Occupy Taobao – Venders protest over e-commerce woes
By Huang Daohen
Tens of thousands of disenfranchised Americans have “occupied” Wall Street over the last few weeks to protest the country’s high unemployment and other problems.
Now vendors at China’s leading online marketplace Taobao are taking it to the next level. Many have been placing and canceling huge orders with their big-brand competitors and causing their rankings to plummet with negative feedback.
The raid, triggered by a Taobao policy change, may have exposed the belief of a level e-commerce market as a myth.
On the warpath
The “war” between small venders and bigger business owners in the Taobao Mall, an online marketplace with 40 million users, 50,000 businesses and 70,000 brands, has not gone unnoticed.
In the past week, 50,000 people claiming to have small-scale businesses on Taobao Mall ganged up to sabotage the stores of larger retailers, taking out massive orders and clogging up the network with returns.
The returns also came with negative feedback, crushing the online sellers’ ranking in the marketplace.
Many brand resellers have been affected, including those for the clothing chains GXG and Uniqlo, who sell more than 100 million yuan of clothing through the online mall each year.
Zhu Jingnan, manager of French dress shop GXG, said the vengeful purchases last week might cost the company 500,000 yuan in lost sales. But Zhu said he was more worried about the negative feedback, which could diminish his business’ ability to compete.
Taobao said that more than 10,000 orders were returned to the large vendors on Wednesday night alone. On most days, the store sees fewer than five returns.
But the venders were never the real target: Taobao was.
On October 10, Taobao announced it would increase its annual membership fee from 6,000 yuan to between 30,000 and 60,000 yuan. Its compulsory cash deposit would also be increased from 10,000 to as much as 150,000 yuan, effectively sweeping all small businesses off the site.
The price hike led many vendors to believe Taobao was in cahoots with the big name brands. Many met online to form an “anti-Taobao union” and raid the larger vendors.
Zhou Miaomiao, a small bags vender from Wenzhou, Zhejiang Province, was among the participants.
“Though I can understand a possible increase, a 10-fold hike would shut me down,” she said.
Jack Ma Yun, founder and president of Taobao’s parent firm Alibaba, compared the protest to Nazis.
“I logged on to the Internet and saw people shouting Nazi-like slogans of ‘Get rid of everything! Destroy everything!’” Ma said.
Ma’s questionable understanding of Nazi slogans aside, Zhou said that Taobao’s new policy is destroying not only the community of small vendors, but the very lifeblood that makes the Taobao marketplace so prosperous.
“It’s truly unfair. We were the ones that helped Taobao prosper in the first place,” Zhou said.
Zhou said she could never afford the new costs with the scale of her business. She plans to give up and close her store if Taobao insists on raising its fees.
To be delayed
But there may be some good news for vendors like Zhou.
Alibaba said Monday that it will delay the new fees and give small vendors a 9-month grace period.
The company also said it would invest 1.8 billion yuan in the Taobao Mall to help small vendors increase the scale of their business.
However, new vendors at the mall will have to pay the increased fees starting from January 1, the statement said.
Taobao’s move may have less to do with listening to its users than listening to the Ministry of Commerce. The government authority, which has been active in encouraging small business growth, stepped in over the weekend and told Taobao to respond to its users.
The anti-Taobao union has also postponed its raids.
“Since the government has stepped in, we will suspend our attack. We believe the government will ensure our fair treatment,” the union saind in an online statement.
However, some small vendors were determined to continue their guerrilla raids on storefronts.
Growing pains
The temporary victory of the vendors could be bad for the industry.
Taobao’s decision to raise its fees was completely in line with market logic, said Kang Yan, a senior analyst at Accenture in Beijing.
Raising the access threshold at Taobao Mall would remove a lot of substandard and gray market stores.
“It is not only an effective measure to attract and hold consumers and users, but also provides an edge for future competition,” Kang said.
Business-to-consumer sales in China totaled 54.2 billion yuan during the second quarter of this year, up 170 percent year-on-year, according to statistics from IT consulting firm Analysis International.
Taobao Mall, founded in 2008, accounts for 33 percent of the volume. It is trailed by 360buy.com and Amazon.cn.
But the site has long been known as a paradise for hawkers of counterfeit goods, Kang said. Quality problems and complaints about the service are legion, and media reports of fraud are the norm.
“The fee hikes will force small shops to focus on product quality and the services needed to create a sound commercial environment,” Kang said.
If the move is so right, then why is Taobao being seen as so wrong?
Kang blamed its on the e-commerce industry’s coming of age. The industry has been developing rapidly for 11 years and has an annual turnover of more than 4 trillion yuan.
But Kang said it is largely self-regulated. Relevant laws remain sketchy, and many areas of the industry are entirely ignored by the government.
The Consumer Protection Act, created in 1994, has no clause about Internet transactions. At the time it was written, the Internet as users understand it today hardly existed.
“When a dispute does make it to court, insufficient evidence and holes in the law ensure it will be thrown out,” Kang said.
In Taobao’s early years, Jack Ma acted as a moderator when disputes arose between Taobao’s users and vendors. But as a businessman, Ma said he never found a solution that all the parties could accept.
By Huang Daohen
Tens of thousands of disenfranchised Americans have “occupied” Wall Street over the last few weeks to protest the country’s high unemployment and other problems.
Now vendors at China’s leading online marketplace Taobao are taking it to the next level. Many have been placing and canceling huge orders with their big-brand competitors and causing their rankings to plummet with negative feedback.
The raid, triggered by a Taobao policy change, may have exposed the belief of a level e-commerce market as a myth.
A man walks past an advertisement for Taobao Mall. Kevin Lee/CFP
On the warpath
The “war” between small venders and bigger business owners in the Taobao Mall, an online marketplace with 40 million users, 50,000 businesses and 70,000 brands, has not gone unnoticed.
In the past week, 50,000 people claiming to have small-scale businesses on Taobao Mall ganged up to sabotage the stores of larger retailers, taking out massive orders and clogging up the network with returns.
The returns also came with negative feedback, crushing the online sellers’ ranking in the marketplace.
Many brand resellers have been affected, including those for the clothing chains GXG and Uniqlo, who sell more than 100 million yuan of clothing through the online mall each year.
Zhu Jingnan, manager of French dress shop GXG, said the vengeful purchases last week might cost the company 500,000 yuan in lost sales. But Zhu said he was more worried about the negative feedback, which could diminish his business’ ability to compete.
Taobao said that more than 10,000 orders were returned to the large vendors on Wednesday night alone. On most days, the store sees fewer than five returns.
But the venders were never the real target: Taobao was.
On October 10, Taobao announced it would increase its annual membership fee from 6,000 yuan to between 30,000 and 60,000 yuan. Its compulsory cash deposit would also be increased from 10,000 to as much as 150,000 yuan, effectively sweeping all small businesses off the site.
The price hike led many vendors to believe Taobao was in cahoots with the big name brands. Many met online to form an “anti-Taobao union” and raid the larger vendors.
Zhou Miaomiao, a small bags vender from Wenzhou, Zhejiang Province, was among the participants.
“Though I can understand a possible increase, a 10-fold hike would shut me down,” she said.
Jack Ma Yun, founder and president of Taobao’s parent firm Alibaba, compared the protest to Nazis.
“I logged on to the Internet and saw people shouting Nazi-like slogans of ‘Get rid of everything! Destroy everything!’” Ma said.
Ma’s questionable understanding of Nazi slogans aside, Zhou said that Taobao’s new policy is destroying not only the community of small vendors, but the very lifeblood that makes the Taobao marketplace so prosperous.
“It’s truly unfair. We were the ones that helped Taobao prosper in the first place,” Zhou said.
Zhou said she could never afford the new costs with the scale of her business. She plans to give up and close her store if Taobao insists on raising its fees.
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