Going local no help for eBay in China

A new alliance with a local company has not yet paid off for online auction firm eBay as it continues its efforts to break into China's $4bn consumer-to-consumer (C2C) auctions market, according to new market research.

EBay China's market share fell from 16 per cent to 7.2 per cent during the first six months of this year, despite signing a joint venture deal with Hong Kong-based Tom Group which gave the latter a controlling share in eBay's Chinese operation.

The figures come in a new report on second-quarter C2C market performance from China-based consultancy Analysys International.

In sharp contrast, China's dominant C2C auction firm Taobao increased its share of sales from 74 per cent to 82.95 per cent.

Taobao is owned by Alibaba, China's largest online business auction firm. Taobao's increased market share mirrored eBay's losses.

Local newcomer Paipai maintained its nine per cent share of the market, with no other company holding a significant stake, according to Analysys.

Analysys researchers suggested that the sharp drop in eBay China's market share might have been made worse by the need to "transfer the website and server to its new local transaction platform".

Since last December, eBay in China has operated as a joint venture in which Tom Group owns a 51 per cent share to eBay's 49 per cent.

Other western internet firms, including Yahoo and MySpace, have similarly taken minority stakes in the Chinese firms that operate under their brand names.

Like Yahoo, eBay's move to seek local help came after its China venture failed to match the dominance of its international operation. However, in eBay's case, the move seems to have been followed by a sharp reduction in its market share.