Q1) What was Alibaba Group’s motivation for diversifying into the consumer business with the launch of Taobao? Does it make sense?
Alibaba group felt that it was under threat from eBay as eBay had a large market share in C2C business. Alibaba felt that eBay may go into the B2B business which Alibaba is in, and their business may be under threat. Hence Alibaba decided to go into the C2C business with Taobao to compete with eBay for the fear of eating into Alibaba business.
It made sense because Taobao managed to overtake eBay’s share of the C2C business and become the dominant market share for C2C and made Alibaba a very rich company.
Q2) How did Taobao beat eBay?
Taobao beat eBay through its free services, whereelse eBay charges buyers and sellers a fee for transacting through eBay. Also, Taobao was able to understand the local context and culture better, and created colourful and localized webpage so that local China users like Taobao more than eBay.
Taobao also established trust with its users such as requiring users to register using their real identity cards and bank account in order to establish authentic identification. Also, Taobao rated its sellers and buyers to establish a sort of history of the trustworthiness of the buyer and seller. It also had Alipay, an escrow service which enables buyers and sellers to transact their money with peace of mind.
The money will be held in the Alipay escrow account until the goods are actually being received before the money is released.
Taobao also had an instant messenger known as Wang wang which allows its users to communicate with each other to build up greater trust in the Taobao portal.
Q3) Should Ma implement Zhao Cai Jin Bao? Why or why not?
Ma should not implement Zhao Cai Jin Bao because it did not work well. Many sellers became angry because although they paid to have their listings prioritized, many buyers did not buy their listings but however shopped from other buyers instead when they find a cheaper price. Hence the sellers did not get a fair deal from this service.
Q4) What do you think is the most appropriate way to monetize Taobao?
Taobao should be monetize through many other means, such as through paid advertising. Taobao may also consider branching into other value added services such as mobile commerce, Business to Consumer transactions, charging a small transaction fee from sellers who sold on Taobao portal, or creating value added services and products such as cloud services or digital wallet services.