Taobao Opens its First Online Supermarket in Shanghai

Taobao opens its first online supermarket in Shanghai

Taobao, China’s largest online shopping website, has just launched its own online supermarket at chaoshi.taobao.com. Currently on trial in Shanghai, the service is expected to go live in Beijing, Hangzhou, Shenzhen and Guangzhou in the upcoming weeks.

Working with more than 200 merchants in the fast moving consumer goods industry such as Unilever, P&G, Coca-Cola, Pepsi, Nestle and Guangming, Taobao’s online supermarket will offer everything from coffee and biscuits and toiletries to utensils, home electronics and home textiles.

As with most products that you’ll find on Taobao, the pricing is extremely competitive. Delivery is free for purchases above RMB100 and there is a 24 hour delivery guarantee. Seriously, why make your way down to Carrefour when you can now log on and have stuff shipped to you the next day! Think of all the time, cab fares and frustration you’ll save yourself!

The online supermarket concept is not new. The web is littered with failed attempts to combine the convenience of Internet shopping with an old-fashioned grocery store deliver service. The fate of Taobao’s venture may hinge on how successfully the company can warehouse, manage and quickly distribute a diverse inventory of low-margin, high-volume products to thousands of customers. It remains to be seen if consumers will accept Taobao’s estimated 24-hour delivery time, especially for perishable food items. Taobao is “aiming to reduce delivery time to within 12 hours of order placement,” said Ma Xiaojun, the supermarket’s general manager. The company also plans to “increase capacity for evening deliveries in order to meet the lifestyle needs of Chinese consumers,” he said.

A wider selection of grocery items is also planned. “We are aiming to offer fresh (goods) such as seafood, fruits and vegetables after Chinese New Year,” he said. Taobao is currently in talks with additional partners to secure specialized warehouse and delivery capabilities needed to handle fresh produce.

Google vs. Baidu: Faceoff in China!

Google vs Baidu, Who will win China?

Google (GOOG), she says, lost share in China, dropping to 17% in the third quarter, from about 19% in the second quarter.

Google chief executive Eric Schmidt (L) and ex-President of Google China Kai-Fu Lee

Lee scurried to set up an office for his incubator, raise a fund and assemble a team from thousands of job seekers. Lee’s PR reps in China and the Valley hyped his new project as his fulfillment of a dream to coach young Chinese entrepreneurs and support their best start-up ideas.

DangDang - Amazon of China!

It shouldn’t be all that surprising to see a big American brand being one-upped by a local competitor. Indeed, the story of a home-grown Chinese start-up triumphing over an iconic Internet rival is by now a familiar theme.

Just like Chinese search engine Baidu trumped Google, online bookseller Dangdang (当当网) outsmarted Amazon in China (卓越亚马逊) with better merchandising skills while Alibaba-owned Chinese auction site Taobao (淘宝网) took the lead from eBay by giving sellers a free listing of their goods and charging only for premium accounts.

Taobao, eBay of China!

What helped was being on site to respond to China’s fast-moving marketplace rather than in a faraway office on the other side of the Pacific.

And Baidu is trying to extend its search dominance on mobile phones, an area where Google has done well in China, thanks to a search deal with China Mobile, the nation’s largest carrier. In October Baidu announced a deal to provide mobile search to customers of China Unicom‘s (CHU) 3G services, and it also is testing a mobile app that features Baidu’s some most popular online tools, including a message board service. China Unicom—the country’s second largest mobile carrier—signed a three-year deal with Apple this summer to bring the iPhone to China.

Baidu to Provide Wireless Search for China Unicom's 3G Subscribers

Tech analaysts in China have said Google has done a good job understanding the nuances of the Chinese language. (Google hasn’t fared as well in Russia, where rival Yandex dominates thanks, in part, to its ability to accommodate the peculiarities of the Russian language.) Some users also say Google delivers a better search experience: Baidu had been criticized for mixing ads and organic search results on the same confusing page.

Baidu benefits from incumbent status (it formed in 2000, while Google China didn’t get going until 2006 –after Google sold a modest share in Baidu) and, its executives say, a set of tools that help Chinese users get information – not just search results. A tool called Baidu Post Bar it a bit like a social-networking application that allows users to tap other folks online for advice or comments as they are searching for, say, the best appliance to buy.

But no one, least of all Baidu executives, assumes Google is content with its position in China today. “We don’t underestimate their technology or their ability,” says Baidu CFO Li.

And while Baidu, for now, seems content to focus on search (CEO Robin Li likes to point out that the company’s other services – maps, mail, Baidu Post – all help enhance the search experience) Google’s ambitions in China go well beyond traditional online advertising and search. The company is widely believed to be looking for multiple ways to introduce its Android mobile operating platform in China, and recent reports suggest it may look to open an Android application marketplace in China.

Google to Launch Chinese Android Market?

For now, though, Google must live with its second-banana status in China. According to various Chinese news outlets, Google China issued a news release listing the most popular searches in China in 2008. The most searched term among Google users in mainland China? Baidu.

“Baidu” tops most searched terms on Google China
Baidu tops the most searched terms on google in China, according to a report-”Hottest Words by Chinese Mainland, Hong Kong, Macao and Taiwan 2009″ -Google China released Wednesday. Among stocks, Vanke A share, China Unicom and Ping An of China were the most searched for. Shanghai Composite Index, fund, exchange rate Growth Enterprise Board, and paper gold were among the top economic search terms. Google users were also curious about the prices of gold, airplane flights, steel and petrol.

Internet expert Xiewen said the report reflected Google’s generosity as well as its own flaws in China.

The report also released the most searched “economic search terms”. Shanghai Composite Index, fund, exchange rate Growth Enterprise Board, and paper gold were on the list.

In addition, it is noteworthy that Internet companies occupy the top ten “hottest searched words by mainland users” and three of them are Chinese online video sites. The emerging social website “kaixin001.com“,”xiaonei.com (now renren.com)” are also on the list, according to the report.

Taobao: eBay of China

Taobao CEO: Jack Ma

Ge Hongjun started a shop on Taobao.com (Chinese: 淘宝网) — China’s answer to eBay — as a class project but he now sees it as his ticket to becoming a retail magnate after graduation.

Taobao’s growing popularity has captured the imagination of students like Ge, but also giants like Dell, Uniqlo(ユニクロ), Procter and Gamble, and Chinese firms seeking to step from the shadows after years of manufacturing for US and European labels.

The e-commerce site, whose name means “treasure hunt” in Chinese, is a source for everything from turkeys to televisions, with 80.9 billion yuan (11.8 billion dollars) in 2009 first-half sales.

Taobao.com, China’s largest online auction and retail Web site

Taobao.com

That is double the same period last year and higher than Amazon.com‘s over the same period.

Taobao charges nothing to list items for sale and the site’s revenue comes from advertising.

It does not release turnover figures, but Goldman Sachs estimates revenue will likely hit 200 million dollars this year.

Taobao — a division of Hong Kong-listed Alibaba.com (Alibaba Group is 40 percent owned by U.S. search titan Yahoo Inc), a business-to-business e-commerce company — launched in 2003 when eBay controlled 90 percent of the Chinese online shopping market after buying Shanghai-based EachNet.

Taobao forced eBay out of China with free listing

Taobao now controls 82.8 percent of China’s online shopping market, according to iResearch, a Chinese consultancy. E-commerce accounted for only 1.9 percent of all product sales in China, the firm said, but is growing fast.

Official data this week showed online sales in China nearly doubled in the first nine months of this year to 168.9 billion yuan as consumers become more confident about Internet shopping.

China has at least 338 million Internet users, the most in the world.

Taobao president Jonathan Lu said convenience and a greater price consciousness amid the economic crisis had boosted consumer acceptance of Taobao.

This year, for the first time, household goods became Taobao’s top selling category, Lu said.

“What is most interesting is the level of mainstream acceptance of using online retail channels to shop for everyday items, a trend both prominent global brands and small businesses have recognized,” Lu said.

Unlike in the U.S., where established companies like Barnes & Noble Inc. and Apple Inc. moved early to woo online customers, retailers and consumer brands in China largely ignored the Internet.

Procter and Gamble started selling Rejoice shampoo, Olay skin cream and Gillette shaving products on Taobao earlier this year at discounts of 20-30 percent to attract customers and build market share.

UNIQLO (ユニクロ)

Computer makers Dell and Lenovo also introduced Taobao sales channels.

Companies like Qilong Trading Company, a previously anonymous company that in the past only manufactured for international brands, are also using the site to develop their own labels, Taobao said in its latest trading update.

Li Ning is China's top domestic sportswear brand

Li Ning, whose products are endorsed by NBA star Shaquille O’Neal, sells mainly through its more than 6,800 stores across China. In April of last year, it opened its own channel on Taobao’s site, an experience that helped it learn strategies to address obstacles to online sales in China. For example, many Chinese consumers have resisted buying goods online out of concern about scams or faulty merchandise. Also, credit cards are rare—when someone buys something online in China, they typically pay cash upon delivery.

Alipay to become world’s No 1 e-payment firm

Alipay 支付宝

They see the site as a way to develop an identity and tap into rising Chinese consumer spending power, Taobao said. China’s No. 1 online payment firm Alipay is expected to top eBay Inc’s unit, PayPal, by transaction value in two years, to become the world’s leading e-payment service, according to Alipay’s president, Polo Shao.

Ge and thousands of small Taobao vendors are riding that same wave.

“It is difficult to say how much I can earn because I just started and haven’t got a stable business model yet,” Ge said, “but I am determined to succeed.”