When any company expands its roots to other countries, the whole scenario takes several turns. There are so many rules and regulations which company has to follow at the new place and it sometimes becomes overwhelming to keep up with the change. So much so that even the giants like eBay fail to perform in one of the world’s biggest markets i.e. China. It is not just about eBay failure in China but many companies who had tried to explore the Chinese market failed miserably due to many reasons including market reach, the approach of the customers, strict rules and regulations and unimaginable competition from the local companies.
The entry of eBay and its biggest competitor Taobao
Back in 2004, when the internet was still booming in several parts of the world, the shopping giant eBay planned to enter the Chinese market. At that time only a small local company Alibaba was the only threat that eBay had to face which was apparently not a big deal for the company. However, Jack Ma who is the founder of Alibaba was sure enough that someday eBay will become a major issue for Alibaba and he had to do something to counter its presence in China.
Back in 2004, when the internet was still booming in several parts of the world, the shopping giant eBay planned to enter the Chinese market. At that time only a small local company Alibaba was the only threat that eBay had to face which was apparently not a big deal for the company. However, Jack Ma who is the founder of Alibaba was sure enough that someday eBay will become a major issue for Alibaba and he had to do something to counter its presence in China.
To counter the eBay’s strategies for China, Alibaba introduced a new brand Taobao in the Chinese market. Different from Alibaba which is a business-centric platform, Taobao is more concentrated on the smaller businesses and individuals just like eBay.
The advertising war – eBay vs Taobao
When eBay came to know about Taobao and its plan to counter the efforts of eBay, the company injected 100 million dollars for the advertising in the Chinese market. The company bought exclusive advertising rights with major portals like Sohu, Sina, and Netease. The company renamed its operations to eBay EachNet and it was visible everywhere including internet, busses, and subways.
When eBay came to know about Taobao and its plan to counter the efforts of eBay, the company injected 100 million dollars for the advertising in the Chinese market. The company bought exclusive advertising rights with major portals like Sohu, Sina, and Netease. The company renamed its operations to eBay EachNet and it was visible everywhere including internet, busses, and subways.
Jack Ma thought to fight back cleverly though. He knew that even though China is technologically advanced than the most part of the world, but a lot of users prefer to see television instead of surfing internet. He brought major advertising slots on TV networks in 2004 and the advertising war was now clearly visible between Taobao and eBay.
How eBay was defeated
The main issue with the eBay structure was that it was more of product-centric while Taobao was customer-centric. The categories on Taobao were like Men, Women, Gadgets etc. while eBay was stuck with the old methodology of Sellers and Buyers which was not working in China.
eBay was charging its customers for the listing while Taobao remained free for a much longer period of time. Those who doubted intentions of Jack Ma declared that he is crazy as nothing is free in this world and one day he has to make it a paid service. Taobao administration was not in the mood of making it a paid website anytime soon which let the nickname Crazy Ma.
The main issue with the eBay structure was that it was more of product-centric while Taobao was customer-centric. The categories on Taobao were like Men, Women, Gadgets etc. while eBay was stuck with the old methodology of Sellers and Buyers which was not working in China.
eBay was charging its customers for the listing while Taobao remained free for a much longer period of time. Those who doubted intentions of Jack Ma declared that he is crazy as nothing is free in this world and one day he has to make it a paid service. Taobao administration was not in the mood of making it a paid website anytime soon which let the nickname Crazy Ma.
What made things more difficult for eBay was that China was cell-phone savvy rather than being internet savvy. Taobao knew it and they started providing free voice mail between the seller and the buyer along with messaging. The understanding of the local customer base helped Taobao a lot in countering every move of eBay.
Another point of failure for eBay was the potential of social media. eBay China never concentrated on the social media market for gaining new customers which were a huge mistake. The potential of social media was well known to Jack Ma and took the advantage of the platforms to counter any possible attacks by eBay.
What do we learn from eBay’s defeat in the Chinese market?
First of all, for any western company, it is very important to understand that China is a completely different market from the rest of the world. The methods of advertising, rules and regulations and approach of the customers are totally different.
It is very important to understand the Chinese market from the root to the last leaf before you start venturing your investment in the Chinese market. One wrong step can demolish your whole business plan in no time.
First of all, for any western company, it is very important to understand that China is a completely different market from the rest of the world. The methods of advertising, rules and regulations and approach of the customers are totally different.
It is very important to understand the Chinese market from the root to the last leaf before you start venturing your investment in the Chinese market. One wrong step can demolish your whole business plan in no time.
The advertising on the right platforms including social media is the key to success in China. If you miss the opportunity to find customers on social media, it is next to impossible to gain market share in China.
When you are forming policies for the Chinese market, make sure that you keep up with the local rules and regulations and have all the required licenses and documents streamlined before you start your operations.
Conclusion
Currently, eBay is not operating in China and it may never come back to the country as well. The lessons that eBay’s failure in China have provided to the rest of the world are strong and if a western company wants to survive in China, it has to become a part of the economy rather than trying to conquer it. There are a lot of brilliant minds in China itself who can stand up tall in front of any tech giant. The Chinese policies prefer local companies above international brands which is yet another setback for the western countries. So before you set up your business in China make sure you understand the basics of the business in the country and prepare your policies according to the local rules and regulations.
Currently, eBay is not operating in China and it may never come back to the country as well. The lessons that eBay’s failure in China have provided to the rest of the world are strong and if a western company wants to survive in China, it has to become a part of the economy rather than trying to conquer it. There are a lot of brilliant minds in China itself who can stand up tall in front of any tech giant. The Chinese policies prefer local companies above international brands which is yet another setback for the western countries. So before you set up your business in China make sure you understand the basics of the business in the country and prepare your policies according to the local rules and regulations.
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