Taobao was founded by Alibaba Group on May 10, 2003. Taobao is an online e-commerce market place which facilitates consumer-to-consumer (C2C) retail by providing a platform for small businesses and individual entrepreneurs to open online retail stores that mainly cater to consumers in China, Hong Kong, Macau and Taiwan.
Sellers are able to post goods for sale or resale on Taobao either through a fixed price or by auction. Buyers can assess seller backgrounds by information available on the site, including ratings and reviews.
There are factors contributing to Taobao’s success:
1) Low cost incurred on sellers and no cost on buyers
To counter eBay’s expansion, Taobao offered free listings at the first few years to sellers and there were no additional charges for transactions carried out in between sellers and buyers. This heightens the interest for sellers to set up online shops on Taobao and the wide array of choices for marketed goods also encourages buyers to shop via Taobao.
2) User-friendly website features
Taobao introduced website features designed to act in the best interests of local consumers, such as an instant messaging tool (Aliwangwang) for facilitating buyer-seller communication and a payment tool( Alipay). As a result, Taobao became the undisputed market leader in mainland China within two years. Its market share surged from 8% to 59% between 2003 and 2005, while eBay China’s plunged from 79% to 36%. Finally, eBay shut down its own site in China in 2006.
Taobao played on the weaknesses of its competitors as on its own strengths and it seized the opportunities it was given and overcame the threats in starting out as a new e-commerce mall.
3) Diversification of marketing models
In April 2008, Taobao introduced a new B2C platform called Taobao Mall to complement its C2C marketplace. Since then, Taobao Mall has established itself as the destination for quality, ostentatious goods for Chinese consumers. Taobao Mall launched an independent web domain, Tmall.com, and enhanced its focus on product variety and improvements in shopping experience in November 2010. It became an independent business in June 2011 and changed its Chinese name to Tian Mao (Tmall) in January 2012. As of October 2013 it was the eighth most visited web site in China.
In October 2010, Taobao beta launched eTao as an independent search engine for online shopping, providing product and merchant information from a number of major consumer e-commerce websites in China. Online shoppers can use the site to compare prices from different sellers and identify products to buy. According to the Alibaba Group web site, eTao offers products from Amazon China, Dangdang, Gome, Yihaodian, Nike China and Vancl, as well as Taobao and Tmall
In May 2011, Alibaba Group opened a physical furniture store in Beijing under the Taobao Mall brand. The five-story 25,000sqm Taobao Mall iFengChao Furniture Showroom opened as a complement to their online stores. Taobao stepped out of the traditional boundary of an e-commerce mall and meet up to the demands of a brick and mortar store as well.
In June 2011, Alibaba Group Executive Chairman and former CEO Jack Ma announced that Taobao would be split into three different companies: Taobao Marketplace (a C2C platform), Tmall.com (a B2C platform; then called Taobao Mall), and eTao (a search engine for online shopping ). The move was said to be necessary for Taobao to “meet competitive threats that emerged in the past two years during which the Internet and e-commerce landscape has changed dramatically.”
Taobao’s varied and flexible marketing models made it possible to fulfill the constituents in the strategic 4Ps marketing.
4) Powerful promotional efforts
Taobao’s strategic alliances with Chinese Internet portals such as 21 CN, Sohu and MSN enabled the establishment of long term cooperation with each other that is mutually beneficial. In recent years, Taobao is also depending on advertisements through commercial movies and famous TV programs to promote itself. The power of media imposed a successful marketing effect.
On April 29, 2013, Alibaba announced an investment of USD 586 million in Sina Weibo, a Chinese microblogging website. According to Reuters, the deal “should drive more web traffic to Alibaba’s Taobao Marketplace, China’s largest e-commerce website with a consumer focus.” On August 1, 2013, Alibaba launched Weibo for Taobao, which allows users to link Sina Weibo accounts with Taobao accounts. This cross-marketing of e-commerce malls with social networking sites will be sustainable as long as Sina Weibo remains widely in use.
5) Corporate cooperation with banks
Taobao undertakes economic cooperation with the various major banks in China such as ICBC, BOC, etc to ensure a trustworthy transaction of banking system for the sales carried out through Taobao. This cooperation will enable the banking transactions carried out on its website to be full proof against fraud and deceive. This made online banking possible and it is thus more convenient to shop online as compared to brick and mortar shops.
From 2012 onwards, Taobao began to accept international Visa and MasterCard credit cards while AliPay supported domestic bank cards. The plan to support international credit cards was announced in late 2011 and this is a great foresight of Taobao noting the high demand in e-commerce market. It is also a big leap taken by Taobao to bring their e-commerce business to a global level.
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