An analysis of cross-cultural issues that led eBay to failure in Chinese market.

1. A cross-cultural analysis about
the Failure of eBay in China

2. NAWATAT SUWANSINPAN
150239291
MENGXIN LIU
160017582
PENG LIU
160011616
XINMIAO LIANG
160507290
Team Introduction

3. Agenda
• Chinese market is not dangerous
• eBay and Taobao
• The failure of eBay in Chinese market
• An analysis of the failure
Chinese consumer characteris9cs
Communica9on
Trust-based rela9onships
• Conclusion
• Q&A

4. Chinese market is not dangerous
• Not all multinational companies failed in China
• In general, China is open towards Western
multinationals
• An increased popularity in Chinese e-commerce
• Chinese market is not as functional as American’s
• A key is to understand what Chinese customers are
used to while purchasing products

5. • First launched to public in March 1998
• Online auction and shopping website
• People buy and sale a variety of products worldwide
• Global leader in online C2C services (Customer-to-Customer)
• Enter Chinese market in 2002
• Took over EachNet (Chinese company)

6. • Local compe9tor
• Online shopping website
• Taobao was launched in April 2003
• Integrated Chinese cultures into business
• 30 million ac9ve users on Taobao by the end of 2006
(PACIS Proceedings, 2008)
Source: Ye , Hu, and Li 2008: PACIS Proceedings. Paper 102.

7. 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

8. Market Shares
Source: Standard Graduate School of Business (2010); Taobao vs. Ebay China, p.17
MarketShare

9. “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

10. eBay could not understand
Chinese consumer characteristics.

11. Markets in China

12. Markets in China

13. Markets in the US

14. Markets in the US

15. Shopping Behaviour in Supermarkets
Chinese
Speaking
customers
English
Speaking
customers
The table adapted from: Ackerman and Tellis 2001: 57–82

16. 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 bunches
Female 7.4 bunches 1.4 bunches
Time per selection
Male 38.8 seconds 13.9 seconds
Female 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 person
No. of shoppers scratching and tapping skin of fruit 17 person 1 person
OBSERVATIONS

17. Markets in China and the US
• Lengthy-conversa9on
• More-interac9on
• Price can be nego9ated
• More-selec9ve
• Short-conversa9on
• Less-interac9on
• Non-Nego9able price
• Less-selec9ve

18. Markets in China and the US
• Lengthy-conversa9on
• More-interac9on
• Price can be nego9ated
• More-selec9ve
• Shopping is an entertainment
• Finding the best value
• Short-conversa9on
• Less-interac9on
• Non-Nego9able price
• Less-selec9ve
• Shopping is a task
• Saving 9me

19. Dependent Chinese and
Independent Americans
• tend to rely upon others
• retain a close rela9onship
with people around them
• feel liVle pressure to seek
other forms of psychological
comfort
• nature of group culture
• self-reliant
• acquire material comforts or
overcome the physical
environment
• intensify their acquisi9ve
ac9vi9es and create more
devices for their security and
safety
• more independent
Source: Hsu’s observation in Sun et al. 2000:156-165.
Chinese People Americans

20. eBay did not allow buyers to
communicate with sellers easily.

21. eBay’s user interface
Screenshot from: http://www.aboutdm.com

22. Taobao’s user interface
Screenshot from: http://dodri0.tumblr.com/post/101239021220/how-to-use-aliwangwang-to-chat-with-taobao-sellers

23. Taobao’s user interface
Screenshot from: http://dodri0.tumblr.com/post/101239021220/how-to-use-aliwangwang-to-chat-with-taobao-sellers

24. A comparison of two website features
• Product photos
• Product descrip9on
• User reviews and Comments
• Product photos
• Product descrip9on
• User reviews and comments
• Instant communica9on by
Ali-wang-wang

25. Pattern of communication
• Complex communica9on • Direct communica9on

26. A negotiation view of Western
The Deal
The patterns of negotiation
Party BParty A
Source: Browaeys and Price 2008: 277-280

27. A negotiation view of Western
Trust-based
Relationships
Gifts and favours
Bonding via
entertainment
Contract based
on a handshake
The patterns of negotiation
A negotiation view of Asian
The Deal
The Deal
Party BParty A
Party A Party B
Source: Browaeys and Price 2008: 277-280

28. Communication is a key
• Can build up a long-standing rela9onship
• Rela9onship may begin before doing business
• Further communica9on will base on the developed
rela9onship
• Gaining trust is necessary
Chinese consumers are
• Selec9ve
• Finding the best value

29. eBay failed to establish trust in
transaction process

30. • Establishment of trust
• The emergence and importance of
• The Chinese refund system
Great trust has been placed on Taobao

31. • 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)

32. 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

33. 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
?

34. 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

35. 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

36. 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

37. Conclusion
Not all mul9na9onal companies failed in China
• eBay could not understand the characteris9cs of Chinese
consumers.
• eBay did not allow buyers and sellers to have an instant
communica9on.
• Payment method used by eBay could not make Chinese
people trust.

38. • Different cultures in China and America
• Goods and Service Industry
- Service Adapta9on (Rugman and Verbeke, 2008a
- Service Sa9sfac9on (Garbarino and Johnson, 1999)
Conclusion

39. Lesson learned
• Understanding the consumer characteris9cs is necessary.
• Culture is not explicit but powerful.
• No culture is sta9c, it always changes.
• Rela9onship can be one of the keys to be successful.
• Goods and service industries require different approaches.

40. 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.

41. Questions & Answers