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Taobao works to bring order to booming e-market

Taobao works to bring order to booming e-market

Write: Moyna [2011-10-13]

Taobao works to bring order to booming e-market

Taobao, China's largest business-to-consumer online marketplace, pledges to improve its management system and introduce new regulations. [CFP]

The millions of online stores that have opened their doors in recent years have been both a boon and a curse for many Chinese consumers. Although online shopping has proven to be convenient, product quality is rarely guaranteed. As complaints start to pile up, one company is working to reverse the trend and offer better service for its customers.

Taobao, China's largest business-to-consumer online marketplace by transaction value, announced on Monday that it will improve its management system and introduce new regulations designed to bring order to the country's growing e-commerce sector.

The company said it will regulate entry into its online marketplace by increasing annual service fees for businesses from 6,000 yuan ($ 944.88) to 30,000 or 60,000 yuan, depending on the scale of the companies that apply for entry.

The fees will be fully or partially returned to the traders on the condition that their scale and service quality meet the target set by Taobao.

Under the new policy, larger businesses will barely be affected, as the fees take up only a small part of their sales, while medium and small traders might feel a financial pinch. However, Taobao said that as long as they adhere to the company's business standards, they can get their money back eventually.

"We hope to use this plan to spur businesses who fail to meet our standard and encourage them to conduct self-inspections to improve their services. Otherwise, they will be deserted by the market," said Zhang Yong, president of Taobao, in an open letter to the businesses, adding that the sales commissions rate will remain unchanged.

Taobao has also promised zero tolerance for counterfeit products. Companies selling fake products will face an immediate shutdown, with their default payments confiscated.

Taobao, a unit of e-commerce giant Alibaba Group, mainly hosts stores selling retail brands. The company's efforts to fight fraud and counterfeiting are largely the result of frequent cases of fraud that have been reported amid China's e-commerce boom.

Alibaba made huge waves in February, when an investigation showed that 1,219 of the company's suppliers in 2009 and 1,107 of its suppliers in 2010, respectively accounting for 1.1 percent and 0.8 percent of its total suppliers during the two years, had acted fraudulently.

The case led to the resignation of Alibaba's chief executive officer and chief operating officer. Since then, the group has created a series of regulations in a bid to restore trust, including the creation of a fund to cover fraud disputes between suppliers and buyers and the introduction of a seven-day compensation system.

The company's efforts have paid off. According to a report released by Alibaba, reported cases of fraud during the first half of the year dropped 80 percent over the same period last year.

The company's decision to focus more on quality mirrors the increasingly competitive landscape of China's e-commerce sector, as companies struggle to catch the attention of the country's 485 million Internet users.

Statistics from IT consulting firm Analysys International showed that the total transaction volume for China's business-to-consumer (B2C) market reached 54.26 billion yuan during the second quarter, up 172.6 percent year-on-year.

"The improvement of service quality is not only an effective measure to attract and hold users, but also provides an edge for future competition. Only in this way can the B2C market head in a healthy direction," said Su Huiyan, a senior analyst with the IResearch Consulting Group.