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EcommerceBytes-NewsFlash, Number 2368 - September 13, 2010 - ISSN 1539-5065    1 of 6

Alibaba Sets Sights on US Markets, Says China Expert

By Ina Steiner
EcommerceBytes.com
September 13, 2010




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eBay CEO John Donahoe accepted Jack Ma's invitation to speak at the Alibaba AliFest conference in China last week. Does it mean the two rivals are ready to work together, or will the competition intensify? AuctionBytes asked Helen Wang, an expert on China affairs, for her thoughts on last week's events and what it may portend for the future.

Ms. Wang is a consultant and expert on China's middle class and works extensively with business communities both in China and the United States. Her forthcoming book, "The Chinese Dream: The Rise of the World's Largest Middle Class," is based on over 100 interviews with the new members of the Chinese middle class, which is 300 million strong and predicted to reach 600 - 800 million in the next fifteen years, making China on target to be the second-largest consumer market in the world after the U.S. Ms. Wang's book features a chapter on eBay's entry into China and its battle with Alibaba.

AuctionBytes: eBay CEO John Donahoe spoke at Alibaba's conference in Hangzhou on Friday. Given that Alibaba trounced eBay in China, do you think John Donahoe's attendance at Alifest is significant?

Helen Wang: I think it is quite significant. PayPal is doing very well in China. I don't know what to make of (Donahoe's attendance at AliFest), but I think it is a good move for eBay - although I would think it's awkward. Someone defeats you in China market, and someone seems also trying to test you in the U.S. market - but it's good for eBay to engage with Alibaba. The reason eBay failed is very simple - because they didn't study the market.

AuctionBytes: Meg Whitman was CEO when eBay entered China. Did arrogance play a role in eBay's defeat in China?

Helen Wang: Absolutely. There's no doubt arrogance played a role. At the time she told the Wall Street Journal, "oh, we have some small competitors." She didn't even consider Alibaba a competitor.

AuctionBytes: If it hadn't been Jack Ma, would eBay have done well in China, or was it inevitable that a Chinese company would defeat eBay?

Helen Wang: I don't think it was inevitable. eBay had every chance to succeed, it was a golden opportunity, and they lost. Definitely arrogance played a big role there. They said, "we have the brand, we own the market. We'll just do it our way, we have tons and tons of money."

AuctionBytes: I remember she locked up the portals so Alibaba couldn't advertise. What did Meg Whitman do right, and what did she do wrong?

Helen Wang: First, she didn't try to understand the market. The people she sent to China didn't know the China market. They didn't even speak Chinese. They didn't understand that the Chinese market is very, very different environment than the U.S. market, and even the European market. So that's a big mistake.

They didn't try to use the founder of Eachnet, who understood the Chinese market, and all his team, and his talents, and they brought in totally different management team. I think that's the first mistake.

AuctionBytes: Was it a mistake to use the eBay brand in China?

Helen Wang: There are many Western brands doing well in China, the same brand as in the U.S., but completely adapted for the local market. Even GM is doing so well in China now. They know what the Chinese consumer wants, they adapt the car for them.

eBay wasn't flexible. You can have the eBay brand there, but if you understand the consumer preference and taste, you can adapt your brand towards what the Chinese consumer wants. eBay was very product oriented, while TaoBao is very customer oriented.

AuctionBytes: Do you think Alibaba has plans to operate a consumer marketplace in the U.S.?

Helen Wang: I think that's definitely their plan. They have been thinking about that for several years now. Whether they are moving very fast or not, I don't know, I don't think so. But that's definitely their plan.

I don't think we should be threatened by that, I believe in competition. With them wanting to come to the U.S.,.. for us, our companies should be competitive enough.

That is definitely their plan. They hired several Americans as their senior VPs to penetrate the global market. But they haven't been that successful, I would say.

AuctionBytes: If Alibaba came to the U.S. marketplace, they would have to either build, or buy. Do you have a sense of which road they would go down?

Helen Wang: I think they will probably buy, that's my guess.

AuctionBytes: John Donahoe told the Wall Street Journal that PayPal processed more than $2 billion in transactions to Greater China in the first half of this year, the bulk of which was tied to transactions between Chinese merchants and overseas buyers. What are the hurdles for PayPal in China, will it ever gain traction in the Chinese domestic market?

Helen Wang: That has to do with how the banking industry reforms moving forward. The banking industry is still very much regulated and a lot of government control. But I do see people saying they will privatize banking because China definitely needs that, they have so many assets and don't know how to make investment efficiently to make a good return.

On the one hand they want to reform, on the other hand, they don't want to let go of control because they see the American financial industry (turn into) a mess, so they think, maybe we should have more regulation. But on the other hand, they are trying to liberalize, so we'll see.

Helen Wang's forthcoming book, "The Chinese Dream: The Rise of the World's Largest Middle Class," is available for preorder on her website, HelenWang.net.

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About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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