EBay fails to crack China crisis

EBay's slice of the $674m consumer-to-consumer business in China has fallen significantly

EBay's consumer auctions in China continue to lose market share despite now being free of charge, according to data from a local market research firm. 

The company's slice of the $674m spent on consumer-to-consumer (C2C) sales in China fell significantly during the past nine months as a smaller rival gained ground, according to figures released yesterday by Beijing-based Analysys International.

Martin Wu, chief executive at eBay China, told AFX News earlier this month that revenue earned by eBay China sellers increased more than 10 per cent in the first quarter, while total revenue for users of China's largest C2C auction firm, Taobao, remained unchanged. 

Although the revenue data from Analysys appears to contradict this statement, it is not clear whether it includes eBay's Stores, which might be classed separately as business-to-consumer transactions instead of C2C.

Analysys confirmed to vnunet.com that the figures it had released were correct, but did not answer a request for clarification of this issue.

In the C2C market, where products are sold by individuals to individuals, Analysys' data shows that eBay users' share of total transaction revenues fell to 28 per cent in the first quarter from an average of 31.46 per cent in 2005.

Revenue generated by C2C sales has risen from approximately $644m in the fourth quarter of last year to $674m in the first quarter of this year, accordin g to Analysys.

The decline continues a trend for eBay. The company was originally the leader in China's online auction market, but the introduction of a free auction service by rival Taobao caused a stampede in the direction of the newcomer in 2004.

In January this year, eBay dropped transaction fees from its basic C2C services in China, but this does not appear to have stemmed the tide.

While the two companies have a broadly comparable number of users, with eBay slightly ahead, the value of C2C business transacted on Taobao still appears to be much greater, according to Analysys.

Despite this, the latest revenue share figures are only mildly encouraging for Taobao. The company's slice of the market remains at around 57 per cent; it has failed to grow during the past year despite absorbing smaller rival 1Pai, which previously held 7.3 per cent of the market.

Taobao is owned by B2C auction giant Alibaba, which is Yahoo's affiliate in China. Yahoo controls 40 per cent of Alibaba, and invested $1bn in the firm last year. 

But the online auction firm which appears to have absorbed all of 1Pai's market share, as well as a piece of eBay's, is newcomer Paipai. 

The company saw its share of revenues leap from zero to 14 per cent in the nine months since it took up the online gavel.

Paipai is controlled by China's dominant instant messaging firm, Tencent, and has attracted many users of the firm's QQ mobile and internet messaging service. 

Country-wide C2C business revenue and user growth both slowed considerably in the first quarter, Analysys' data indicated.

The number of users grew 14.3 per cent quarter-on-quarter to reach 43.29 million. The three previous quarters had all seen growth of 20 to 25 per cent.

Total transaction revenue growth was also much weaker, at 4.66 per cent, compared to between 20 and 40 per cent in the three previous quarters.