail so forcefully?
The Birth of Alibaba
The founder of Alibaba, Jack Ma was not a red prince with money and connection at his disposal. He was from a relatively modest upcoming, albeit not poor. As a youth he befriended tourists in his hometown, Hangzhou. His interest for foreign countries didn’t leave him and he became an English teacher.
He took advantage of booming Chinese export to launch a translation company. That is what led him for the first time in 1995 to travel to the United States. The project he came for, failed but it didn’t matter, because he came back with something much more important: the certainty that the Internet was about to change everything.
Same year, he tried to create a company named Chinapage, but it was too early. Nobody was interested in the project. It is only in 1999, when working at an ecommerce subdivision of commerce ministry, that Jack decided the time was right to try again. This time it was a success and in the year he raised 25 million dollars from investors. The concept was simple: allow Chinese manufacturers to list their products online (and in English) so Western companies could easily find and buy from them.
Twelve years ago, in 2004, the web had a very different place. Facebook was in its infancy, and eBay was planning to conquer China very young cyberspace. But Jack Ma saw the threat it posed to Alibaba. Given the American company resources, it could easily branch out to Alibaba’s B2B business. So they decided to strike first.
Realizing that the difference between person and small business in China was slim to none, they created TaoBao, a C2C (Consumer to Consumer) platform. This didn’t fail to attract the anger of the western giant which pursue a very aggressive marketing campaign. EBay signed exclusive advertisements contract with the top Chinese portal (Yahoo-like) such as Sina and Sohu. Moreover, they brought an additional 100 million dollars in investments. source
But Chinese “webization” was far from complete at the time. Understanding that well, Alibaba focused on TV ads, which gave a much better return on investment. But while smart, that move is not where “Crazy” Ma earned his nickname. No, what really killed eBay was his pricing policy.
It was FREE. While eBay charged the listing of products on its platform, Alibaba let sellers do it for absolutely nothing. Add to that a better understanding of Chinese consumers which adapted the platform to better respond to them, against one that refused to deviate from its global strategy, and you know why two years later, the challenger became the leader.
Confidence and stubbornness cost eBay its chance to have a place in what is now the biggest ecommerce market in the world. They wasted money on the wrong kind of advertising, they refused to adapt, didn’t hire local management, even moved their server infrastructure leading to slower connection. But they are not the only western giant to stumble upon the great wall, Google also will.
Today, Alibaba is the leader of the Chinese ecommerce market with its two platform TaoBao and Tmall. But it is not to say they are unchallenged. Tencent, one of the three biggest tech company in China intend to use WeChat (Leader Chinese social network in China) to compete with a m-commerce oriented model. Moreover, Tencent bought 15% of JD.com, which is the second ecommerce website in the country. Now the question is, when are those giants on the Chinese web going to try hunting in our own land? Is Alibaba up to a clash with Amazon in the west? Only time will tell.
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