Taobao under fire as online vendors undercut stores

PUBLISHED : Thursday, 28 July, 2011, 12:00am
UPDATED : Thursday, 28 July, 2011, 12:00am


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Taobao, the mainland's biggest internet retail services provider, is embroiled in a conflict between online vendors and traditional oats merchants.

On July 19, about 100 traditional retailers of oats and various oat-based products - made by Sanzhuliang, a company based in Inner Mongolia - staged a protest in front of Taobao's headquarters in Hangzhou to demand that the company's online vendors stop selling the same brands at lower prices.

The protesters carried banners that read 'Taobao harms national brand' and 'Say No to Dumping'. They also blocked the company's front gates and managed to barge into the company's second floor, according to Xinhua News Agency.

'Shanhuolang', the top online vendor among over 60 oats sellers on the Taobao Marketplace portal, had priced the Sanzhuliang brand of oats at 78 yuan per kilogram. That is a steep discount from the 136 yuan per kilogram that traditional merchants charge for the same product.

Sanzhuliang announced on its website that the online sales of its brand at lower prices damaged its interests and those of its retailers, according to the state news agency.

Florence Shih, a spokeswoman for Alibaba Group, an e-commerce giant and the parent of privately held Taobao, said this was the first time that low-priced goods sold online had been raised as an issue against the company.

'Taobao Marketplace treats all sellers operating on our platform with equality and respect, regardless of the size of their business, and we will continue to ensure that the interests of all customers and merchants are protected,' Shih said.

She said that Taobao was continuing its dialogue with the merchants and the product supplier involved in the matter.

'We are committed to working with brand owners to protect their intellectual property rights,' she said.

'But in terms of distribution channel conflicts, we suggest that brand owners communicate and resolve any issues with their distributors,' Shih said.

According to a Deutsche Bank report, e-commerce was growing rapidly on the mainland and online shopping would reach 1.5 trillion yuan (HK$1.8 trillion) by 2014.

'Chinese consumers are in the midst of a behavioural shift, migrating an ever-increasing amount of their buying online,' it said.

Taobao estimated it had more than 370 million registered users and over 800 million product listings.

It sold an average of 48,000 items per minute last year, as more consumers in inland provinces shopped online.

According to mainland internet market analysis firm iResearch, Taobao accounted for 90.5 per cent of the consumer-to-consumer online shopping segment in the first quarter this year.