How Taobao bested Ebay in China

Financial Times THE CASE STUDY March 12, 2012 8:55 pm Financial Times THE CASE STUDY March 12, 2012 8:55 pm How Taobao bested Ebay in China By Mark Greeven, Shengyun Yang, Tao Yue, Eric van Heck and Barbara Krug The story. Taobao.com was founded in 2003 by Alibaba, the Chinese e-commerce company, as a defensive move against its US rival Ebay, which had set up in China the previous year. The challenge. When Ebay launched in China it had global revenues of more than $2bn. As a young, domestic entity, Taobao was taking on a huge rival while also fending off many similar small competitors in the sector, where barriers to entry were low. The strategic response. Noting that Ebay in China was charging users to list products and services, Taobao allowed them to list for free in order to build a big cohort of sellers and buyers. Critical mass would eventually attract revenue-generating activities, such as online advertisements. Taobao also presented itself as very much a Chinese enterprise. For instance, the screen names of online moderators were derived from characters in popular Chinese kung-fu novels. Next, Taobao aimed to be more innovative than Ebay in customer service. In 2003 Taobao started Aliwangwang, its instant communication tool, to help buyers and sellers interact. It also introduced the online payment system Alipay a year later. Online credit card or debit card payment was very rare in China and customers usually paid cash on delivery. Alipay formed partnerships with leading Chinese banks and signed a long-term agreement with China Post, which meant customers without a debit or bank card could fund their Alipay accounts at any of its 66,000 offices. What happened. Taobao developed into a diverse e-commerce platform where businesses sell a very wide range of items to online shop owners who then sell on to consumers. At the end of 2006, Ebay shut its main website in China and formed a joint venture with Hong Kong- headquartered Tom Online. Taobao continued to build a network of ventures around its core operations. In 2007 it set up Alisoft.com, where small Taobao sellers could buy customised software from independent vendors to help with functions such as customer relations or managing inventory. In 2008 Taobao integrated Alimama.com, an online ad company with a network of more than 400,000 specialised websites where Taobao sellers could affordably post ads to reach their target audiences. These complementary ventures formed a network, with Taobao at the centre surrounded by interlinked companies. All cross-sold and cross-marketed each other’s services and offered packaged deals to Taobao sellers. As this “ecosystem” developed it attracted other businesses to use Taobao, Alipay, Alisoft and Alimama’s platforms to provide further customised services to Taobao sellers. The extent and reach of the ecosystem became too hard for rivals to replicate. By 2010 Taobao served more than 80 per cent of China’s e-commerce market, with 170m registered users and revenues of more than Rmb20bn from online advertising and fee-paying services such as shop design and sales training. Meanwhile, Ebay moved its business focus to cross-border e-commerce, where Chinese consumers sell to overseas consumers. It holds a leading position in that segment. Key lessons. How Taobao kept Ebay out of the market and became China’s dominant e-commerce platform in a relatively short space of time holds lessons for Chinese and western companies alike. First, Taobao provided services and solved problems for the smaller businesses that are the driving force behind China’s economic boom. For instance, Alipay enabled people to pay for goods and services easily. Second, Taobao set up or integrated services that complemented each other and used this ecosystem to create a bar to competition. Third, Taobao identified how to help people buy and sell. By making online shopping easy, safe and fun it helped many first-time online buyers build confidence in e-commerce. By Mark Greeven, Shengyun Yang, Tao Yue, Eric van Heck and Barbara Krug The story. Taobao.com was founded in 2003 by Alibaba, the Chinese e-commerce company, as a defensive move against its US rival Ebay, which had set up in China the previous year. The challenge. When Ebay launched in China it had global revenues of more than $2bn. As a young, domestic entity, Taobao was taking on a huge rival while also fending off many similar small competitors in the sector, where barriers to entry were low. The strategic response. Noting that Ebay in China was charging users to list products and services, Taobao allowed them to list for free in order to build a big cohort of sellers and buyers. Critical mass would eventually attract revenue-generating activities, such as online advertisements. Taobao also presented itself as very much a Chinese enterprise. For instance, the screen names of online moderators were derived from characters in popular Chinese kung-fu novels. Next, Taobao aimed to be more innovative than Ebay in customer service. In 2003 Taobao started Aliwangwang, its instant communication tool, to help buyers and sellers interact. It also introduced the online payment system Alipay a year later. Online credit card or debit card payment was very rare in China and customers usually paid cash on delivery. Alipay formed partnerships with leading Chinese banks and signed a long-term agreement with China Post, which meant customers without a debit or bank card could fund their Alipay accounts at any of its 66,000 offices. What happened. Taobao developed into a diverse e-commerce platform where businesses sell a very wide range of items to online shop owners who then sell on to consumers. At the end of 2006, Ebay shut its main website in China and formed a joint venture with Hong Kong- headquartered Tom Online. Taobao continued to build a network of ventures around its core operations. In 2007 it set up Alisoft.com, where small Taobao sellers could buy customised software from independent vendors to help with functions such as customer relations or managing inventory. In 2008 Taobao integrated Alimama.com, an online ad company with a network of more than 400,000 specialised websites where Taobao sellers could affordably post ads to reach their target audiences. These complementary ventures formed a network, with Taobao at the centre surrounded by interlinked companies. All cross-sold and cross-marketed each other’s services and offered packaged deals to Taobao sellers. As this “ecosystem” developed it attracted other businesses to use Taobao, Alipay, Alisoft and Alimama’s platforms to provide further customised services to Taobao sellers. The extent and reach of the ecosystem became too hard for rivals to replicate. By 2010 Taobao served more than 80 per cent of China’s e-commerce market, with 170m registered users and revenues of more than Rmb20bn from online advertising and fee-paying services such as shop design and sales training. Meanwhile, Ebay moved its business focus to cross-border e-commerce, where Chinese consumers sell to overseas consumers. It holds a leading position in that segment. Key lessons. How Taobao kept Ebay out of the market and became China’s dominant e-commerce platform in a relatively short space of time holds lessons for Chinese and western companies alike. First, Taobao provided services and solved problems for the smaller businesses that are the driving force behind China’s economic boom. For instance, Alipay enabled people to pay for goods and services easily. Second, Taobao set up or integrated services that complemented each other and used this ecosystem to create a bar to competition. Third, Taobao identified how to help people buy and sell. By making online shopping easy, safe and fun it helped many first-time online buyers build confidence in e-commerce.

Why You Need to Make Your Life More Automatic (TONY SCHWARTZ)

(original link http://blogs.hbr.org/schwartz/2012/03/why-you-need-to-make-your-life.html?cm_sp=blog_flyout-_-schwartz-_-why_you_need_to_make_your_life) Why is it that three prominent books published just during the past several months focused on the subject of willpower? The first answer is that neuroscience has finally begun to open a window into the complex way our brains respond to temptation and what it takes to successfully exercise choice. Second, a raft of recent studies have shown that the capacity for self-control — even more than genetic endowment or material advantage — fuels a range of positive outcomes in life, including more stable relationships, higher paying and more satisfying work, more resilience in the face of setbacks, better health, and greater happiness. Finally, these books — Willpower, The Willpower Instinct, and The Power of Habit — are a response to an increasingly evident need. Demand in our lives is truly outpacing our capacity. The sheer number of choices we must make each day — what foods to eat, what products to buy, what information merits our attention, what tasks to prioritize — can be overwhelming. As Roy Baumeister puts it in Willpower, "Self-regulation failure is the major social pathology of our time." Each of these books provides compelling studies and fascinating stories that illustrate the challenges we face in exercising more self-control. All of them also come to the same paradoxical conclusion that I did two years ago in a book of my own, Be Excellent at Anything, and that I've often written about here. Put simply, the more conscious willpower we have to exert each day, the less energy we have left over to resist our brain's primitive and powerful pull to instant gratification. According to one study, we spend at least one-quarter of each waking day just trying to resist our desires — often unsuccessfully. Conversely, the more of our key behaviors we can put under the automatic and more efficient control of habit — by building something I call "Energy Rituals" — the more likely we are to accomplish the things that truly matter to us. How different would your life be, after all, if you could get yourself to sleep 8 hours at night, exercise every day, eat healthy foods in the right portions, take time for reflection and renewal, remain calm and positive under stress, focus without interruption for sustained periods of time, and prioritize the work that matters most? Right now, the vast majority of what we do each day occurs automatically. We're often triggered, as these authors make vividly clear, by subtle cues we're not even aware of — a smell, a visual image, a familiar sight. These cues prompt us to move away from any potential pain and discomfort, no matter how minimal, and toward immediate reward and gratification, no matter how fleeting. The primary role of our prefrontal cortex is to bias the brain towards doing the "harder" thing. Unfortunately, our rational capacity is often overwhelmed by the power of our own most visceral and primitive desires. We're often captive to our biochemistry. When the neurotransmitter dopamine is triggered, for example, what we feel is craving, not pleasure. This explains not just why we fall into a range of self-destructive addictions, but also why we don't take better care of ourselves and make wiser choices day in and day out. The solution is to learn how to co-opt the more primitive habit-forming regions of our brains, so that rather than reinforcing our negative impulses, they become the soil in which we build positive rituals that serve our long term interests. So how do you get started? The first step is simply to understand better what you are up against. That requires slowing down. Speed is the enemy of reflection, understanding and intentionality. When we slow down, we can begin to notice both what's driving us, and how to take back the wheel. Eat slower, for example, and you not only begin to notice how rarely you savor the food you eat, but also how often you eat for reasons other than hunger and how rarely you notice when you've had enough. To begin strengthening your capacity for self-observation, take two or three minutes at several designated times a day to breathe in to a count of three and out a count of six with your eyes closed. Notice the thoughts, feelings or sensations that arise, name them, and then let them pass. Return to the breath. You're training mindfulness. We each have an infinite capacity for self-deception — endless ways that the awesome power of our desires cause our prefrontal cortex to defend the indefensible and rationalize behaviors that aren't serving us well. The first step to building willpower and self-control is recognizing how little we currently have. You can't change what you don't notice. BOOKS MENTIONED HERE: Willpower by Roy F Baumeister and John Tierney The Willpower Instinct by Kelly McGonigal Ph.D. The Power of Habit by Charles Duhigg Be Excellent at Anything by Tony Schwartz