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eBay adapts in China

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Online retail giant eBay has reversed its once ailing fortunes in China after adapting its business model to suit local conditions.

The US multinational made its first substantive play in China by spending $100m in Eachnet, with the goal of replicating the strategy used elsewhere.

Having rapidly reduced its emphasis on this venture in 2006, eBay has instead forged a position assisting Chinese enterprises wishing to sell their products to overseas shoppers.

Jeff Liao, eBay’s chief executive in Greater China, told the Financial Times that the dramatic growth being experienced by many indigenous firms constitutes a huge opportunity.

"When we started our cross-border business in China in 2007, the majority of sellers were small and medium-sized businesses that were already online," he said. "But the situation has changed."

The company now boasts 180,000 vendors from the world’s most populous nation, all of which undergo a "probation" period of between three and six months to ensure they do not sell counterfeit goods.

At present, eBay’s client roster includes retailers like Vancl, the fashion chain, sportswear giant Li Ning, and Metersbonwe, the apparel specialist.

Cross-border sales delivered 20% of eBay’s business last year and represent an extremely promising area for future expansion.

"What really matters are the 96m registered buyers we have worldwide," Jay Lee, eBay’s senior vice president, Asia Pacific, said.

In pursuing its current approach, eBay is encroaching on the territory of Alibaba, one of China’s biggest ecommerce groups.

Alibaba came to prominence by deploying a similar model in the business-to-business space, and has ramped up these efforts by rolling out AliExpress.

Although this platform is largely targeted at the B-to-B segment, individual shoppers can make limited orders.

Previously, the ascent of Taobao, Alibaba’s leading business-to-consumer property, undermined eBay’s original forays in China.

A further emerging source of competition between the two organisations lies in the electronic payments market.

From August, eBay will halt the operation of its PayPal system on AliExpress, a strategy attributed at least in part to concerns over the amount of consumer, rather than corporate, usage.

"PayPal remains deeply committed to China by providing Chinese merchants access to a safer and easier way to sell to millions of our users all over the world," said Dickson Seow, PayPal Asia Pacific’s director of communications.

"You’ll continue to see new initiatives, products and services from PayPal in China that help Chinese merchants grow their businesses by selling goods and services to our global buyers."

PayPal saw Chinese transactions reach a value of $4.4bn in 2010, up 44% on an annual basis.

While eBay is all too aware Alibaba’s scale in China, the American firm believes rigorous procedures for vetting vendors and insistence on high service standards should strengthen its local standing.

Equally, eBay’s stronger international status could serve as insulation against broader incursions from Alibaba.

"We don’t know if business-to-business is [Alibaba’s] real intent or if they are hiding behind that," said Lee. "But we have the buyer base."

Source : Warc

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