A cyber world apart – Taobao

Well, it looks like a full week after Google throwing a temper tantrum, it’s still hanging on in China, with tooth and nail. The coming down in the next few weeks will be funny/painful, depending on your stance, to watch.

But this post is not about how arrogance defeat Google or how cheap PR stunt backfires. Google tripped at the same place that failed eBay and Yahoo, assuming they can simply extrapolate and export the same formula that made them successful to China. It would be interesting to take a look at the Chinese internet landscape and observe the differences.

This FT story is among the more in-depth ones that I’ve seen, discussing the quirkiness of the Chinese market and common mistakes made by western Internet companies. Though one theme hasn’t been explored enough, that local companies are tough competitors. They are often innovators as well, like Tencent’s breakthrough with SMS as a revenue model, or Taobao’s renowned bazaars, or Shengda’s e-publishing business.

Taobao.com, which is owned by Alibaba group of which Yahoo has a 40% stake, is in my opinion the best best Chinese internet company, bar none. It looks and feels like eBay, but is actually Amazon. It’s a B2C company, populated entirely by China’s small-time merchants, in essence, the world’s largest bazaars. With the brick-and-mortar retailing scene increasingly being dominated by large companies (no, WarMart’s not doing that great in China either. The French Carrefour is the market leader), Taobao is the place for small, niche players. It gives them a leveled playing field against the big boys, with a ratings system that gives them credibility and a national market. It comes with its own payment system, ZhiFuBao, which is better than PayPal by having an escrow function and way cheaper in fees. Shipping is provided by 3rd-party private courier services that charge as little as Rmb10 (USD1.5) to ship 1kg of goods nationwide.

I think this is the future for small-time, interesting retailing.