With the launch of the Taobao search engine, ETao.com, Alibaba has launched internet war on Baidu, its leading competitor in the Chinese Internet market.
Baidu is China’s leading search engine with a nearly 80% market share of online search engines in the country. Alibaba is looking to loosen Baidu’s foothold with ETao.com, which will provide Chinese “netizens” with a vertical e-commerce search engine while simultaneously boosting sales for the already successful Taobao B2C platform, which along with other Alibaba subsidiaries accounts for a 90% share of the e-commerce market in China.
Alibaba has already seen results. Baidu recently retracted its proposed launch of “Youa,” an e-commerce site that would have directly challenged Taobao.
While Taobao secures it position as the most successful B2C platform, other e-commerce sites wage a different war. As Dangdang, 360buy and Amazon all claw for the top position in Chinese e-commerce, a “price-slashing” battle has begun. Dangdang recently congratulated itself on “Beheading operation” that cut prices on the site to a level that undercuts many competitors. Others have followed this very same path, with 360buy attacking Dangdang by selling books online (an important product for Dangdang) at a price that almost ensures little to no profit.
If profit is not the motivating factor in this battle, what is? The answer is clear: the larger the market share an e-commerce platform can garner will result in exponentially greater future profits. So, while e-commerce sites compete now, it is the consumer that wins out. Let it be noted that despite this struggle, Taobao still maintains an estimated 20% lead in market share for e-commerce. Alibaba couldn’t be happier.
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