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eBay gambles on offering free services in China(Business Daily Update)Author: g eBay Inc's move to offer certain free services to some users in China is a gamble aimed at fending off competition from its main rival, online auction site Taobao.com, analysts said. "(Ebay is) desperately trying to win back their user base," said Edward Yu, president of Beijing IT research house Analysys International. eBay announced on December 20 that it would allow users to set up "online stores" on its site in China free of charge. eBay China's online stores -- of which there are currently around 100,000 -- offer advanced functions such as inventory listings to help users manage their online business. These features are generally for higher volume users. Regular eBay users in China, however, will remain subject to the usual listing fees and a commission on their sales. Jim Sun, an analyst with Evolution Securities in Shanghai, sees the move as a short-term bid to regain lost market share. "They're trying to get more market share. In the short term, they're competing on price," he said, adding that eBay had already lowered its fees to users this year. Taobao, which is a subsidiary of privately-held Alibaba.com, offers its full range of services free of charge to users. Analysys International said Taobao held a 57.1 percent share of the market in terms of gross merchandising volume for the first three quarters of this year. eBay's share stood at 34.1 percent. eBay led the market with a user base of 29.8 million, with Taobao close behind in second. But Analysys predicted Taobao will surpass eBay in both user base and transaction volume in the first half of next year. eBay spokesperson Lillian Wu said that the decision to make online stores a free service came after several months of discussions with focus groups of eBay users across China. Analysys' Yu said he views the move as an "interim tactic" as eBay regroups and decides on a long-term strategy. But he said that it would be "very difficult to reverse" the momentum Taobao has gained in this market. He added that eBay's payment system, PayPal, still enjoys stronger relationships with banks and higher purchase limits than Alibaba's AliPay. "In the future (these two companies) will be competing on those kinds of details," he noted. Yu said that eBay may be able to differentiate itself from Taobao by leveraging its global presence and offering users in China access to global goods not available on the mainland. |