Industry Analysis - DEFINE THE BUSINESS

1. Industry Analysis-DEFINE THE BUSINESS • Markets: • C2C, B2C e-commerce market • Products: intermediates • Provide platform for auctions • Service charge @ 0.25% • Capabilities • Competitors • Inside China market:

2. Industry Analysis-INDUSTRY STRUCTURE • Online shopping market size:  • 17.9%in China visited shopping site within 6 months • more than 90% of respondents who conduct online shopping will continue the shopping, with 63.7% of Internet users shopping experience that is not going to try online shopping in the future. •  huge potential market of online shopping. 

3. Industry Analysis-KEY SUCCESS for Taobao • Good naming • “Taobao” means treasure hunting, which is easy to remember and imply luck • Platform • Taobao's product display platform and billing platform are very good. Users are first attracted to Taobao by its advertising and its business model, but it is the platform that keeps them loyal. Meanwhile, eBay.cn's display platform and billing platform are not well tailored to the habits of Chinese users. In addition, the slowness of its Web site and the fact that it charges users to sell items have made people reluctant to use eBay.cn. • Charging • Taobao is dedicated to its policy of not charging its sellers. In October 2008, Taobao announced it would invest RMB 5 billion ($731.05 million) in a five-year "Big Taobao" strategy. Through this, it aims to occupy a larger market share while maintaining its business model. Rather than charge sellers, it aims to make money by cooperating with other subsidiaries of its parent company, Alibaba. It is an almost unbelievable amount to invest during an economic downturn, and demonstrates Taobao's confidence and determination to maintain its leading position. It is doubtful that eBay will be able to regain its market share in China if it persists in charging sellers. • Communication • With regards to instant messaging tools, Taobao's free AliWangWang is more attractive compared to eBay's use of Skype, which charges for some services. AliWangWang's video and screen capture functions and mobile phone integration are better and more convenient than Skype's audio and video functions.

4. Industry Analysis-KEY SUCCESS for Taobao • Customer service • Taobao has a dedicated customer service department, which offers all-day all-year non-stop phone and online services to solve sellers' and buyers' problems. In contrast, eBay.cn does not have an independent customer service department, although it has a hotline. However, it is more likely to leave its users to solve any problems by themselves. Taobao has an online message-leaving system, which allows user to ask questions and complain directly and wait for a response from a member of Taobao's staff, while eBay answers customer queries via e-mail. • Security • Taobao has formed a trading security team made up of 50 members of staff to combat online fraud, whereas eBay educates people on safe trading practices through a security center page. • Consumer rights protection • This is a big factor that differentiates Taobao's from other C2C providers. Taobao offers compensation to people who make purchases through the Alipay payment service. If defective purchases are reported within 14 days, Taobao will ask the seller to compensate the buyer. If the seller refuses, Taobao itself will compensate the buyer. This is really impressive. • Complaints • On the upper right corner of all Taobao's pages there is a button that people can click on to complain about a particular listing, whereas eBay relies on e-mails and telephone calls to handle complaints. So we can see that eBay still has a long way to go if it is to revive its prospects in China's C2C market. Taobao is not a sleeping giant. Rather, it is aware of the need to stay on its toes.

5. Reference • 淘宝开放平台( Taobao Open Platform, TOP ),http://www.dbanotes.net/review/taobao_open_platform.html • Taobao Expands into Offline Retail Business, http://www.chinainternetwatch.com/548/taobao-expands-into-offlien-retail-business/