ISBN 978-952-5726-00-8 (Print), 978-952-5726-01-5 (CD-ROM)
Proceedings of the 2009 International Symposium on Web Information Systems and Applications (WISA’09)
Nanchang, P. R. China, May 22-24, 2009, pp. 202-205
Analysis on the Successful Strategies of Taobao’s
E-Commerce
Yang Lixia 1, Liu Xun 2
1
College of Arts, Hebei University of Engineering, Handan, China
Email: claireyang123@yahoo.com.cn
2
College of Mechanical Engineering, Hebei University of Engineering, Handan, China
Email: cnliuxun@yahoo.com.cn
Abstract—The improvement and the development of
internet technologies have triggered the rapid development
of E-commerce applications since 21st century. A number
of E-commerce sites have been rising in China. But with the
bursting of the bubble economy, most sites have been
eliminated. As a new site with holding the idea of
localization, the successful strategies of Taobao are worth
our thinking and emulating. This paper mainly discusses
Taobao’s success and its inspiration to the development of
the domestic E-commerce.
Taobao’s successful experience is worth emulating by
the domestic enterprises.
II.
In May, 2003, Taobao website was established by the
biggest commodities trading site-Alibaba which invested
one hundred million, and it provides a great platform for
millions of Chinese people who prefer do shopping
online, based on Alibaba’s market experience and
service capabilities of BtoB (business to business).
Taobao built the leading domestic net-market and the
personal transaction net-community, by its flexible
operating trade. It also provides online business services
to millions of members in the world.
Taobao had become the largest E-commerce trading
platform over our country since it was established one
year ago, and became the largest E-commerce shopping
centre in Asia since the next year, and its action has
influenced the whole industry, even the entire Internet. It
can be seen from the rank of ALEXA in 2004, Taobao
has reached 18th in the world [1]. From the following
graph, ‘2007 CtoC (Consumer to Consumer) Market
Data in China’, it shows that Taobao totally occupies
83.6 percent [2].
Index Terms—Taobao, E-commerce, successful strategies
I.
INTRODUCTION
With the rapid development of the Internet, Ecommerce attracts more and more attention and becomes
a focus as a business body engaged in the production and
operation mode. Although the specific conditions of
different countries based on the forecast of world
economic development, governments are all paying more
attention to the development of E-commerce. Ecommerce has become a new driving force for economic
growth.
Businesses of all sizes in all sectors are using the
Internet in many different ways - to work with partners
and suppliers, for procurement, for internal activities
such as knowledge sharing and new product
development, and much more. E-commerce in general
can be divided into Business-to-Business and Businessto-Consumer. Besides, there is also Consumer-toConsumer, which is a fast developing pattern.
In recent years, China has set off an upsurge of Ecommerce, our daily time more or less have the relations
with it. According to CNNIC (China Internet Network
Information Center) report, as of June 30, 2006, the
number of Internet users in China reached 123 million,
ranks second in the world. The number of shopping on
the Internet has reached to 30 million, and the proportion
of paying on the net has been increasing annually.
Experts believe that the risen trends of the number of the
Internet users and the people shopping on the net will
make the Internet Shopping Mall into a new round of
business battleground. Since 2000, the domestic Ecommerce transactions on the site once reached 100. As
it is known, there are eBay, Yabuy, Coolbid, and so on.
But with the bursting of the bubble economy, most sites
have been eliminated. Through constantly enriching its
contents and services, Taobao gradually makes itself a
well-known E-commerce website and becomes the
leader who exceeded eBay in one short year’s time.
© 2009 ACADEMY PUBLISHER
AP-PROC-CS-09CN001
ESTABLISHMENT OF TAOBAO
III.
TAOBAO’S SUCCESSFUL STRATEGIES
Taobao can be the top of E-commerce market in just
two years, people may think it lies on the characteristics
of the Internet economy, but the most important is its
effective business strategies, including operation
strategies and service strategies.
A. Operation Strategies
1. Capturing the market by No Fees
In order to create brand, Taobao made a plan that it
wouldn’t receive any charging transaction fees and
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these two issues, Taobao launched the corresponding
tool ‘Taobao Wangwang’ and ‘Alipay’, which become
Taobao’s own features.
listing fees in the first three years. Taobao believes that
only allows users to get real benefits in online
transactions, and then there will be more loyal network
dealers.
With this belief, Taobao captured the market rapidly
and took more than 60% market share in two years. Free
is a huge investment, it reduces the threshold of personal
transactions and protects the interests of both sides [3].
1. Taobao Wangwang
‘Taobao Wangwang’, as a communicate tool, provides
a convenient platform for buyers and sellers. By using
‘Wangwang’, they can make a discussion on the quality
and price of commodities; by using ‘Wangwang’, they
cannot only communicate with each other, which
enhance the confidence between both parties, and they
can also participate in various high-quality activities of
members.
‘Taobao Wangwang’ makes more convenient and
timely communications between buyers and sellers. That
attracts more players for Taobao.
2. Strengthening the comprehensive cooperation with
banks
On October 27, 2003, Taobao and Zhejiang branch of
ICBC (the Industrial and Commercial Bank of China)
signed a comprehensive cooperation agreement, which is
a guard against default and fraud. It reflected the
integrity of online transactions and payment. The mode
of payment and settlement on the online bank was born.
This is a new mode which puts the bank intermediaries
into the Internet and E-commerce, and it creates a
precedent on the national credit guarantee cooperation.
The introduction of this service has greatly increased the
users’ confidence on the credibility of online payment,
and it also laid a solid foundation for business
development of Taobao.
2. Alipay
‘Alipay’ is a particular secure payment service focus
on online transaction. It was built up through Taobao
making a union with ICBC, ABC (Agriculture Bank of
China), CCB (China Construction Bank), and many other
domestic financial institutions. By using it, Taobao is as
the credit intermediary. It is a service which temporarily
keeps the money of the purchase before the buyer
confirms to receive the purchases.
The using diagram of Alipay is below [3]:
3. Building the shopping platform by associating with
strong enterprises
On April 5, 2004, Taobao announced an alliance with
the Chinese Internet portal 21CN and launched a big
shopping site. The two parts will give consumers more
services over the channel, E-mail, messaging, and market
activities.
On April 12, 2005, Taobao and Sohu (sohu.com)
announced a strategic alliance. The two sites will share
their large active user groups, and work together to
promote the progress of E-commerce in China. The
alliance of the two big sites makes a full realization of
the complementary advantages and the sharing of
resources.
4. Establishing an identifying secure trading platform
In July 2004, Taobao reached an agreement with the
Ministry of Public Security, to build a "national citizen
identification number enquiry service centers", which
provides a more secure trading environment for Taobao.
Taobao will submit the registers’ information to the
Ministry of Public Security, and after the center checked,
the results will be returned to Taobao. Those who seek to
use false identity information to deceive the bad
elements will reveal the prototype.
Taobao has also strengthened its illegal violations of
the crackdown, when doing the cooperation with the
authoritative departments. This cooperation has greatly
enhanced the popularity of Taobao.
IV.
PROPOSALS FOR THE DEVELOPMENT OF THE
DOMESTIC E-COMMERCE
With constantly enriching the contents and services,
Taobao gradually makes itself a well-known Ecommerce website and becomes the leader who exceeded
eBay in one short year’s time. Taobao’s success has
brought many proposals to E-commerce in China.
B. Service Strategies
Before Taobao invested in the Chinese market, the
builders made a full investigation. They found two major
characteristics when Chinese people bought things: they
see the goods first, and then cut the price: they have a
strong suspicion on online payment. In fully understood
A. To Enhance E-Commerce Awareness of Businesses
and Consumers
The basic one to operate E-commerce is innovating
the public concepts [4]. This is a step-by-step process.
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difficult to control the quality of logistics, which makes
E-commerce sites not control the after-sales service, so it
leaves a chance for fraud. Nowadays, most courier
companies in the market are too small, their business
scope is limited, and most of them operate without union.
Adding the shortage of unified standards and price
standards, the quality of the services cannot be improved.
E-commerce trading platform should build high
credibility, independent large-scale logistics union in the
future. Only do this, it can embody ‘no distance’
transacting online, and can effectively reduce the fraud
and loss of customers. More important is to control the
market by rational and efficient integration on logistics
resources. E-commerce sites can also cooperate with
other companies in some areas, by using the postal
delivery system or other transports of goods. For
example, Taobao cooperates with Yuantong Express,
ZhaiJisong, and other logistics companies. Currently
they are trying to resolve the plight of logistics and
distribution. However, because there still have problem
on their cost, service quality, the cooperation needs to be
improved yet.
Therefore, to break out distribution bottlenecks, first
of all, needs to strengthen the integration construction of
the logistics. It should break the existing protected areas
and the fragmented structure of the logistics. It also
should eliminate the boundaries among internal
departments of enterprises, to achieve the integration of
capital, logistics and information. Secondly, there must
build ‘logistics information system’ for E-commerce
requirements. It is necessary to strengthen the ‘internal
information system’ construction of logistics system, and
gradually to achieve E-information operation of their
internal management. Logistics enterprises should make
‘customer satisfaction’ as their center, to enhance the
customer’s efficiency and reduce costs of circulation.
Through the analysis above, it can be seen that there are
significant advantages on consumers, communications
and other costs of E-commerce. However, as a new thing,
compared with online shopping and traditional shopping,
the recognition is not very high to many businesses and
consumers. The development of E-commerce in China
will bring unprecedented opportunities to the economy.
It is good for participating in international competition,
and it also can improve the international competitiveness
of domestic enterprises.
Therefore, it is important to enhance E-commerce
awareness of businesses and consumers, to innovate
public concepts, and even to gradually implement the
awareness and concepts into the economic development.
Firstly, it is necessary to strengthen the E-commerce
propaganda to raise the social and public awareness of
electronic commerce, to eliminate the strangeness and
mystery, to enhance their sense of responsibility. In
addition, it is also necessary to guide the vast number of
consumers to change the traditional shopping way that
seeing is believing, and shopping habits, and to let
people accept E-commerce surly.
B. To Promote E-Commerce Instruments of Payment
The payment security is the most important issue to
develop E-commerce. As of June 2006, the number of
users doing online transactions accounted for only 24%
of the total. It is not just related to the traditional Chinese
‘cash consumption’. The key is that the safety of
transactions is not guaranteed. ‘It’s easy to buy online,
but difficult to pay online’, these words become the most
usual problem complained from the Internet dealers.
At present, many E-commerce sites have launched
their own online trading tools, such as Taobao’s ‘Alipay’,
eBay’s ‘Escrow’. However, because it cannot provide the
traditional transacting documents, coupled with network
hackers, many consumers feel discouraged on Ecommerce.
Therefore, in order to develop E-commerce, the
commercial payment systems must be improved, the
level of bank e-payment must be enhanced. Firstly, in
technical standards, it is necessary to establish a national
unified payment gateway and secure certification center,
and to make great efforts to international standards.
Secondly, it is necessary to make legislation as early as
possible. The laws should determine the qualification of
Internet banks, prescribe the rights and obligations of
online transaction and punish criminal acts severely.
Then it will take online payment into a secure,
predictable legal framework. Third, the government
should appeal all commercial banks, intermediaries and
all sectors of the community to participate actively.
There needs to establish a set of suits China’s national
conditions of the credit system from the experiences of
developed countries.
D. To Improve the Relevant Policies and Regulations
on Electronic Transactions
E-commerce occurs in the virtual world, so it brings
challenges on people’s consumptive concept, ethics, and
code of conduct. It also has an influence on the legal
issues, such as on tax collection. There has not yet
promulgated Electronic Commerce Act, which may
make a bad influence on the healthy development. It is
extremely urgent to build a climate and environment for
the E-commerce development in China [5].
On April 1, 2005, start of the People’s Republic of
China Electronic Signature Laws is the milestone in the
development of E-commerce in China. It has removed
the legal obstacles of e-signatures during E-commerce
and other related areas. On April 18, 2005, Self-regulated
Services of Online Trading Platform was implemented.
The business standards coordinate the relations between
trading platform and social supervision. Subsequently,
the People’s Republic of the 10th Five-Year Plan
proposed ‘developing E-commerce positively’, stressed
‘establish the sound E-commerce infrastructure, legal
environment, certificated system of credit and safety, and
build a safe, convenient on-line payment platform’.
C. To Construct a Standardized Logistics System
Constructing a standardized logistics system has been
one of the bottlenecks for developing E-commerce in
China. China E-commerce lacks of complete and
independent logistics and distribution system. It is
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In recent years, an upsurge of E-commerce has been
set off in China. However, it is quite late to roll out
market economy system in China, so the commercial
environment, credit system, logistics system, and
consumptive attitude, are all not very mature. To make
domestic E-commerce develop fast, there must be wellformed national rules, popularity of E-business concept
the establishment of modern personal credit system and
the innovation of E-technology.
From these, there are significant achievements on the
establishments of commercial policy. But it still needs to
be improved because of the limitations of traditional
legal system, the shortage of integrity and innovation.
Judging from the current view, it is urgent to enact
laws and regulations of e-commerce activities, including:
①on the aspect of time, place, signature, original contact,
electronic instruments, there needs a corresponding law.
② it needs effective system of electronic signatures,
referred to the scope of electronic signatures, attribution,
and the use of electronic signatures and other effects. ③
it needs E-commerce regulatory system. The national
financial regulatory departments should enhance the
supervision of on-line electronic transactions, and
determine the scope and responsibility of formulating
appropriate sanctions. ④ it should formulate a unified
principle of tax collection and management.
V.
ACKNOWLEDGMENT
I wish to acknowledge all those who assisted in
making my paper possible and a deep appreciation is
expressed to my family for their never-ending support
and encouragement during this process. Without their
infinite love, I could not have reached the completion of
my paper.
CONCLUSIONS
REFERENCES
Generally speaking, the reason why Taobao can
succeed is depending on its developing strategies which
can be well catering for our internal consumers. In the
early age, Taobao quickly attracted the majority of users
through free strategy. And its features of ‘Taobao
Wangwang’ and ‘Alipay’ make Taobao become the
forerunner of China’s E-commerce websites, and win a
competitive predominance [6]. In addition, many
companies only serve for most large or medium sized
websites, but not for common media and advertisers.
This group of small value is not worth mentioning, but
Taobao, by providing personalized custom ad services,
gathers the large number of these groups. That formed
very substantial economic profits. For other E-commerce
enterprises, it is also very worthy of reference.
[1] CCTV,
http://news.ccw.com.cn/mfr/htm2005/20050707_10aou.ht
m, 2008.12.11
[2] iResearch.cn,
http://news.iresearch.cn/Zt/76332.shtml,
2008.12.21
[3] Lu Ying, “The comparison of C2C marketing strategies
between ebay Yiqu and Taobao”, Journal of Fujian
University of Techonology, 2007.Vol 2.
[4] He Yongming, “Chinese C2C Websites: Their Existence
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(Natural Sciences), 2005. Vol 2.
[5] Zhang Runtong, “Electronic Business”, Science Press,
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[6] Asia Business Media, Taobao is Bigger than Walmart,
www.bsgasia.blogspot.com, 2007
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