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SCMP Reporter

E-commerce portal expects free service to attract more users
Mainland e-commerce portal Tom Eachnet has announced that it will no longer charge sellers for the use of its platform, a move apparently aimed at closing the gap with dominant player Taobao.com.
The change in business model would open Eachnet's online platform to all internet users to build brand awareness and confidence towards online marketplaces, said the company, which is jointly owned by Li Ka-shing's Tom Group and America's largest online marketplace eBay.
Only in August last year, Tom Eachnet chief executive Wang Leilei  said the portal would remain a  fee-collecting business as free service 'is never a business model'.
'A fee-paid model would help us provide tailor-made service to meet customers' need,' he said then.
Tom Eachnet vice-president Chang Lin explained the change reflected the management view on the mainland business model of an e-commerce portal.
'We need to incubate users to be active in using the online platform for transactions,' Ms Chang said. 'The free platform could encourage potential sellers to join our platform, try our service at zero cost. We could also provide our buyers to check the  quality of goods before making payment to ensure our buyers' satisfaction  with our service.'
According to a survey conducted by iResearch, a mainland research house,  Taobao.com accounted for 83.6 per cent  of the mainland C2C (consumer to consumer) electronic commerce  market by the end of last year. Tencent Holdings' Paipai.com had 8.7 per cent, and  Tom Eachnet,  7.7 per cent.
IResearch estimated the market value  of C2C activities  at 51.8 billion yuan (HK$57.88 billion),  up 125.2 per cent over previous year.
Taobao.com,  owned by Alibaba Group, recently  expanded its business from C2C  to business to consumer (B2C).
Previously, most of Taobao.com  users  were sole proprietors as the portal does not charge users listing fees. The newly introduced B2C model introduces several big retailers to join the platform to boost the sales.
IResearch forecasts that the total transaction value of C2C on the mainland could grow  95.7 per cent to 101.4 billion  yuan this year,  while B2C transactions  could rise 86.4 per cent to 80 billion yuan.
The change in Eachnet's business model hinted that the smaller player is under competitive pressure from Taobao.com, which is  no longer solely a transaction platform but  has evolved into an information exchange platform for both sellers and buyers.
'Free model is not the key  factor for  Taobao.com's success,' said Zhu Wei, an internet analyst at China International Capital Corp.  The company generated sales of over 20 billion yuan in the first quarter, up 170 per cent year on year, so it was 'not that easy' for Eachnet to  catch up with Taobao.com by switching to a free model.
Taobao.com 'also generates market data and information for the industry, which should be its most valuable asset', said Mr Zhu, while Tom Eachnet 'could take one or two years to establish its B2C network to boost sales'.
IResearch also believes that the mainland e-commerce could grow robustly in the next two years, citing the B2C model as growth engine.
'As many high-value products such as electrical appliances and diamond join the B2C platform, the sales amount could be much higher than previous years as the C2C model only  allows the sale of low-priced products,' iResearch said in a report last month.
Tom Eachnet claims  it has more than 10,000  members selling their products on the site. The website  attracted 2 million new registrations  in the last quarter. Those  who had paid for  fees this month will be refunded the full amount by the end of the month.
Eachnet  posted a loss of 68.2 million yuan for the year ended December 2005.



Tom Eachnet drops fee-based model to catch up with rival