The impacts of TAOBAO on E-business in China

The impacts of TAOBAO(business to customer) on E-business in China. Introduction

In the last few decades, an increasing number of consumers are willing to choose online shopping rather than traditional purchase methods, such as supermarket and mall. The website named TAOBAO is a newly developing online shopping website, based on business-to-customer(B2C). This system can be defined as one model of electronic business (E-business) and that includes “Selling individual products to individual buyers, usually on cash payment basis; retailing” (Businessdictionary, n.p.). Furthermore, as one of the most popular business forms, e-business usually refers to “…day-to-day business functions over the internet and/or other electronic networks such as electronic data interchange (EDI)” (Businessdictionary, n.p.). In other words, e-business is an application that all business activities are supported by information or communication technology. This essay attempts to show that price advantage, safety of e-business and a new evaluate system were brought impacts to E-business by TAOBAO. Definition

TAOBAO is a Chinese online shopping website similar to eBay and Amazon was established by Alibaba Company in 2003. TAOBAO appeared due to a huge number of users of Internet approximately 564 million in China (CKGSB Knowledge n.p.). According to CNNIC(Marbridgeconsulting, n.p.) -China Internet Network Information Center- report, “China’s online shopping user base reached 242 million in 2012, comprising 42.9% of China’s total internet user base”. Given that is the benefit to small businesses and individual enterprisers, Alibaba Company provided a platform that sellers could open online retail stores in order to cater to consumers in China. Sellers would offer new or used commodity through TAOBAO Marketplace whatever a fixed price or auction. Of course, goods with their fixed price occupy a great majority of percentage. Furthermore purchasers are most likely to evaluate sellers’ creditability through their history sale and comment. According to consumption custom of Chinese, TAOBAO not only works hard to emulate eBay, but also develops a free business to consumer platform (CKGSB Knowledge n.p.). It might why Chinese individuals are willing to use TAOBAO rather than eBay besides an identifying secure trading platform and a particular secure payment service named “Alipay”. According to Bergman (2010), “TAOBAO’s gross merchandise volume (total value of all goods sold) reached an estimated $60 billion” in 2009. Because of special advantages of TAOBAO, it boosted development of e-business and brought a lot effects for e-business. E-business is administered price advantage by TAOBAO

As economy developed in China, the public’s level of consumption is speedily increasing and they enthusiastically expect to keep pace with world’s fashion. However, the price of designer products, especially luxury goods, is prohibitive, due to high import tariff. Therefore overseas Chinese people intelligently open a few stores to TAOBAO marketplace to provide a special service, called foreign purchase. That means abroad people use cheaper price to buy commodity from place of production in the light of consumers’ needs and then send back to China. Consequently, not only could buyers save some additional fees, but sellers could also charge up to 10% service fee according to goods price. That is why most common consumers are willing to choose shopping online through TAOBAO platform. Furthermore, this situation creates an opportunity for development of e-business because of price advantage. Another example as well as prove from home appliances, commodity prices from TAOBAO Mall is relatively cheaper than other traditional stores, such as the Mall of Skyworth which a 42-inch Skyworth television (model number:42L03RF) is the best product (Betty Zhang, 2013). The product’s price is 6199 Yuan in the TAOBAO Mall, while traditional mall offer 6,799 Yuan, a difference of 600. If consumers purchased in holiday, larger discounts and some gifts would be offered. In addition, the price advantage is not only provided to buyers besides sellers. In fact, sellers are most likely to make use of this platform provided by TAOBAO for free, which B2C model compare to traditional markets that save a large amount of expenditure, such as rent of counter and salary of service staff. The strategy is in the huge extent of encouraging enterprises and private retail to accede to e-business and bring a change of expending. Safety in e-business

In the past, consumers had a suspicion for safety of capital and quality of commodities. TAOBAO is on the side of the consumer and put forward a few solutions. First of all, buyers could check sellers’ real information, which included real name and copy of certificate of identification. Consumers have
a rudimentary knowledge of the retail store they would purchase. Furthermore, a communicating tool is provided, named “Aliwangwang”. Buyers could make a discussion on the quality and price of commodities from this convenient platform with sellers. The intercommunication enhances acquaintance of goods from consumers and the confidence between both parties. Last but not least, TAOBAO originate a particular secure payment platform named “Alipay” which is the first use of “the third party security transaction mode”. It means that the buyer would pay to “Alipay” account before “Alipay” send messages to the seller with delivering goods. After buyers receive the goods, they confirm instructions to “Alipay” to pay the sellers. It is a complete network transaction. “Alipay” furthest protect safety of consumers’ capital so that buyers could have sense of security and reduce worries (Yang,L. and Liu,X.,2009). So TAOBAO achieved a huge success by the platform and increasing individuals were high on online shopping. Moreover more websites used this model. Therefore e-business gains a chance to expand scale and enjoy the trust from consumers. A new evaluating system brought a new chance to e-business

Traditional markets satisfy face to face sales which consumers could meet the seller and estimate commodities before purchasing, while on-line shopping have no opportunity to intercommunicate between buyers and sellers. How to identifying product quality become a serious issue for online customers. Furthermore “these risks are significant obstacles to the development of electronic business” (Qiang Ye e.g., 2009). Moreover, there are many choices that consumers may hardly select between different sellers and brands from TAOBAO marketplace. “With limited information on the value of these choices, customers often choose to follow other buyers” (Qiang,Y. e.g. 2012). Therefore, a new evaluating system is built and innovated by TAOBAO which include sellers’ reputation and historical sales records. In other words, consumers directly check a seller of a certain product with the former sales information and evaluation of sellers and product in goods’ description pages. Seller’s reputation system reflects overall reputation of their stores, such as efficiency, attitude of service, and trustworthiness. Furthermore it “has significant positive impact on the buyer’s willingness to purchase, and negative comments about the seller have negative a impact
on sales volumes” (Qiang,Y. e.g., 2009). Because of limitation of Seller’s reputation system that could not help consumers decide a certain commodity, another standard are put forward –historical sales records. This comment is often aimed at a particular good for evaluating qualities and prices. Sellers’ reputation and historical sales records make up a relative complete evaluating system to reduce risk that purchase through electronic business platform and increase confidence in e-business. As speedy development of electronic business, a few problems also appear before public’s eyes, fraud is one of the most serious problems. A small amount of sellers market imitative commodities for trying to gain illegal profit. And opportunistic sellers may manipulate sellers’ reputation and historical sales records by creating many fictitious accounts for misleading consumers. The behavior badly breaks balance of e-business and influence market order. E-business marketplace may lose more potential customers due to cause loss of other consumers. Conclusion

Through analyzing many characteristics of TAOBAO, it is clear that Chinese e-business market is changed and boosted. Although many questions are brought for e-business by TAOBAO, this platform still has developments and growth in positive status. According to research in marketing, the Alibaba Company built a platform involved decreasing extra fees for creating price advantage, a few methods of keeping safety and ameliorate an evaluating system in order to reducing risk. In the last few years, share of traditional market proportion is already divided up by e-business market because of development of TAOBAO. E-business faces a huge chance of improvement when TAOBAO created a relative reasonable B2C system for ensuring rights and interests of consumers. TAOBAO already set up a new model with market penetration, but it is not enough for e-business. In the future, more and more companies will enter this e-business market through insisting on self-creation, inventing systems without stopping, building core power. TAOBAO may be confronted with numerous difficulties from other companies, but this competitive relation between different companies is a benefit to the development of e-business.

Bergman, J. 2011. The eBay of the East: Inside Taobao, China’s Online Marketplace. Available from:,8599,2098451,00.html [Accessed on 29/07/2013] Businessdictionary(online).

Available from: [Accessed on: 11/08/2013]
Available from: [Accessed on: 11/08/2013]
CKGSB Knowledge, 2013. Digital Marketing and China’s Expanding Internet: Is E-Commerce Giant Taobao China’s eBay? Available from: [Accessed on 29/07/2013] Marbridgeconsulting(online).Available from: [Accessed on: 11/08/2013]

Yang,L. and Liu,X. 2009. Analysis on the Successful Strategies of Taobao’s E-Commerce. Available from: [Accessed on: 13/08/2013] Qiang,Y., Zhuo,C., and Bin,F. 2012. Learning from other buyers: The effect of purchase history records in online marketplaces. Available from: [Accessed on 16/08/2013] Ye,Q. e.g. 2009. The Impact of Seller Reputation on the Performance of online sales: evidence from TaoBao buy-it-now (BIN) data. Available from: [Accessed on 16/08/2013] Zhang,B. 2013. TAOBAO Circuit City Has A Price Advantage. Available from: [Accessed on 13/08/2013]

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