Alibaba's Taobao

27 Pages·2017·1.1 MB·English

Alibaba’s Taobao�
& the Crea2on of an Entrepreneurial
Ecosystem
CDC

Tarun Khanna
September 6, 2017
© 2017 Tarun Khanna
招 宝

财进
zhāo cái jìn bǎo
© 2017 Tarun Khanna
User Response to �
Mone2za2on
•  Outrage from sellers in reac2on to fees on
priority lis2ngs (tens of thousands of nega2ve
messages)
•  Why
–  Hidden service, violates promise to be free
–  Technical issue with pay-for-performance
contracts
•  Merchant misuse: bid hi on keywords, but then list
products at hi prices. So buyers brought to website
without paying fees
© 2017 Tarun Khanna
Taobao’s Response to User
Outrage
•  Taobao asked their customers!
•  Benefit of communica2on with users
–  60% voted against keyword pricing, especially
small vendors
–  40% voted for it, sellers pursuing differen2ated
lis2ngs
•  So zhāo cái jìn bǎo discon2nued
© 2017 Tarun Khanna
New Mone2za2on Model�
Taobao Mall
•  New B2C ‘Mall’ as solu2on
–  Established Vendors enter mall with a small fee
–  Smaller vendors can stay on tradi2onal C2C
plaborm
•  Remember that Wangwang gives informa2on
about how to target sellers appropriately
•  Taobao breaks even six months about Tmall
introduced
© 2017 Tarun Khanna
Taobao and Tmall�
Fast Forward to 2017
•  Taobao
–  Dominated by small businesses and individuals
–  Gross sales generated in qtr ending Sept 2015: $69 bn
•  Tmall
–  Browse and Shop for higher quality items (Olay face creams and Burbery
coats)
–  Gross sales generated in qtr ending Sept 2015: $43 bn but growing faster than
Taobao sales
•  Focus on brand consciousness among increasingly well-
off Chinese has led Alibaba to seemingly bet on Tmall
going forward
•  Where do the brands come from? Tmall Global links
American brands to “digital China” (e.g. Costcos found it
much easier to open a storefront on Tmall global than
create its own site)
© 2017 Tarun Khanna
Emerging strengths and some
vulnerabili2es
•  Strengths
–  Mobile commerce. Taobao smartphone app dominated
JD.com smartphone app 86%:5%
–  (1/3 of Alibaba’s orders come from smartphones)
•  Weaknesses
–  TMall has had mixed success. It has raised fees and lost
some vendors even in mainland China
•  Traffic on Tmall Global is a frac2on of that on Alibaba's other
marketplaces: The site ranks No. 311 out of about 3,500 in terms
of popularity in China, while Alibaba's Taobao and mainland Tmall
sites rank Nos. 2 and 5 respec2vely
–  Taobao loses in several ver2cals to Dangdang in books and
to JD.com in electronics
© 2017 Tarun Khanna
Alibaba and JD.com
•  Remember Amazon ul2mately beat eBay. What
about JD.com and Alibaba? (JD.com is following
more of an Amazon model)
•  JD manages its inventory and logis2cs and can enforce
quality much beuer, a ‘fact’ it has emphasized successfully
in compe2ng with Alibaba
•  JD.com: Taobao’s tolerance of counterfeits takes price
compe22on to an extreme extent and chases away quality
from China
© 2017 Tarun Khanna
Alibaba Group JD.com
Market Value (2016) $217 billion $30 billion
Margins and Turnover
Gross Margin % 66.0 7.9
Total Assets Turnover 0.33 2.12
Inventory Turnover NA 9.69
Growth Over Prior Year %
Total Revenue 32.7 43.5
Gross Profit 27.5 76.6
Tangible Book Value 35.5 (29.6)
Business Model: Online Marketplace e-Commerce Retailer
Asset-light/Revenues mainly Direct Sales to consumers and
adver2sing and commission fees distributors
Outsources logis2cs to third Owns and Operates na2onwide
par2es logis2cs and fulfillment
Sources: CapitalIQ, Datastream, 9/6/2017; Deutsche Bank Market Research 4-27-2016
© 2017 Tarun Khanna
© 2017 Tarun Khanna