a cross-cultural analysis about the failure of ebay in chinese market
TRANSCRIPT
A cross-cultural analysis about the Failure of eBay in China
NAWATAT SUWANSINPAN 150239291
MENGXIN LIU 160017582
PENG LIU 160011616
XINMIAO LIANG 160507290
Team Introduction
Agenda
• Chinesemarketisnotdangerous• eBayandTaobao• ThefailureofeBayinChinesemarket• Ananalysisofthefailure
Chineseconsumercharacteris9csCommunica9onTrust-basedrela9onships
• Conclusion• Q&A
Chinese market is not dangerous
• NotallmultinationalcompaniesfailedinChina• Ingeneral,ChinaisopentowardsWesternmultinationals
• AnincreasedpopularityinChinesee-commerce• ChinesemarketisnotasfunctionalasAmerican’s• AkeyistounderstandwhatChinesecustomersareusedtowhilepurchasingproducts
• FirstlaunchedtopublicinMarch1998• Onlineauctionandshoppingwebsite• Peoplebuyandsaleavarietyofproductsworldwide• GloballeaderinonlineC2Cservices(Customer-to-Customer)• EnterChinesemarketin2002• TookoverEachNet(Chinesecompany)
• Localcompe9tor• Onlineshoppingwebsite• TaobaowaslaunchedinApril2003• IntegratedChineseculturesintobusiness• 30millionac9veusersonTaobaobytheendof2006
(PACISProceedings,2008)
Source: Ye , Hu, and Li 2008: PACIS Proceedings. Paper 102.
Time Frame
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Alibaba was established
EachNet was founded
eBay went in China and took over
EachNet
Introduction of PayPal in China eBay has halted in
China
Taobao was launched
Aliwangwang was created
Alipay was created
Taobao owned roughly 84% of market share in
China
Market Shares
Source: Standard Graduate School of Business (2010); Taobao vs. Ebay China, p.17
Mar
ket S
hare
“eBay used the same strategy successfully across the world but not
in China. This is a lack of cultural understanding of eBay.’’
—Prof. Cheng-Hua Tzeng School of Management, Fudan University
eBay could not understand Chinese consumer characteristics.
Markets in China
Markets in China
Markets in the US
Markets in the US
Shopping Behaviour in Supermarkets
Chinese Speaking
customers
English Speaking customers
The table adapted from: Ackerman and Tellis 2001: 57–82
Chinese Speaking
customers
English Speaking
customers
The table adapted from: Ackerman and Tellis 2001: 57–82
Shopping Behaviour in Supermarkets
Numbers of bunches touched per selection Male 4.6 bunches 2.1 bunchesFemale 7.4 bunches 1.4 bunches
Time per selectionMale 38.8 seconds 13.9 secondsFemale 54.2 seconds 7.7 seconds
Observations of other shopping activities
No. of shoppers smelling fruit 13 person 0 person
No. of shoppers digging for fruit 40 person 2 personNo. of shoppers scratching and tapping skin of fruit 17 person 1 person
OBSERVATIONS
Markets in China and the US
• Lengthy-conversa9on• More-interac9on• Pricecanbenego9ated• More-selec9ve
• Short-conversa9on• Less-interac9on• Non-Nego9ableprice• Less-selec9ve
Markets in China and the US
• Lengthy-conversa9on• More-interac9on• Pricecanbenego9ated• More-selec9ve• Shoppingisanentertainment• Findingthebestvalue
• Short-conversa9on• Less-interac9on• Non-Nego9ableprice• Less-selec9ve• Shoppingisatask• Saving9me
Dependent Chinese and Independent Americans
• tendtorelyuponothers• retainacloserela9onshipwithpeoplearoundthem
• feelliVlepressuretoseekotherformsofpsychologicalcomfort
• natureofgroupculture
• self-reliant• acquirematerialcomfortsorovercomethephysicalenvironment
• intensifytheiracquisi9veac9vi9esandcreatemoredevicesfortheirsecurityandsafety
• moreindependent
Source: Hsu’s observation in Sun et al. 2000:156-165.
Chinese People Americans
eBay did not allow buyers to communicate with sellers easily.
Taobao’s user interface
Screenshot from: http://dodri0.tumblr.com/post/101239021220/how-to-use-aliwangwang-to-chat-with-taobao-sellers
Taobao’s user interface
Screenshot from: http://dodri0.tumblr.com/post/101239021220/how-to-use-aliwangwang-to-chat-with-taobao-sellers
A comparison of two website features
• Productphotos• Productdescrip9on• UserreviewsandComments
• Productphotos• Productdescrip9on• Userreviewsandcomments• Instantcommunica9onby
Ali-wang-wang
Pattern of communication
• Complexcommunica9on • Directcommunica9on
AnegotiationviewofWestern
TheDeal
The patterns of negotiation
Party BParty A
Source: Browaeys and Price 2008: 277-280
AnegotiationviewofWestern
Trust-basedRelationships
Giftsandfavours
Bondingviaentertainment
Contractbasedonahandshake
The patterns of negotiation
AnegotiationviewofAsian
TheDeal
TheDealParty BParty A
Party A Party B
Source: Browaeys and Price 2008: 277-280
Communication is a key
• Canbuildupalong-standingrela9onship• Rela9onshipmaybeginbeforedoingbusiness• Furthercommunica9onwillbaseonthedeveloped
rela9onship• Gainingtrustisnecessary
Chineseconsumersare• Selec9ve• Findingthebestvalue
eBay failed to establish trust in transaction process
• Establishmentoftrust• Theemergenceandimportanceof• TheChineserefundsystem
Great trust has been placed on Taobao
• Concern about Internet insecurity ➢ Invasion of privacy ➢ Expose personal details online (e.g. name,
address, bank account)
Establishment of trust
Chinese people lack trust in business transaction process
In the USA: only 21% of Internet users believe that online purchasing data transactions are secure, these same concerns are major issues for Chinese consumers conducting online transactions, and are even amplified as a result of Chinese cultural characteristics. (Nua Internet survey, 2002: 58)
Establishment of trust
The current Chinese banking system is primarily designed to accommodate businesses, especially State Owned Enterprises (SOE).
Chinese banking system has not supported consumer lending practice, meaning Chinese Banks don’t lend money to individual consumers for purchase.
Consequently, Chinese people form the concept of ‘buy when you have cash to pay’
Credit card payment involves more exposure of privacy
Source: Efendioglu and Yip 2004: Interacting with computers 16(1), 59-60
Establishment of trust
Compared with the US, ‘Chinese legal infrastructure is not sophisticated and organised enough’ (Efendioglu and Yip, 2004: 59)
Illegal activities Especially: Fraud
it is unclear: How to be convicted
?
The emergence and importance of Alipay
consumers sellers
● As the third part to protect and guarantee the consumers’ benefits ● A platform to build trust (McKnight et al.) ● Consumers’ money deposited during transaction process ● Money will be paid when a transaction is done with satisfaction about
goods and service
Source: Lu and Zhou (2007)
Dissatisfaction
Refund
Taobao's refund system
ConsumersSellers
Afford the refund cost to maintain lasting business relationship
‘Loss of face’ in rejecting purchase, buy again
• Communication is important for consumers and sellers to establish trust, which can reduce the possibility of refund
Different Payment System
• Payment prior to receiving goods • No communication during
payment process
consumers sellers consumers sellers
• Payment after receiving goods • More communication during
payment process
Conclusion
Notallmul9na9onalcompaniesfailedinChina
• eBaycouldnotunderstandthecharacteris9csofChineseconsumers.
• eBaydidnotallowbuyersandsellerstohaveaninstantcommunica9on.
• PaymentmethodusedbyeBaycouldnotmakeChinesepeopletrust.
• DifferentculturesinChinaandAmerica
• GoodsandServiceIndustry-ServiceAdapta9on(RugmanandVerbeke,2008a-ServiceSa9sfac9on(GarbarinoandJohnson,1999)
Conclusion
Lesson learned
• Understandingtheconsumercharacteris9csisnecessary.
• Cultureisnotexplicitbutpowerful.
• Nocultureissta9c,italwayschanges.
• Rela9onshipcanbeoneofthekeystobesuccessful.
• Goodsandserviceindustriesrequiredifferentapproaches.
References
• Ackerman, D. and Tellis, G. (2001). ‘Can culture affect prices? A cross-cultural study of shopping and retail prices’, Journal of Retailing, 77(1), pp. 57–82.
• Browaeys, M. and Price, R. (2008). Understanding cross-cultural management. 1st edn. Harlow, England: Financial Times/Prentice Hall.
• Efendioglu, A.M. and Yip, V.F. (2004). ‘Chinese culture and e-commerce: an exploratory study’, Interacting with Computers, 16(1), pp. 45-62.
• Lu, Y. and Zhou, T. (2007). ‘A Research of Consumers’ Initial Trust in Online Stores in China’, Journal of Research and Practice in Information Technology, 39(3), pp. 167-180.
• Sun, T. Chen, Q. Fang, T. and Liang, S. (2000). ‘A tale of two cities - A buying behavior perspective’, Advances in Consumer Research, 27(1), pp. 156-165.
• Ye, Q., Hu, Q. and Li, Y. (2008). ‘How organizational culture shapes competitive strategies: a comparative case study of two e-commerce firms in China’. PACIS 2008 Proceedings, Paper 102.
Questions & Answers
