Alibaba boost for Taobao Mall

PUBLISHED : Tuesday, 18 October, 2011, 12:00am
UPDATED : Tuesday, 18 October, 2011, 12:00am


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Mainland internet giant Alibaba Group will invest up to 1.8 billion yuan (HK$2.2 billion) in privately held subsidiary Taobao Mall to support the small merchants that do business through the country's biggest online shopping platform.

Group chairman and chief executive Jack Ma Yun unveiled the spending programme yesterday in an apparent response to heated protests made by thousands of small online vendors against Taobao Mall's recently announced plan to raise its service fees by January 1 next year.

The Ministry of Commerce intervened in the intensifying dispute over the weekend when it advised the management of Taobao Mall, which hosts about 50,000 registered online sellers, to listen to the complaints raised.

'The media has made a big deal of the price increase, saying we are driving out the smaller sellers,' Ma said.

'We admit there were problems with our decision-making and we didn't do a good job in communication.'

At a press briefing in Hangzhou, Taobao Mall president Daniel Zhang Yong said the sharp increase in fees as well as hefty merchant security deposits has been delayed for nine months.

Most of Taobao Mall's existing merchants will not have to pay the higher rate until October 1 next year.

That transition period will not apply to online merchants who rank in the bottom 10 per cent of customer satisfaction rankings.

Ma announced that Alibaba Group will inject one billion yuan into a so-called consumer protection fund, to be managed by the Bank of China, that will help pay for refunds to consumers who are unhappy with Taobao Mall merchants' goods and services. That fund will serve as a temporary backstop if online retailers refuse to provide compensation.

After October 1 next year, refunds will be covered by merchant s' security deposits.

Alibaba Group, which is the parent of Hong Kong-listed business-to-business e-commerce provider, will also provide 500 million yuan in loan guarantees to help qualified small businesses borrow from banks if they are struggling to pay the higher service fees.

In addition, about 300 million yuan will be allocated for brand-awareness marketing.

Taobao Mall earlier announced a rise in annual technical service fees of up to 60,000 yuan from 6,000 yuan at present. The service fees are refundable if retailers achieve certain sales volumes or high positive-feedback levels from customers.

The company also required merchants to put down security deposits of up to 150,000 yuan, which are subject to forfeiture if independent online sellers fail to live up to the platform's product quality and customer service standards.

'Our principle is to safeguard e-commerce integrity, to fight against fakes and IPR infringement,' Ma said.

Zhang estimated that up to 5,000 small merchants may ultimately leave Taobao Mall owing to the higher fees. The company planned to help these vendors switch over to Taobao Marketplace, a unit of Alibaba Group that is geared for small transactions and group-buying activities.

Taobao Mall expected to gener- ate up to 200 billion yuan in sales next year.