Taobao, China’s largest online retail website had recorded a whopping 370 million users in 2010, a 35 percent year-on-year increase from 2009. It will rank third if it were a country, falling just behind China and the U.S.
The e-commerce giant currently has over 800 million product listings and receives more than 50 million unique visitors each day. The statistics are impressive and Taobao has surely come a long way to reach today’s success.
Although eBay had the headstart in China through Eachnet back in 2002, Taobao (founded by Alibaba in 2003) still managed to win the battle through its ‘free of charge’ strategy to compete with Eachnet’s listing fee model. Taobao owns more than 80 percent of China’s online retail market share while Eachnet owns only 8 percent. Note that the data is dated 2008 but it still provides a good overview.
So how do Taobao make money? According to BDA China Analyst note, over 80 percent of its revenue is generated from ads while the rest are from Taobao Mall which generates commissions from merchants. It was estimated that Taobao made over USD 300 million in 2009 through advertising.
Taobao owns an umbrella of brands: Taobao Mall is a dedicated B2C platform featuring more than 30,000 local and global brands while Taobao is a C2C marketplace. There are also several extensions under Taobao Mall. They include Consumer Electronics Mall, Hong Kong Design Gallery Mall, Designer Footwear Mall, Home Furnishing Mall and Beauty Mall.
With almost every e-commerce channel covered, online retail in China is very much dominated by Jack Ma’s Alibaba Group, the parent owner of Taobao. For now, all eyes are fixed on how Groupon China is going to take on Taobao’s group buying site, Ju Hua Suan which generated over USD 30 million in sales last year. I’m betting on Taobao to dominate in China.