China Watch Blog has learnt that China’s e-commerce giant Alibaba Group Holding Ltd reorganized its online retail unit Taobao into three separate companies, a move that highlights the company’s fighting back to rising e-commerce rivals amid fierce competition.
Taobao will be split into Taobao Mall, which enables businesses to sell to customers, Taobao Marketplace where consumers trade with each other, and the shopping-related search engine eTao, the China Daily reported the company as saying.
The reorganization will help Taobao to deal with its different business models and fend off competition from companies, such as Dangdang.com and 360buy.com, analysts said.
“We must continually test new organizational structures to discover new approaches and models that fit the development of Internet businesses,” Jack Ma, chairman and chief executive officer of Alibaba Group, said in a letter to employees.
The three companies will have their own management and operate as wholly owned subsidiaries under Alibaba Group, which owns Taobao.
Taobao started as a marketplace for consumers to buy and sell goods to each other. It now controls 80 percent of China’s online retail market with 370 million registered members.
However, this marketplace, where many individuals trade, is difficult to manage. Meanwhile, the business-to-consumer model, which has been adopted by companies like Dangdang and 360buy, has become increasingly competitive, with high transactions volumes and high profit margins.
“The splitting up of Taobao will help it leverage the business-to-consumer model,” said Chen Shousong, an analyst with the domestic research company Analysys International.
As early as November, Alibaba launched a new domain for Taobao Mall to separate it from the Taobao Marketplace, giving Taobao Mall more visibility.
China’s online retail market has seen booming growth in recent years, reaching 461.1 billion yuan ($71.2 billion) in sales last year after growing by 75 percent from 2009, according to the Beijing-based research company iResearch.