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Chinese online startups still see Taobao as main launchpad to success
Publication Date : 05-10-2012
Unlike most of his peers, who were looking for decent jobs with state-owned enterprises, multinational companies or government-funded institutions, when Wang Jiaxing graduated from university in 2010, the 23-year-old student was already running an online box-selling business with annual sales of more than 2.4 million yuan (US$380,000).
At first, operating a store on Taobao, China's largest customer-to-customer online platform, was just a hobby for Wang, but he decided to try and make it his career and now the annual trade volume is around 24 million yuan and he has over 40,000 clients all over the country.
"I could have got a job with a state-owned company, which would have been well-paid and stable," Wang said. "However I thought a job like that would be too monotonous and it would be more interesting work running a store on Taobao."
Even though his father owns a box-making factory which he may one day deal with, Wang's focus is on his own business.
"I think successful businessmen are not necessarily the smartest people, they are the most focused ones," Wang said. "And I am that kind of person."
There are many young people like Wang, who regard Taobao as the best way to start a successful company. They come from all over China, especially Zhejiang province, where Taobao and its parent company the Alibaba Group are based.
In September, Peking University and Aliresearch published a joint research report of online shops' owners, which shows that more than 80 per cent of the store owners on Taobao were born between 1981 and 1994.
"In the past there were two types of jobs that graduates considered ideal, stable jobs with governments or state-owned enterprises, or well-paying jobs with big transnational corporations or financial institutions," said Chen Yu, director of the China Institute for Occupation Research at Peking University. "However, for young people today, starting their own business seems to be another attractive career path."
Nie Yurong, 24, a clothes designer, had an offer from a university in London, but she gave up the opportunity to study overseas as her online store was doing well.
Nie and her small team operate a store selling her brand "Uare", which had a total trade volume of 1 million yuan last year. The figure is expected to be more than double that this year. Now the designer is preparing to open her first non-online store.
Nie said running her Taobao store was a good learning experience, as she got to talk to customers directly and she had to negotiate with suppliers and manufactures herself.
"For startups, Taobao is a very good place to begin because they don't have to pay anything if they have no marketing plan," said Chen Shousong, an analyst at the Beijing-based research firm Analysys International. "Taobao also has a fully-fledged business system for displaying products, receiving payments and customer service, all of which make it easier for startups."
Moreover, the situation for startups on Taobao is relatively fair.
"What counts is only the quality of goods and services. This suits youngsters very well," said Chen Yu of the China Institute for Occupation Research.
However, the Taobao model is not without its problems.
"Some of our customers cannot see the value behind the designs," said Nie. "Taobao is famous for low prices, and some of our customers ask us, 'Why are your goods so expensive?' But the price is already very low when you consider the design costs."
"There are also lots of stores copying my designs, and without the design costs they can offer lower prices which makes it very difficult to compete with them," Nie added.
But despite the problems Taobao has nurtured many successes over the years and more and more young people want to try and emulate that success.
Formed in 2003, Taobao's market share was 94.5 per cent at the end of June, according to the China e-Business Research Centre.
However, with more and more offline retailers launching e-commerce businesses on Taobao, it is not so easy for startups to succeed. To meet the demand, Taobao launched a business-to-customer platform called Tmall at the beginning of this year, in a bid to attract more offline retailers. Many box-making factories which used to be Wang's suppliers now have their own stores on Taobao.
Chen Shousong said if startups want to compete in the new environment, they will need to invest more than they did before and they will need to be more professional.
"They need to find quality products and get low prices from suppliers. They need to market themselves through online advertising and they must provide a good customer service."
But with 15 million transactions on Taobao every day, there are plenty of young people willing to give it a try.
US$1 = 6.28 Chinese yuan