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Alibaba, Taobao join hands to boost market share

By Wang Xing (China Daily)
Updated: 2009-09-15 07:57

Alibaba's revenue increased 23.6 percent during the second quarter of this year. [Agencies]

E-commerce giant Alibaba.com plans to encourage more users to sell products through the online auction site Taobao.com to expand their presence in the domestic marketplace.

David Wei, chief executive, Alibaba.com, said the business to business (B2B) website plans to break up the boundaries between Alibaba.com and Taobao.com to enable Taobao users to get stocks directly from the Alibaba platform.

The company held an online goods trade fair between its B2B users and Taobao.com users last weekend in Hangzhou. It said the contract value of the deals clinched during the three-day event was nearly 200 million yuan, two times more than the first online goods trade fair held in Guangzhou four months ago.

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"Before our first online goods trade fair, Taobao.com users were purchasing only small quantities of textiles from Alibaba.com," said Wei. "But now, the purchases have gone up significantly."

With the financial crisis crippling global trade, Alibaba users, mostly Chinese small- and medium-sized exporters, have been witnessing reduced demand from overseas markets. That has forced Alibaba to increase its marketing expenses and reduce its pricing to increase the number of users.

Alibaba's revenue increased 23.6 percent during the second quarter of this year, with Gold Supplier Members, its major revenue generator, growing 136.7 percent. But its net profit declined 26.3 percent on increased expenses for marketing and other new investments.

According to Wei, the global economy may still take two years to recover fully. "A recession of global trade, however, does not necessarily lead to a decline in e-commerce," he said.

Liu Ning, chief analyst from research firm BDA China, said the benefit of incorporating resources of Alibaba.com and Taobao.com may not be that significant as online product sales only account for just 1 percent of the total product sales in China. But he said the move could benefit Alibaba in the long run as online shoppers in China would continue to grow.

Established in 2003, Taobao.com is China's largest online auction site, taking up about three-fourth of the market share, according to domestic research firm iResearch.

Jonathan Lu, president of Taobao.com, said the company's online transaction volume is expected to double to 200 billion yuan this year from the 99.96-billion yuan it reported last year.

"More and more consumers are flocking to the Internet in search of cheaper goods amid the economic slowdown, while many others choose to open online shops as secondary jobs," Lu said.

But he said the company does not have any listing plans for now and is more focused on expanding its market to larger user bases, especially in the country's western regions.

According to figures from CNNIC, online shopping users in China increased by 14 million to 87.88 million in the first half of this year, accounting for about one-fourth of China's online population.