Ebay entered in Chinese market in 2002 while acquiring EachNet. When they launched the website in China, the owners expected the company to be successful. The business model seems to be adapted. However in reality they applied the same business model in China that they were using across the world because it was a successful one. In this way, they did not take in consideration the cultural differences and the specificity of the Chinese market. The business model consisted at charging small transaction fee for listings and sales made via costumer to costumer website.
First of all, Ebay was used by consumers in order to buy products directly from official shops. People don’t really do C2C business for buying used products especially because small business can suggest cheap products to consumers. Indeed, for both sides sellers and buyers prefer to deal with fixed prices rather than auctioning.
A different environment
The platform failed to recognize to consider the differences of the Chinese business environment. The manager staff were from Germany and United States. Consequently, there is a language barrier and insufficient understanding on the local market. Concerning Taobao, which can be considered as a competitor they managed to hire Chinese people to handle the business. These people could understand in the best way the Chinese culture. Actually, the name of the platform has a significant meaning which means to dig for treasure. Even thought Ebay tried to adopt a Chinese name it was not as catchy as Taobao one.
In China, the reputation of your brand is very important and can have a significant impact on your business. One of the main issue of Ebay in China stems from the fact that the brand had not the same strength than in United States. This is why, even if the executive power intended to settle an effective promotion strategy by diffusing many ads on television.
Buyers were a bit reluctant about doing online payments instead of paying upon receipt of products. They should have adapt products and services to local costumers but instead of that they continued to use the website as global platform format.
Ebay in China
Taobao worked with most of local bank in China in order to carve out a strong secured network for online banking. Nonetheless, on Ebay consumers could only pay via paypal, credit card and some debit cards of local banks. Online banking was quite limited. This point discouraged consumers to purchase goods on the website.
In order to better understand why ebay failed in China, we can have a deep look on Tao Bao strategy. Tao Bao worked hard to build a reliable relationship with the Chinese costumers in order, to create something called “swift guanxi”. This Chinese concept aims at building a close and pervasive interpersonal relationship. The goal is to favour high-quality social interactions and the exchange of mutual benefits. This principle is very important of one wants to be successful in China. Understand the consumers and penetrate their comprehensive environment and life can make the difference.
Everything on Taobao is though in purpose of making life easier for the costumer. There is a section of instant messaging in which costumers can exchange with sellers in order to have information about the products they want to buy. The American company failed on this aspect. They did not really consider the fact that Chinese consumers have a real need to have others’ opinion.
Using computer-mediated communication technologies in associated is very essential.
Failure of integration of the Chinese market
One of the major issue of Ebay was that they were too confident about their popularity in the Chinese market. They though that doing business would be exactly the same. This is the same problem regarding the costumers’ behaviors. They did not recognize differences between Chinese and American market.
Actually, competition is very hard in China. Even if, in some cases as a foreign brand you have much more weight than Chinese brands. This is not the case regarding e-commerce platform. Taobao is very powerful in China and has invested in advertisement, promotion but also in tools in order to optimize the website. They made the choice to put money for television. They realized that it was the best way to invest instead of putting money in internet sites. In spite of millions and millions of dollars that Ebay spent in order to staying the competition, their opponents did a better job because they took in consideration the full market.
In addition , Ebay creators should have employed Chinese people to integrate their teams. It would have been very useful because these people could have handle better the language and all the features of the Chinese market. Asking for help could have been useful to take benefit from their knowledge and experience regarding the Chinese market.