Taobao Sees Significant New Trends in Chinese Online Consumption

2009 mid-year key metrics suggest significant numbers of people
are turning to e-commerce for everyday items

Online shopping becoming channel for international brands
to increase breadth and depth of reach in China

Taobao incentivizing Chinese manufacturers
to create new brands for domestic consumption

HANGZHOU, China – August 20, 2009 – Mid-year statistics released by Taobao, China’s largest online retail shopping destination, show that e-commerce has reached a level of penetration that is satisfying the wide-ranging daily needs of consumers in China. In addition, Taobao is creating significant opportunities for domestic manufacturers to build new brands on the Internet platform as well as for established, high quality international and Chinese domestic brand name products to access Chinese consumer in ways not easily done through traditional channels.

Daily Needs of Consumers Are Satisfied Through E-Commerce

According to sales statistics for the half-year ending June 30, Taobao is increasingly cementing its identity as the local superstore for tens of millions of people as more and more consumers are turning to Taobao for everyday needs. For example, household goods has become the top selling category by total sales transaction value for the first time, signaling a definitive shift in consumer perception of Taobao as a primary destination for essential daily products in addition to high-value goods such as laptop computers and cameras. In the first half of the year, Taobao merchants sold an average of 438 household items per minute.

New Platform to Build Consumer Brands

Additionally, companies who previously functioned as original design manufacturers for international brands destined for export have reported success in sales of home-grown branded products on Taobao. An example is Qilong Trading Company in Hangzhou, which had long served as a textile manufacturer supplying famous American and European labels. Qilong has since launched Top Kor, its own original brand of female apparel targeting professional women in their twenties and early thirties that is sold exclusively on Taobao. More and more of these contract manufacturers are realizing that the long-term growth of their business depends on developing a brand identity for products that is separate from their OEM work as they take advantage of rising domestic consumption within China.

New Channel for Established Brands to Reach More Consumers

Taobao is also helping prominent global mainstream brands make inroads across the country, especially in second- and third-tier cities where these brands may not have a retail presence. Well-known global brands joining Taobao Mall, the corporate retail section of the online shopping platform, include Dell, Lenovo, Proctor&Gamble and Uniqlo as well as many famous Chinese domestic brands. According to Taobao sales statistics, transaction volume on Taobao Mall for established brands has shown strong acceleration, tripling the level achieved in 2008. By June 2009, dozens of corporate online retail stores on Taobao Mall were reporting average monthly sales exceeding RMB1 million (US$146,000[1]). In July, the official Lenovo flagship online store achieved record sales of more than RMB10 million (US$1.5 million) for the month.

“Our top priority this year has been upgrading the Taobao experience and adding additional community building features to complement the desires and needs of our users, who tell us that they see Taobao as a place where shopping, socializing and sharing all take place in a seamless way,” said Jonathan Lu, president of Taobao, “We believe these three trends demonstrate that our customers’ appreciate Taobao’s ongoing commitment to and investment into their needs.

“What is most interesting is the level of mainstream acceptance of using online retail channels to shop for everyday items, a trend that both prominent global brands and small businesses have recognized. The convenience of online shopping, coupled with consumers’ price-consciousness in today’s economic climate, has prompted continued expansion of Taobao’s reach, not just in terms of popularity among consumers, but also the way in which traditional retailers and brands access these consumers.”

Taobao recorded transaction volume (gross merchandise volume) of RMB80.9 billion (US$11.8 billion) for the first half of 2009, a 97 percent year-on-year increase. Taobao’s gross merchandise volume equated to 1.4 percent of total retail sales in China in the first half of this year, according to the Chinese Bureau of Statistics.

Taobao has become a primary shopping destination for China’s rising middle class and young consumers. Forty-seven percent of Taobao users are between the ages of 26-35 and 39 percent are between the ages of 16-25. As of June 30, 2009, Taobao had nearly 145 million registered users, an increase of 101 percent year-over-year.  While spending per order in the first half of this year has declined by RMB51.5 (US$7.54) compared to last year due to the economic slow-down, the overall number of orders has increased by 184 percent over last year because of growing acceptance of e-commerce among the mainstream Internet population.

About Taobao

Launched in 2003, Taobao (www.taobao.com) is the largest Internet retail website in China with 78 percent of the Chinese domestic online consumer market.[i] It provides the most comprehensive product offering and serves nearly 145 million registered users. Transaction volume on Taobao (gross merchandise volume or GMV) reached nearly RMB80.9 billion (US$11.8 billion) in the first half of 2009, exceeding the largest retailer in China in transaction volume during the same period. According to government statistics, Taobao’s GMV equaled approximately 1.4 percent of China's total retail trade in the first half of 2009. Taobao is the primary online shopping destination for the largest online population in the world.[ii]

About Alibaba Group

Alibaba Group is a global e-commerce leader and the largest e-commerce company in China. Since it was founded in 1999, Alibaba Group has grown to include the following core businesses: Alibaba.com, Alibaba Group's flagship company and the world's leading B2B e-commerce company; Taobao, China's largest consumer e-commerce company; Alipay, China's leading online payment service; and Yahoo! Koubei, a company providing online classified listings for local services and search.

For media inquiries please contact:

John W. Spelich

Alibaba Group

Tel: +852 2215 5129

Email: johnspelich@hk.alibaba-inc.com

Justine Chao

Alibaba Group

Tel: +852 2215 5229

Email: justinechao@hk.alibaba-inc.com