709456-PDF-ENG-alibaba-taobao1商业案例.pdf

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1、 9-709-456REV:JULY 30,2009 _ Professors Felix Oberholzer-Gee and Julie Wulf prepared this case.HBS cases are developed solely as the basis for class discussion.Cases are not intended to serve as endorsements,sources of primary data,or illustrations of effective or ineffective management.Copyright 20

2、09 President and Fellows of Harvard College.To order copies or request permission to reproduce materials,call 1-800-545-7685,write Harvard Business School Publishing,Boston,MA 02163,or go to www.hbsp.harvard.edu/educators.This publication may not be digitized,photocopied,or otherwise reproduced,post

3、ed,or transmitted,without the permission of Harvard Business School.FELIX OBERHOLZER-GEE JULIE WULF Alibabas Taobao(A)In early 2008,the Hangzhou-based Alibaba Group operated Chinas leading online marketplaces:A,an international business-to-business(B2B)exchange that assisted small and medium-sized C

4、hinese enterprises in finding overseas trading partners;A,the companys B2B site for domestic trade;and Taobao,a B2C and C2C exchange for Chinese retailers and consumers.The group also ran a web portal(Yahoo!China);an online-payment service provider(Alipay);and a marketplace for online advertising in

5、ventory(Alimama).By 2008,Alibaba Group had captured about one-half of B2B e-commerce in China.The groups quickly growing consumer site,Taobao(淘宝,“hunting for treasures”),had attracted particular attention after it managed to displace the once dominant eBay,the worlds largest consumer marketplace.Aft

6、er spending hundreds of millions of dollars trying to defend its presence in China,at the end of 2006,eBay management cut its losses and shut its site,acknowledging Taobaos appeal among consumers and retailers.1 With a market share among C2C players of 84%in 2007,Taobao had become Chinas leading con

7、sumer e-commerce marketplace,facilitating transactions valued at RMB 43 billion.a By spring 2006 it had become apparent that Taobao was pulling away from its closest rival eBay.However,the company had little revenue because it offered its services free of charge.In a first move to test a monetizatio

8、n model,Taobao launched a value-added service called Zhao Cai Jin Bao(招财进宝,“bringing wealth and riches”).The service let sellers bid for keywords,ranking paid listings ahead of free listings and collecting a fee when a transaction relating to the paid listing was completed through Taobao.As the comp

9、any rolled out Zhao Cai Jin Bao,the executive team waited in suspense.Would the service be a success?Had Taobao chosen the right way to monetize its marketplace?Alibabas B2B Platform Jack Ma founded Alibaba with the support of a group of friends in December 1998.Ma,a former teacher who had experienc

10、e building websites for Chinese companies,created Alibaba to assist small and medium-sized companies(SMEs)in selling their products on the Internet.Ma explained:“There are more than 40 million SMEs in China.Many of them operate in fragmented markets,with limited access to communication channels and

11、information sources that would help market and promote their products.A critical difficulty is that many SMEs have no way to evaluate the trustworthiness of their trading partners.”a In mid-2008,100 RMB equaled US$14.6.709-456 Alibabas Taobao(A)2 At the outset,the website offered little more than a

12、bulletin board on which a few businesses posted trade leads.But a decade later,more than 32 million registered users relied on Alibabas B2B platform to find trading partners,and the group had built a sophisticated ecosystem around its core business.Posting a trade lead on Alibaba remained free,but a

13、bout 1%of registered companies purchased premium subscriptions to display their products and storefronts on Alibabas marketplaces.Premium subscribers operated their own storefront on Alibaba,and the company assisted them in building and maintaining their websites.(Exhibit 1 shows the site of Zhejian

14、g Sunkey Industrial Co.,a manufacturer of aluminum profiles.)Scott Ni,director of site operations at Alibaba,explained:“We visit the factories of our members to shoot videos and take pictures of products.We also create their website and produce promotional materials to showcase our companies at trad

15、eshows.”The storefronts of premium subscribers provided detailed product information,a virtual tour of the company,and TrustPass verification.Under the TrustPass program,Alibaba asked third parties to verify the corporate registration and banking information of its members.TrustPass members were als

16、o able to view and post feedback about other TrustPass companies.Alibabas B2B marketplaces thrived.In 2007,the company tripled its operating profit to RMB 804.3 million on revenues of RMB 2,163 million(see Exhibit 2 for financial information).Premium subscribers using the international marketplace()

17、paid an annual fee of RMB 50,000.These fees generated about 70%of the companys revenue.With 23 million registered users,the companys site for domestic trade()was much larger but less important financially,with 266,000 premium subscribers each paying RMB 2,800 for a standard China TrustPass package.A

18、s of 2007,the company had 700,000 storefronts on its international marketplace and 2.26 million storefronts on its China marketplace.Additional sources of income were promotional placements,banner advertising,and paid keyword searches.Companies paid up to RMB 120,000 annually to have their name list

19、ed first when buyers searched for a popular item.At the end of 2007,Alibaba listed its B2B business(marketplaces A and A)in Hong Kong,selling 19.25%of the companys enlarged share capital and raising US$1.7 billion.The market responded enthusiastically,driving the companys P/E ratio to 320 in post-IP

20、O trading(see Exhibit 3 for share price information).Taobao and the groups other businesses remained privately held.Each group company had its own executive team(president,CFO,and vice presidents responsible for the operating units)and its own board of directors.The overriding objective was to encou

21、rage the businesses to be best in their industry.Ma explained:“Business unit presidents must have the freedom to do what is right for their business.I want business units to compete with each other.”With group companies given free reign to develop on their own and capture new opportunities,it was na

22、tural that companys activities would not always be aligned.Joe Tsai,CFO of Alibaba Group,described an example:“Alipays primary objective is to be a leader in payment processing,which requires it to develop its own client base of online merchants.However,these clients could be other e-commerce websit

23、es that compete directly with Taobao.For example,J is a client of Alipay,yet is a subsidiary of Amazon,a company that competes with Taobao.”Taobao Porter Erisman,vice president of International Corporate Affairs,remembered the beginnings of Taobao well:“Jack told me in April 2003 that he wanted to p

24、ursue a new venture.The project was to be top secret.Seven employees started to work on Taobao that month.The team was hidden off-site Alibabas Taobao(A)709-456 3 in Jacks old apartment where Alibaba was born.They spent day and night there and were not even allowed to tell their families and friends

25、 what project they were working on.”Ma had carefully observed the rise of eBay in China.The U.S.company had entered China by investing US$30 million in EachNet in 2002.EachNet,a Chinese online auction founded in 1999 by Tan Haiyin(HBS 1999)and Shao Yibo(HBS 1999),mostly catered to early Internet use

26、rs,many of whom were tech-savvy computer enthusiasts(see Exhibit 4 for Internet penetration rates).At the time of eBays investment,EachNet commanded an 85%market share with revenues of RMB 12 million.In June 2003,eBay CEO Meg Whitman(HBS 1979)acquired the remaining 67%stake in Eachnet,rebranding the

27、 site as eBay EachNet.2 Whitman had high hopes for her companys venture,predicting that“China could be eBays largest local market in a five-to-ten-year period.”3 Ma explained his concern over eBays entry:eBay grew strongly.At that time,there were only two companies in China that understood online ma

28、rketplaces,eBay and Alibaba.I was particularly concerned that eBays power sellers would grow their business to compete in the B2B space.In China,the line between individuals and small businesses is blurry.There are many people with entrepreneurial ambitions.I needed to stop eBay to protect Alibaba.M

29、arketplace Design Taobao sought to distinguish itself from eBay in numerous ways.Ma wanted to imbue Taobao with a strong local culture that reflected a deep understanding of Chinese consumers and an attitude of informality.Taobaos president,Sun Tongyu,explained:“We ask Taobao employees to select a n

30、ickname and refer to each other by it.The nicknames come from fictional characters in Jin Yongs famous kung fu novels.”Yu Yan,the Taobao nickname of Zhang Yu,vice president in charge of C2C marketplace operations at the company,explained the cultural differences between Taobao and eBay,pointing out

31、differences in the design of the two websites(see Exhibit 5 for sample home pages):“Chinese consumers like busy web designs with strong colors.Westerners prefer sparse sites like Googles,but Chinese customers want their sites to be noisy,with lots of links.”Added Erisman:“We got the navigation right

32、.Our design was much more usable for Chinese eyes.It reflected how Chinese shoppers think.Even some small details,such as including a mens navigational tab and a womens navigational tab,made the navigation more suitable to Chinas online shoppers.It was like being in a Chinese department store.”Trust

33、 To attract buyers and sellers,the company needed to find a way to engender trust between vendors and customers.This was particularly challenging in the Chinese context.Professor Paul Ingram of Columbia Business School,who studied social networks,explained:In the West,we tend to reserve trust from t

34、he heart(affect-based trust)for family and friends and trust from the head(cognition-based trust)for business partners.We see emotional concerns in business as unprofessional.But in China,affect-and cognition-based trust are highly intertwined,even in business.4 It is important that business partner

35、s have an affective bond.Few Chinese business relationships develop without socio-emotional exchanges such as sharing meals,gifts,and socializing with each others family.709-456 Alibabas Taobao(A)4 Taobao developed a number of mechanisms to help create trust between sellers and buyers:Taobao sellers

36、 needed to register using their national identity card and bank account information.As on eBay,Taobao allowed buyers and vendors to provide feedback for each other.Taobao distinguished between a persons reputation as a seller and a buyer.(eBay provided only one score for each user.)Sellers on eBay t

37、ended to have more positive reputation scores(almost 50%had no negative scores in a six-month window)compared with sellers on Taobao(14%had no negative scores).5 Taobao sellers who provided feedback on a buyer automatically received a positive rating if the buyer did not respond within 45 days.In 20

38、04,the company introduced Alipay(支付宝,“payment treasure”),an escrow service designed to eliminate settlement risk among trading parties.Using Alipay,a buyer deposited payment for an outstanding order in an Alipay account;Alipay informed the seller when it received the funds,and the seller then shippe

39、d the goods.When the buyer informed Alipay that the merchandise had arrived,it instructed its bank to release the funds to the seller.Erisman explained the significance of Alipay:Alipay was critical to Taobaos development.Even when buyers see a seller with high ratings,the lack of trust still create

40、s a big challenge.Alipay eliminates the settlement risk.The payment mechanism itself is not important.Payment is easy in China.People are used to wiring money;they can even do it online.But banks cannot address the settlement risk.This is where Alipay comes in.Now more than 80%of Taobao transactions

41、 rely on Alipay.Taobao members were able to use Alipay free of charge.On eBay,there were many buyers who complained that they did not receive an item.Thanks to Alipay,this problem barely existed on Taobao.6 Taobao invested significant resources to facilitate communication between buyers and sellers

42、and between users and the company.It embedded an instant-messaging service,Wangwang,in its website,allowing buyers to directly haggle with sellers,a process that both sides seemed to enjoy(see Exhibit 6).Yu Yan explained:“Buyers and sellers use our instant-messaging service to provide continuous fee

43、dback,ask for assistance,and make suggestions.”As a result,“communication problems”constituted only 8%of Taobaos non-positive feedback.At eBay,this share stood at 20%.7 Fees Unlike its U.S.competitor,Taobao did not charge listing or transactions fees.Erisman explained:“E-commerce was new in China.Pe

44、ople were wary of scams.Chinese consumers were not familiar with online marketplaces,and merchants were reluctant to sell online without significant incentives.They wanted the marketplace to be free so they could dip their toes in the water.”Ma directly challenged Whitman:“We call on eBay to do what

45、s right for this phase of Chinas e-commerce development and make its services free for buyers and sellers in China.”Whitman was not amused:“Free is not a business model.It speaks volumes about the strength of eBays business in China that Taobao is unable to charge for its products.”8 Locked into a h

46、ead-to-head race,in 2004 it remained uncertain whether Taobao or eBay would prevail(Exhibit 7 compares user satisfaction levels during this period).Alibabas Taobao(A)709-456 5 Competition eBayBy the time Taobao entered the C2C segment,eBays global revenues were US$2,165.1 million and the company had

47、 about 5,700 employees.In addition to its dominant position in the U.S.,eBay had established a local presence in 19 countries.Creating a global marketplace was critical to eBays strategy:“A key element of our growth strategy is to continually expand the eBay marketplace to new communities around the

48、 world.”In 2003,international markets accounted for 35%of the companys net revenuesmore than a five-fold increase from 2000.eBay had successfully expanded into international markets using the same basic business model.In 2001,eBay claimed to be the dominant platform in four of its overseas markets:A

49、ustralia,Canada,Germany,and the U.K.eBays international expansion strategy was to enter countries with a large degree of Internet penetration and computer usage,then on a case-by-case basis,determine whether to start from scratch,do an acquisition,or enter into a partnership.In Germany,eBay entered

50、via acquisition in 1999 by buying Alando.de,the premier auction site in that country.The company achieved similar success in the U.K.where eBay crushed its competition.In 2002,in response to eBays achievements,Yahoo!withdrew from the Internet-auction business throughout most of Europe.In contrast to