Taobao was started in 2003 as a customer-to-customer website. The company has quickly grown into one of China’s top retailers with over 370 million users and is now heavily involved in business-to-consumer transactions (B2C). Many Western brands like Levi’s, Samsung, Uniqlo, Gap and adidas have used Taobao as a conduit for selling to Chinese consumers. Many of these Western companies are trying to reach consumers beyond Beijing and Shanghai, and half of all Taobao transactions come from areas outside of China’s major cities.
Retailers can partner with Taobao by creating an online store on Taobao Mall. The benefit of launching these online stores is that it helps companies reach the Chinese consumer in a very direct way. Retailers are realizing that while brick and mortar stores are popular in China, many Chinese consumers are turning to the Internet for their shopping needs and to learn about new brands.
One of the major drawbacks of Taobao is that many merchants on the site sell counterfeit merchandise. For some brands, the catalyst for developing an online store in Taobao was to reduce the amount of their counterfeit merchandise sold on the site through unlicensed vendors. Many retailers value Taobao for the exposure that it gives them to a broad audience of Chinese consumers, but they are frustrated with the magnitude of counterfeit merchandise sold. Retailers and manufacturer brands believe that Taobao is “notorious” for selling counterfeit merchandise and has done little to reduce the practice. Taobao however claims that it is stepping up its efforts to reduce the sale of counterfeit merchandise and hopes to continue to build a presence with global brands.
Discussion Questions:
- What is Taobao? Is it more like a mall or like Amazon.com? T
- What are the advantages and disadvantages for U.S. based retailers for opening an online store on Taobao?
Michael Kan, More foreign brands use China’s Taobao for e-commerce,” IDG News Services, April 06, 2011.
Grewal Levy Marketing News 
I would say Taobao is a chinese amazon. Taobao is able to effectively reach a broad range of consumers in China. Especially considering many of China’s population live inland from the densely populated coast and river valleys, they too have a desire for merchandise. However, problems exist with counterfeiting I believe are here to stay.
The demand for a $500 dollar purse in comarison to a $20 dollar knock off does not exist to much of China’s population. The high import taxes make domestic goods more appealing to Chinese consumers. The nature of the goverment policies and limited budgets of Chinese consumers will be a hard barrier to over come for luxury companies especially.
Taobao is a combination of Amazon.com and a mall. Taobao is able to reach many consumers from all over like Amazon but is the virtual location of many different stores creating an online mall. It would be advantageous for U.S. based retailers to open an online store in Taobao because it would be a way for them to penetrate into a new market and therefore have the potential for growth. U.S. based retailers may also find this to be a less risky way of entering the Chinese market as they are not investing in any PP&E in China or what seems to be any large financial investment. However, the U.S. based retailers may not prove to be fruitful as there are much counterfeit merchandise sold on the website. This is because U.S. based retailers may be exposed to regulations that are not as strictly enforced as they are in the U.S. concerning branding and patents.