A billboard advertising Taobao in Shanghai. Taobao controls 80 percent of China's online retail market with 370 million registered members. [Photo / China Daily]

 

Move will give better control over business models in competitive field

BEIJING - China's e-commerce giant Alibaba Group Holding Ltd reorganized its online retail unit Taobao into three separate companies, a move that highlights the company's fighting back to rising e-commerce rivals amid fierce competition.

Taobao will be split into Taobao Mall, which enables businesses to sell to customers, Taobao Marketplace where consumers trade with each other, and the shopping-related search engine eTao, the company said on Thursday.

The reorganization will help Taobao to deal with its different business models and fend off competition from companies, such as Dangdang.com and 360buy.com, analysts said.

"We must continually test new organizational structures to discover new approaches and models that fit the development of Internet businesses," Jack Ma, chairman and chief executive officer of Alibaba Group, said in a letter to employees.

The three companies will have their own management and operate as wholly owned subsidiaries under Alibaba Group, which owns Taobao.

Taobao started as a marketplace for consumers to buy and sell goods to each other. It now controls 80 percent of China's online retail market with 370 million registered members.

However, this marketplace, where many individuals trade, is difficult to manage. Meanwhile, the business-to-consumer model, which has been adopted by companies like Dangdang and 360buy, has become increasingly competitive, with high transactions volumes and high profit margins.

"The splitting up of Taobao will help it leverage the business-to-consumer model," said Chen Shousong, an analyst with the domestic research company Analysys International.

As early as November, Alibaba launched a new domain for Taobao Mall to separate it from the Taobao Marketplace, giving Taobao Mall more visibility.

China's online retail market has seen booming growth in recent years, reaching 461.1 billion yuan ($71.2 billion) in sales last year after growing by 75 percent from 2009, according to the Beijing-based research company iResearch.

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In his letter to employees, Ma said that the company won't exclude the possibility of listing Alibaba Group. This is seen as a potential tactic to deal with tense relations between Alibaba and its biggest shareholder Yahoo Inc.

"Alibaba Group's possible listing may act as a buffer in the acute dispute between Alibaba and Yahoo because it can dilute Yahoo's stake in it," said Hu Yanping, general manager of the Beijing-based research company Data Center of China Internet.

Alibaba's relationship with Yahoo, which owns 43 percent of the group, has deteriorated, especially after Yahoo Chief Executive Officer Carol Bartz replaced co-founder Jerry Yang to take leadership of the company. Alibaba tried to buy back Yahoo's stake but its attempts failed.

Ma is currently involved in compensation negotiations with Yahoo because of his transfer of Alibaba's payment division, Alipay, to a company controlled by him while Yahoo claimed it was not informed beforehand.