Bite-size Case Study

Alibaba: the company that made eBay a dwarf

Published on May 26, 2016 Originally recorded 2015   3 min
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Let's look at another case, Alibaba, which is a Chinese company that has made eBay a dwarf. Alibaba was established as a B2B e-commerce company and it seemed that eBay had succeeded in China with its C2C platform. Alibaba decided to set up its own C2C company Taobao. In 2003, when Taobao was launched, eBay had around 90 percent share of the Chinese market. After two years only by the end of 2005, Taobao's share had gone from zero percent to around 60 percent, while eBay's market share was dropped to only 32 percent.
So, Alibaba clearly copied eBay's idea of e-commerce. However, it is an innovative imitation which focuses on users' needs. You might not know that when Taobao was established in China, it did not have a credit system. Consumers did not have a credit card. Therefore, it could be extremely risky to shop online. And Alibaba's own Alipay, a transaction system created a mechanism to overcome the consumers' doubts and fears. The first Taobao provided chat rooms for buyers and sellers to have a chat before buyers make purchase decisions. After purchase decision is made and buyers send money to Alipay, and after receiving the money, Alipay signals the seller to dispatch the goods, service as contracted, and after receiving the goods and service, the buyer is allowed a week or so to inspect the goods and service. If satisfaction is reached, the buyer sends the information to Alipay to confirm the purchase. Only then will Alipay release the payment to the seller. So you can see, it is an effective way to eliminate people's fear of rampant frauds.