Taobao Mall Teams (Alibaba Group) With Rivals
BEIJING—Taobao Mall Co., a unit of Chinese e-commerce giant Alibaba Group Holding Ltd., said Monday that it would allow 38 Chinese online retailers to open virtual stores on its site, in a strategy shift as the country's largest online retail platform looks to team up with its smaller rivals.
The unit's top executive also said in an interview that the business doesn't need to seek a public listing to fuel growth despite the growing war chests of a number of its rivals, including 360buy.com operator Beijing Jingdong Century Trading Co.
Embracing the smaller retailers marks a new strategy for Taobao Mall, which in the past has mostly focused on hosting stores for retail brands such as Dell Inc. and Fast Retailing Co.'s Uniqlo. Among the business-to-consumer retail websites that will open stores on Taobao Mall are Vancl.com, an online clothes retailer, and Yihaodian, which sells items like groceries and electronics and in which Wal-Mart Stores Inc. in May said it would buy a stake.
Taobao would also be willing to host stores for other websites like Jingdong or E-Commerce China Dangdang Inc., an online book retailer that listed in the U.S. in December, though it hasn't discussed the possibility with either of those companies, Taobao Mall President Daniel Zhang said in an interview.
Alibaba Group in June split its Taobao business into three companies: Taobao Mall, a platform for retailers to sell to consumers; Taobao Marketplace Shopping Online , which operates the flagship Taobao business linking individual buyers and sellers; and eTao, a service for searching across Chinese shopping websites.
"We never forbid other business-to-consumer sites to open storefronts on Taobao. But this is the first time we officially invite those sites to come here to work with us," he said.
Taobao Mall itself won't sell merchandise or become a retailer, and the market is big enough for other retail sites to have a virtual store on Taobao in addition to their own websites, he said.
Taobao Mall is China's top business-to-consumer online retail site by market share, according to research firm Analysys International, while Jingdong is No. 2.
The move comes as Taobao faces toughening competition from a growing list of rivals that includes some raising substantial funds to expand. Jingdong, which sells a wide range of goods on its 360buy.com retail site, hopes to raise as much as $4 billion to $5 billion from an initial public offering in the first half of 2012, people familiar with the situation said this month.
Mr. Zhang said Taobao Mall has no current plans to seek an IPO as the company has enough capital and needs to focus instead on expanding its market share. "So far we don't have any plan [to] IPO, because we don't need it," he said.
Mr. Zhang said Taobao Mall's low cost structure allows it to be "quite profitable" but declined to give figures. Taobao Mall said it aims for the value of transactions on its site to reach 100 billion yuan ($15.7 billion) this year and 200 billion next year. The company gets most of its revenue from sales commission,s and its revenue is also likely to double as its transaction value doubles, Zhang said.
Alibaba Group Chairman Jack Ma this month said the company hopes to increase the combined volume of transactions on its Taobao Marketplace and Taobao Mall, already two of China's most popular consumer e-commerce websites, to 1 trillion in 2012, from nearly 400 billion last year.
To boost its market share, Taobao Mall will continue to invest in branding, attracting new users and infrastructure for purposes such as order fulfillment and customer protection, Mr. Zhang said.
Taobao Mall also said it will revise site policies to boost customer service and protection, including by raising the security deposit it requires of merchants. Taobao hasn't finalized the increase but is considering raising the deposit to several times its current level of 10,000, Mr. Zhang said. The funds will be used to compensate users in the case of poor service, such as if a user buys an item only to be told the store doesn't have it in stock, he said.
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