Ebay may wish to forget 2004. It saw expansion into the China market turn into worldwide embarrassment, all at the hands of a company most in the West had never even heard of.
Ebay’s failure serves as a modern fable, warning businesses what happens when you don’t bother to understand your target market. And it is perfect for pressing home the fact that success in the West doesn’t automatically translate to the China market.
Jack Ma is the founder of Alibaba, a Chinese company that helps small businesses online. When Ebay set its sights on the China market, Ma knew eventually they would encroach on his territory. To protect his interests from the online auction giant, Ma launched a new site – Taobao, where consumers could sell goods to other consumers.
If Ebay thought that a new site launched by a local Chinese business would prove to be of little threat, they were about to be proved wrong.
Ebay’s campaign was very aggressive, and attempted to prevent their competitors from advertising by signing exclusive deals with large web platforms, including major news site Sina. Ebay invested over $100million (source: www.forbes.com) in its expansion into the China market, utilising billboard and poster advertisement in subway stations and on the side of busses.
Jack Ma, however, knew something that Ebay should have known if they had carried out their China market research correctly. Ma knew that his target market would prefer to watch television than go on the internet, and so Tabao started advertising on many major television channels.
Taobao wasn’t a profit making venture, but a defensive strategy. The site offered free listings, and a range of other features that Ebay didn’t have, such as longer listing periods. Because of this, customers quickly began switch from Ebay to Taobao.
Other factors made it more appealing than Ebay. Taobao means ‘Digging for treasure’, which perfectly encapsulated the concept. Taobao also offered buyers and sellers to chat via instant messaging Aliwangwang (source: www.globalpost.com). If you’ve read our previous post on Guanxi, you’ll know that creating a relationship is vital for business…
Ebay made several large mistakes when trying to enter the China market. Firstly, the company assumed that consumers in China were the same as in the West. Rather than carry out extensive Chinese marketing research, they made assumptions, allowing Taobao to dominate the channels that actually mattered.
By understanding their customers completely, Taobao were able to offer a heightened level of service that Ebay wasn’t supplying, allowing them to steal customers.
The reason Taobao succeeded was because Jack Ma perfectly understood his customers. He knew what to offer them, and the best ways to reach them with his marketing.
Market Me China can offer you the same understanding and cultural insight into the China market that allowed Taobao to succeed in the face of larger competition. Contact us today to find out more.
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