eBay's Problems in China

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Case Details:

Case Code : BSTR278
Case Length : 19 Pages
Period : 2002-2007
Pub Date : 2008
Teaching Note :Not Available
Organization : eBay
Themes: Globalization | International Business | Joint Venture
Industry : Internet and E-Commerce
Countries : China

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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eBay Changes its Strategy in China Contd...

In 2002, eBay entered China by acquiring EachNet⁶, a leading auction site in China, to form eBay EachNet. Till 2005, eBay EachNet was the market leader in the Chinese e-commerce market, controlling more than half of the market (Refer to Exhibit I for online trading companies in China). But eBay EachNet soon lost its market leadership position to Taobao.com (Taobao). Some analysts opined that this was because of eBay's failure to localize its globally successful business model to China. Also, Chinese customers preferred Alipay⁷ as it was perceived to be safer than other payment systems such as PayPal⁸. Another factor for Taobao's success was that it did not charge any transaction fee from sellers on the website while eBay had listing fees for its sellers.

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6] Founded in August 1999 by Chinese entrepreneurs, Bo Shao and Haiyin Tan, EachNet had 3.5 million registered Internet users in 2002.

7] Alipay is a division of one of the leading e-commerce companies, Alibaba.com, that allows individuals and businesses to send and receive payments online conveniently and securely. Alipay's core service is an escrow service which solves the concerns related to settlement risk between buyer and seller. In this system, after a buyer commits himself/herself to an online transaction, his/her payment is held in an Alipay account until he receives the product ordered. After the product is received the buyer notifies Alipay and the payment is then forwarded on to the seller. As of December 2006, Alipay had 33 million registered users. (Source: "Alipay - 33 Million Registered Users,"www.imnewswatch.com, February 5, 2007)

8] PayPal was a leading online payment company purchased by eBay in mid-2002. In June 2007, PayPal had 143 million user accounts across the world. Through PayPal, individuals and businesses could send or receive money over the Internet. PayPal supported payments in US Dollars, Canadian Dollars, Australian Dollars, Euros, Pounds Sterling, and Japanese Yen. Buyers could also pay for their online purchases on various e-commerce websites and auction sites like eBay using the balance in their PayPal account. Though this mode of transaction was quick, there were also a number of complaints from disgruntled PayPal users. Most of the complaints were related to the dispute resolution procedures of PayPal.