Chinese Auction Site Pitches for Big Business

Alibaba.com’s Taobao auction site has ambitious plans to reshape the e-commerce landscape in China.

Already the country’s most popular consumer auction site, Taobao now wants to establish itself as an online storefront for large manufacturers and retailers.

"Taobao is like the eBay model, and what we’re adding is an Amazon.com," said Porter Erisman, Alibaba’s vice president of international marketing.

Most Chinese Internet users don’t yet shop online. The growth of e-commerce in China has been hampered by several issues, including the lack of a national system to process payments made between different banks. Alibaba and others have stepped in to fill this gap with services such as AliPay, an online system used to process payments on Taobao.

Online auctions have evolved differently in the United States and China. While U.S. sellers generally offer collectibles or used items, many Chinese sellers offer new products for sale. "There’s already a bit more of a B2C [business-to-consumer] component," Erisman said.

Consumer auctions have soared in China, drawing in entrepreneurs and some small businesses. Taobao receives more than 100 million page views each day and handled US$1 billion worth of transactions during 2005, an increase of 700 percent over the previous year.

That puts Taobao well ahead of rival eBay, which has struggled to keep up despite investing heavily in China. "Taobao has become the leader in China’s e-commerce market," said Elias Glenn, an analyst at research firm Pacific Epoch, in Shanghai.

Larger companies are ready for a piece of the action. Electronics makers Motorola, Nokia and Haier Group, as well as apparel companies Adidas Salomon, Li Ning and Giordano (China), have signed up to open stores on Taobao, which promises more deals are in the works.

One source of new sellers on Taobao is its sister site, Alibaba.com, an online directory of companies and products spanning 10 million small and medium-sized Chinese businesses. While Alibaba.com helps connect buyers and sellers, the site does not offer a way to take orders or process payments.

"These are just natural candidates for many of them to open a retail channel through Taobao," Erisman said.

-Sumner Lemon, IDG News Service

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