China Watch Blog

China Watch Blog has learnt that Shanghai will support construction of large e-commerce platforms similar to Taobao.com in a bid to create a national e-business model and accelerate the city’s growth into a global trading center.

Sha Hailin, chairman of the Shanghai Commerce Commission, said yesterday the government will encourage the development of big online platforms for transactions. But unlike Taobao, which has become China’s most popular consumer shopping website, Shanghai’s strength is in business-to-business online platforms.

The city will soon establish a website to serve cross-border trade as well as domestic deals, and will accelerate the construction of online platforms to trade commodities.

Last year, online retail shoppers in Shanghai spent more than 34 billion yuan (US$5.3 billion), or 5.72 percent of the city’s total retail sales, making it the top online shopping market in the country.

China Watch Blog has learnt that by 2020, Shanghai will be built into an international trade center that can aid resource allocation in both domestic and global markets, has prosperous modern services industries, matches China’s economic and trade status among the world in addition to serving the Yangtze River Delta region, the Yangtze River Basin and the whole country.

According to a press conference hosted by Shanghai Municipal Government, Shanghai, as planned, will have a relatively mature core function framework as an international trade center by the end of the 12th Five-Year Plan. The construction of 10 trade and investment promotion platforms, including a national-level convention and exhibition facility platform, an international trade and overseas marketing promotion platform, a national technology import and export platform, an e-commerce platform and a bulk commodity trading platform, will be the city’s focus in building a global trade center.

Shanghai Municipal Commission of Commerce predicted that the city’s annual gross sales of goods will exceed 8.70 trillion yuan by 2015, with an annual growth rate over 20 percent. Total sales of consumer goods will hit 1 trillion yuan, with a growth rate of 15 percent by 2015. E-commerce volume is expected to reach 850 billion yuan, representing 10 percent of the city’s total sales of consumer goods.

In order to improve Shanghai’s competitiveness as an international trade center and to achieve further trade facilitation, the local government vowed to realize an average annual growth of 15 percent for the added value of specialized services industries and form the 10 trade and investment promotion platform systems that serve the whole country from 2011 to 2015. The city also plans to attract 100 multinational companies’ regional headquarters and build a national-level large-scale convention and exhibition site in Hongqiao Business District. Sharing of information and data will be generally achieved, and all relevant government authorities will make their administrative information public and transparent.

Shanghai will enhance the facilitation of commercial and trade public services and invest more in information infrastructure to form a commercial and trade public services platform involving various aspects and serving the whole country.

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.