Taobao ‘Crown’ sellers club’s routine meeting was held in Caohejing from the13th to 14th Oct. 2012. Kele(alias) was one of the pioneers setting their foot in Taobao. After years and years of effort, Kele’s Taobao shop is growing rapidly in its size, the variaty of goods they offer, with above millions of annual sales amount. Capable sellers share experience and dicuss about the new business model developed by Taobao with a view to adjust their future strategies at the meeting.
Meanwhile, Bable is hoping that readers will gain insight into how those business men, who had been digging gold and profiting from the largest B2C&C2C platform in China, have grown and succeeded with with a novel business model like Taobao, through a brief interview with Kele.
Education does not necessarily mean commercial talent.
Q1: You are one of the pioneer sellers in Taobao, what prompted you to start a online shop? Was it because that you plainly wanted to give it a shot, or that you saw the potential of Taobao?
A1: I decided to try it out. New opportunities come with new forums.
Basing on your perception and observance, what was Taobao like at its early stage? From what time roughly did Taobao became increasingly popular?
A2: It was simple –negotiation, bargaining and deals closure– it was like a flea market.
From around 08.
Q3: What do you think was the reason that Taobao became the top B2C & C2C platform? What was the role that sellers like you in its development?
A3: We had the role of showing support.
Q4: How was the business at the start? What marketing strategies did you employ?
A4: Deal by deal, we establish good reputation.
Q5: Why did you choose this type of product over others? In your opinion, what are the advantages of selling them online compared to the traditional way of making sales?
Q5: My boss was a friend of mine thus I had supply of goods. There was a great number of customers and no tax burden, which saved the trouble of selling from a store.
Q6: Do you see yourself as an entrepreneur? How do you interpret the word ‘entrepreneur’?
A6: No I don’t. Entrepreneurs are businessmen except that the word is a better version of ‘businessmen’.
Q7: In the past few years, for the better of Taobao shop, did you find it necessary to enrich your knowledge of finance and economics and what book did you read? Have you received relevant training? Did you find what you learned in class helpful when it comes to practice? What should be improved?
A7: Sure it is necessary, because you have to have knowledge of marketing and be able to understand financial reports from the very beginning. However, books, which are summary of theories, are not vital to the success of business. Great businessman should be capable of act the same as what was said in the book without strict adherence to it. Copying what was said in the book would often lead to fall of business. Practice is the best way of learning though they price you pay could be huge. What a successful businessman learn from working in his industry is the most valuable thing, but they are not prepared to let the secret out.
The Story Behind Taobao’s success
Q8: Taobao one of the best B2C & C2C systems. What do you think are Taobao’s innovation and advantages that made it what it is?
A8: Reflecting on Taobao’s history, back in 04, 05 when internet was still new and there was much to be explored, Taobao did groundbreaking work. Taobao is the most successful illustration of the application of ‘sanliu’ theory, a theory that involves information flow, cash flow and logistics, that we learned back then.
Information flow: Compared to the old Ebay, Taobao did put restrain on direct communication between sellers and buyers. Phone calls and QQ were both possible means of starting conversation. Later on, Taobao created IM(Instant Massenger) like Wangwang to encourage both parties to chat and meet up, and close as many deals as possible. This was entirely different from the model of Ebay which only permitted communication through emails. Surely, there was a reason that Ebay did so. Ebay saw itself rather as an agent, because it is only through tight control on information flow could Ebay secure its dominating position in transactions, thus making it possible to impose additional fees. However, Taobo, functioning like a fleemarket, seems to provide nothing but a platform. Taobao gave up the idea of profiting from information slow, diverted it attention from copying the model of Ebay( of cause this was not the case later on, Express Service (直通车)，Mall Ranking (商场排名)，and Juhuasuan (聚划算)all relied on information flow to generate profit), and targeted solely on sales rate. This way, the number of users was increased and the loyalty of them was strengthened (all the IT website cared not one bite of profitability, since funding was never hurting for VC (Venture Capital,) this is still true today – it is market share that matters), which is the logic behind its strategy.
Cash Flow: The finance industry as compared to that of foreign countries where credit cards, banks and ATM were largely in use, was like an unexplored desert. On the day Taobao was founded, so was Alipay which, in my opinion, was the main driving force behind the success of Taobao. The hostile net environment combined with guarded position Chinese tend to take against strangers meant that ensuring secured transactions was what would attract customers. Ma Yun has background in foreign trade. Alipay is a bit similar with banks that expertise in import/export trade: buyers pay the bank (Alipay), bank issues a credit letter (Alipay hadn’t employed such a complex procedure, informing the seller was enough), request to the seller to dispatch, and it is only after buyers confirms the quality of goods can money be transferred to the buyer.
The system solved the problem faced by Chinese customers that online payment could not be made without credit card, and it ensured a relatively fair and equal way of transacting. Also there identity can not be verified on the internet and fake IDs are common. And only banks were reliable to the people who inturn would willingly reveal his/her true identity – age, sex and place of residence. Thus this alone was the reason that Taobao did not worry the least bit about private settlement between parties – it is a certain thing that Taobao will profit as long as Chinese remain guarded to trading with strangers, Alipay backup and cash flow was under control.
As early as 2007, Taobao volume of trade of 100million, 100% of which were transacted through Alipay. The average time that the money remained in the hand of Alipay was 7days. Up to 2011 Taobao’s daily volume was up to 1 billion! It is only imaginable how large the amount that Alipay has. Thus it is hardly possible that making profit would be a problem for Taobao! ( up to day, Taobao and Alipay both do not tempted to charge commission – this is probably not something Ma Yun had expected!)
In addition, conformity with Chinese mind set is the main reason that Taobao defeated Ebay. Generally speaking the westerns have a ‘add-up’ mind set – like auction where the seller sets the reserve price and the highest bidder wins. Whereas Chinese like ‘deductions’ – buyers would bargain with the seller to reach a lower price. Taobao renovated its system to one which allows goods to be purchased at an offer lower than the listed price, plus buyers and sellers could have real time communication online, which is much favourable in the eyes of Chinese. When Ebay is sticking to its universal rule of practice, Taobao had employed a strategy which was applicable at the time being, thus when Whitman (the CEO of Ebay) came to the play in person it was already too late to make any difference.
Not many has noticed that Taobao never stops moving forward when it has become the giant of the industry: when new competitors emerge, e.g. Baidu and Paipai, Taobao makes itself learnt of their approach and strategies, it studies their new model, such as ‘group buy’ ( 团购）and ‘price compare’(比价), and updates itself. Besides, the Taobao applications were in market a long time ago. To date, Taobao has been continuously changing and developing, without making major strategic mistakes. I work with Taobao from morning to night, and I found that Taobao has been putting up new products every now and then, like what was said by an employee of Taobao, ‘ in his firm, the only thing stays the same in Taobao is the fact that Taobao is everchanging.’
Who is Ma Yun
Q9: You can have a glimpse of Ma Yun’s grand strategies from the modeal of TOabao. I know you admire Ma Yun personally, can you tell me what qualities of Ma Yun you adore the most？
A9： Ma Yun is some one who understands the significance of keeping ‘low-profile’, a term which I’m referring to, not only in the context of media coverage but also of public relations.
基本上，中国的企业，特别是互联网贩售的企业，基本上都是引用国外的模式，采取价格式破坏者模式杀入，背后依靠的是资金的支持！基本上都会陷入一个融资的怪圈，大家都在努力说出一个好像有美好未来的故事，最后上市由股民们买帐。这种方式，一很难长期保持资金健康，二则是别人模仿太容易了，最后都变成资本对战！国内互联网企业中，我看好有以下特性，1.基于国际模式为样本，但是可以因地宜制，能对用户有一定黏性的企业 2.成本管控良本的不乱烧钱的 3.基本本土用户长期习惯的企业或者国情的才能生存下去！
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Source : Babel, 13 October 2012