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8/8/2019 Ebay Final
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PRESENTED BY:
HARSIMRAT KAUR
POOJA NEWATIA
SONAM CHANDAK
EBAYS PROBLEMS IN CHINA
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INTRODUCTION
y 1995- Founded by Pierre Omidyar, a software
programmer at SanFrancisco, California, USA
y Sept1995- Omidyar launched anonline auction
sitecalled auctionweb (www.ebay.com)
y Feb 1996- introduced a feedbackforum
y 1996- added anotherfeatureto site, anonline
bulletin board
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y 1996-JeffSkoll was appointed as presidentof
ebay.
y 1996- Skoll apponited Griffith as the1st
customer supportrepresentative.
y Mid1997- Ebay received1mn pagehits perweekwith15000 listings on a day making it
oneofthe most visited sites onthe internet.
y Sept1997- Auctionweb changed its nametoebay Inc.
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y Benchmark Capital, a US based venturecapital firm
invested US$ 5mn inebay with 22% stakey Benchmarkdelegatedthis responsibility to David
Beirne alongwith Robert Kagle
y Feb 1998- MegWhitman, an MBA from Harvard,joinedebay as President and CEO
y Sept 24,1998,Whitman initiated IPO by offering
4.025mn shares to public at US$ 18 per share
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y Stockclosed at US$ 47
y AcquiredButterfield & Butterfield, an auctioneer
famous forfine arts & collectibles
y Co. also acquired Kruse International,oneofthe
worlds largest brick and mortarcompanies inthecollectibles cars auction business
y Ebay launched53regional sites toencouragetrade in
items thatweretoo bulky & expensiveto ship
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y April 1999-Whitman signed a US$ 75mndeal
to strengthenebays relationship with AmericaOnline (AOL)
y Ebay entered into alliancewith Mail Boxes
yJune1999- websitewentdownfor 22 hours
Files gotcorrupted
Decidedtoforego listingrevenues around US$4.6mn
ApologizedforoutrageChinesecustomer preferred Ali Pay (Taobaos
payment system) over Paypal
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y Ebay stockcrashed by US$ 47to US$ 135,reducing
its marketcapitalization by US$ 5.7 bn
y Early 2000- announced its entry toB2Btrading
y March 2000- formed partnership withAutoTrader.com to sell usedcarthrough a common
websitewww.ebay-autotrader.com
y Entered into marketing alliancewithVisa topromoteVisa as the preferred paymentoptionon
ebay
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y May 2000- waive all processingfees forVisa
transactionsy Expanded into Japanthroughebay Japan & launched
its Canadian & Austrian sites
y 2001- strengthened its presence in Europethroughthe purchaseofFrench internet auctionfrom iBazar
y Finalized a deal to provide its e-commerce
capabilities to Microsoftdevelopers & to addB
2B
auctions to its consumeroperations
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y Jan 2001- launchedebay premier,thefine art &otherhigh-end
merchandise auction sitewww.ebaypremier.comy Disappointedwith Premiers performance & partneredwith
Sotheby, an international auctionhouse,replacingebaypremier
y
Ebay soldB
utterfields & alsoclosed Japaneseoperationsy 2002- ebay entered China by acquiring a EachNet.com, a
leading auction site in China,toform ebay EachNet
y 2003- started losing its sharefrom local sites likeTaobao.com
andglobal rivals like yahooy Introduced its auction site in Hongkong whichofferedonline
trading.The sitewas freeofcharge
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y Jan 2004- acquiredBaazee.com for US$ 50mn in India
y Nov 2004- launched its sites in Philippinesy June 2005-bought shopping.com for US$ 620mn incash
y Dec 2006- ebay EachNet entered into a joint venturewith
TOM Onlinetoform TOM ebay tocompete inthe intensely
competitivee-commerce market
y Sept 2007- worlds largestonline auctioncompany with
233mnusers & revenues ofUS$ 4249.8mn
y2008- Baidu, leading searchengine in Chinese languagestartede-commerce
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E-Commerce Market in China
y China was the 2nd largest internet market after US
y Numberofinternetusers reached162mn by endof
July 2007
y On an average, internetuser inchina spent17.9
hours perweek,comparedto11.4 hours perweek
in US
y
Internetusers comprisedonly 10.5 % ofcountryspopulation sotherewas a huge potential forfuture
growth
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y Market scalefore-commerce in China grewfrom
RMB120bn in 2001to RMB680bn in 2005
y C2C marketwas smaller incomparisonwith
overall e-commerce market but ithadkept pace
withtheoverall e-commerce market.y TransactionVolume in C2C markethas increased
from 0.4 RMB bn in 2001to13.1 bn in 2005
yBaidu announced its plantoenter Chinesee-commerce market by 2008
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PROBLEMS IN CHINESE E-COMMERCE
MARKET
y Influenced by governmentregulations, logistics andpayment systems
y Enforcedregulations relatedto Internet access,contentregulation,encryption anddomainname
y Government regulations:
y Domainregulations requirede-commercecompaniestoregistertheirdomainnamewith China InternetNetwork Information System(CNNIC)
y Encryptions requires approval from NationalCommissionon Encryption CodeRegulation(NCECR)
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y Regulations relatedto security involvedcensoringthecontent & preventingdisseminationofsensitiveinformationrelatedto Chineseeconomy
y Payment Systems were another problem
y Consumerraiseddoubts overthequality ofpurchasedproducts and after sales services
y Inefficient logistics system was considered anotherconstraint indevelopmentofe-commerce
y This was duetoUnderdevelopedtransportation systems
InadequateuseoftechnologyInconsistentdistribution systems
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y Accordingto State Economic Trade Commission,therewere9 problems plaguingthedevelopmentofe-commerce inChina
Network Safety
Internet Infrastructureconstruction
Social
B
usiness credit problemE-commercerelated laws andregulations
Standardized problem
Network payment
Acceptancedegreeofenterprises one-commerceNetwork marketcapacity
Lackofmanagementtalents
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E-BAY IN CHINAy Enteredchina by acquiring33% stake in EachNet with initial
investmentofUS$ 30 mn in 2002
y Acquiredremaining stakefor US$ 150 mn
y In 2003 its market sharewas nearly 80% and spentheavily on
promoting itselfinchina.y Started losing market share since launchofTaobao in 2003
y In 2004 Eachnets market sharefell form 90% to53 % and
Taobaos market share increasedfrom 9% to 41%
y Invested additional US$ 100 mn inchina in 2005y In 2005ebays sharewas 29.1% as comparedtotaobaos
67.3%
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FAILURE
y Taobao was aheadofebay on various counts
No.ofpages per view,whichwas 7.4 forebay and
10.7forTaobao
Taobaos listings generatedgross merchandise
volumeofUS$120mncomparedtoebays GMV of
US$ 90mn
y ebay failedto make an impact in Japan
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SUCCESS
Ebay alsohad some success in China:
y Skype, internet phone business, aquired in 2005
had morecustomers in China than in US
y Madeefforts touseescrow servicewherepayments would behelduntil buyers were
satisfied
Though itwas generating sales ofUS$ 30-50mn,company was postingoperating loss ofUS$20-
40mn
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EBAYS CHINA TROUBLES
y Various factors behind ebays problem in China
Itdidnt provide a phonenumberthatcustomers couldcall in
caseofany queries whereas Taobao has an instant messenger
serviceEbay EachNet sitewas nottailoredtothe Chineseconsumer
whereas taobaos layoutwas similarto a Chinesedepartmental
storewith separate sections forwomen & men
Ebay charge its userfortransactions through its Chinesewebsitewhereas Taobao offeredthis forfree
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Taobao allowed its customers to interactwithotherusersbefore buying a product. Howeverebay keptusers contact
information as a secrettill buyerhadwonthe bid
Ebays EachNet alsofaced problems with its payment system,
Paypal. Chinesecustomer preferred Ali Pay (Taobaospayment system) over Paypal
Ebays problems werecompoundedwhenTaobao launched
B2C in May 2006
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Taoba
ostarted
offer
ing
product
s & ser
vice
sof
major
companies like Apple Computers, Motorola Inc., Nike
International Inc.
Further Alibaba announced its plans to make a strategic
investment inkoubei.com, Chinas classified listing andcommunity website
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JOINT VENTURE WITH TOM ONLINE
Sensingtheneedfor local support,ebay entered into JV
withTOM Online in Dec 2006
TOM Onlinewas a leadingwireless internetcompany that
provided value added multimedia products & services Ittoo aimedtodiversify its revenue stream as around90% of
its earnings werefrom wireless value added services
ebay hold a 49% stake in JV whileTOM 51%
2nd majortie-up with a local company after EachNetsacquisition in 2003
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STRATEGIC SHIFT
POSITIVE ASPECTS
y Decisioncouldhelp inreducing its operating losses
y Analysts viewed it as a strategic shift aimed at strengthening its
position in Chinese market
y TOM Onlinehad a significant presence in m-commercewhichcould proveuseful in a country wherethere are 4
mobile phoneusers forevery computeruser. Payment
through mobile phones insteadofcreditcards was promising
pilot programs
y Ebay leveragedonexcellentconnections ofKa-shing to
navigate political & regulatory hurdles in China better
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NEGATIVE ASPECTS
y Industry watchers pointedoutthatunlike yahoowhichhad
paid a hefty amountofmoney toget a stake in Alibaba,ebay
was putting money for a minority stake in a JV with a company
was yetto make its presencefelt in a significantway inthe
Chineseonlinetrading market.
y Lineofbusiness was notcompatible sothey wouldneedtime
to learntoworkwitheachother
y
This JV was also indicativeofpressurethatthe Chinesegovernmentregulations putonforeigncompanies toform JV
withdomesticcompanies.
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AFTERMATHy
Thenewentity startedoperatingwithname Tom Yi Quin 2007
y Inordertowinthetrust, JV used anescrow service andensuredthatthe peopleholding auctions werereliable
y
It also placed somerestrictions ontheno.ofluxurygoods that a usercould sell onthe site
y Whitman said JV is doingwell butfigures suggestedotherwise
y
Inthe1st
6 months, MP fell from 16% to7.2%y Erosion in market sharecould be a falloutofthe
upheaval oftransferringebays Chinese auction servicestonewcompany
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OUTLOOK
y Accordingtogovernmentfigures,no.ofinternetusers
hadreached 210mn in 2007
y Tremendous scopeforfuturegrowth as penetration level
were lowwithonly 16% ofpopulationusingthe internety Ebay faced more immediatethreatfrom Taobao as 80%
ofpeople preferred it.
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HOW TO OVERCOME?
y Accordingto a survey by China Market ResearchGroup,Trust andexcellentcustomer service arethemajorfactors that Chinesecustomers lookfor beforebuying a product
y Ebay should leverage its understandingofChineseconsumers andchart its own path intheonlineauctions market
y
They should bringtogetherebays global knowledgeofe-commercewith TOMs local knowledgeoftheChinese
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THANK YOU