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 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, Babel 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.
It started around 2008
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 model of Taobao. 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. Compared to others, Ma Yun behaves more like an internet educator (Missonary), but he’s not a spokesperson for his own company, he very rarely talks about his own company, he won’t announce that he plans to raise hundreds of millions or billions in the coming year, nor will he criticize other people’s companies, he’s more like an internet and enterprise philosopher, discussing whether questions are or aren’t relevant! In fact, 马云是中国这个社会中少数的理想实践者，除了会高谈阔论，但是又有能力去实践落实它！马云基本上很懂得他的公关身份，在公开场合絶不说出超过其身份的话，事实上大多数成功企业家的都是如此！
马云极少示人的，也是他真正厉害的地方，是他和政府的公关能力以及他如教主般利用理想驱使人家为其卖命的说服力！From his early start, making Chinese yellow pages, he’s cultivated relationships with the government, 一直到阿里巴巴，到做到“支付宝”这件事时，我才觉得这个人的政府关系不简单，在中国这样高度金融管制的国家，这个中间有很多说不清，道不明要打通关结的地方，金融监管的许可，要银行支持，因此造成银行利益的流失（支付宝跨省转帐是免钱的，一直到这二年才有金额限制）这不是一般企业能做的！他是少数我所知道能参透中国二套话系统的代表性人物（即很懂得用理想包装现实的人）而且有一种魔力使得政治人物相信，交给他做的，会开创出新的模式出现政绩而且同时能满足自己的利益。我觉得连王石都没有这种本事。
Non-innovative industries will be eliminated
Q10: The great electronics suppliers war ended not long ago. I would really like to hear your opinion: when looking at the huge ecosystem of the Chinese internet, what kind of business are you most optimistic about?
Basically, Chinese entrepreneurs, and particularly internet entrepreneurs, are all inspired by overseas business models. 采取价格式破坏者模式杀入，背后依靠的是资金的支持！Basically, everybody is caught in an evil financing model, 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！
Q:11: based on your own experience, could you explain to us what the entrepreneurial spirit is?
A11: To put it simply, the entrepreneurial spirit is this, first it’s about ‘survival’ and ‘making money’, at a second level, it’s about developing business standards that others will imitate, and at a third level, being an entrepreneur is about constituting a spiritual benchmark, and becoming an idol! Whether this occurs in a free market or environment is irrelevant, in any market environment, even a black market, there will be people practicing these three points.
Conclusion: five or six years ago, maybe nobody would believe that Taobao could succeed, and even fewer would believe that those moving to Taobao would win. We believe that such short-sighted or shallow thinking used to be popular in Chinese society. New things are looked at with hostility, they’re mocked, It’s always been a tradition in Chinese society to half curse, half envy those who were eating crab. However, the experience of Taobao sellers teaches us that things don’t have to be like that. Taobao is innovative, paypal is innovative, Wangwang is innovative, and unceasing cycles of creation and destruction have given rise to the Taobao miracle. As we increasingly enjoy the inexpensive and convenient services of Taobao and other online platforms, only as we look back do we suddenly find out that the people driving this change and transformation are actually countless small figures like those Taobao sellers, or like Jack Ma. They’re more famous under another name: entrepreneurs.
Entrepreneurs, or to speak in more popular terms, let’s call them business people, can find opportunities in any environment, and that opportunity is to find where the profits are. The role of business people is this, to meet the consumers’ demand, provide services, and then request money. They save this money, refraining from immediate consumption and satisfaction. Business people differ from ordinary people in that they are good at controlling themselves, accumulating capital, finding opportunities, taking strong actions, and immediately following the path.
If Jingdong finally lose feathers, it’s because they deliberately cling to an old business model, and reject innovation – because their works lacks meaning too much, is too unlike that of an entrepreneur. Entrepreneur is not a job for everyone, entrepreneurial spirit is scarce. They’re the dragons and phoenixes of the people giving themselves pain. The profits they gain are deserved, well-deserved.
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Source : Babel, 13 October 2012