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EBay Makes a Return to China

Shenzhen-based Xiu.com will host eBay’s platform serving the Chinese consumer.

The Salvatore Ferragamo page.

EBay Inc. is hoping the second time’s a charm as it reenters China.

The San Jose-based online marketplace has struck a partnership with Shenzhen-based Xiu.com under which the Chinese firm will host eBay’s platform serving the Chinese consumer. The arrangement and its specifics will be unveiled in China on Monday, eBay confirmed to WWD.

According to Maureen Mou, Xiu’s senior vice president for global sourcing, the site will go live Monday. She declined to provide the financial specifics of the partnership, but said the eBay-Xiu site will be home to Western premium and luxury fashion brands on an exclusive arrangement; there will be a smartphone application, and the site will also allow for payment via PayPal, eBay’s global e-commerce payment and money transfer platform.


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E-commerce sources in China said the site will likely be called ebay.xiu.com. They don’t believe that eBay made any investment in Xiu for the site launch and infrastructure. That’s because Xiu is essentially a turnkey service provider. In prior distribution arrangements, such as the one it has with KarmaLoop.com, Xiu hosts the secondary site on its existing platform and provides services such as the Chinese translation of the Web page.

EBay is returning to the fast-growing Chinese e-commerce market after failing the first time around as a result of misguided strategies and competition from local site Taobao.

EBay acquired Chinese technology platform EachNet in 2003 for about $150 million and invested another $100 million to convert it to eBay’s platform and market the new site. Homegrown Alibaba’s Taobao offered a different listing model from eBay’s, which proved to be more popular with the Chinese consumer. In addition, Western marketing initiatives didn’t resonate with Taobao’s local promotional strategies. By 2007, eBay became the poster child for its failed attempt to enter China. The business was sold to a Chinese mobile services firm, and eBay had a noncompete arrangement that expired at the end of 2011.

The eBay-Xiu partnership comes as the market is dominated by a few top players: 360buy.com and the sites that are part of the Alibaba Group, Taobao and Tmall.


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One distinguishing factor is Xiu’s focus on high-end premium and luxury brands, although it now also faces competition from players such as Shangpin.com, a full-price designer luxury site that targets customers who are already familiar with its flash-sale operation, and The Luxury Club, locally known as Hui She Shang. Western firms entering the market include Neiman Marcus, with a plan to develop its own Web site for the Chinese market with Hong Kong-based Glamour Sales Holding Ltd., which it hopes to launch before the Chinese New Year in February and Yoox Group’s launch last month of the Chinese version of its flagship multibrand online store. Amazon.com entered China in 2004 when it acquired online bookseller Joyo.com for $75 million in cash and stock, and ships fashion merchandise to Chinese consumers through its MyHabit.com site.

Xiu’s response to the competition has been to line up more exclusive arrangements with Western brands. Last month it became Ferragamo’s authorized host platform for the brand’s site in China. It already offers more than 1,000 brands that include Abercrombie & Fitch, Balenciaga, BCBG Max Azria, Calvin Klein, Chloé, Dolce & Gabbana, Marc Jacobs, Michael Kors, Miu Miu, Polo Ralph Lauren, Tommy Hilfiger and Tory Burch.

Xiu counts venture capital firm Kleiner Perkins Caufield & Byers and private equity firm Warburg Pincus among its investors; the two have invested $120 million. According to Mou, the firm no longer offers electronics, art and furniture merchandise on its site so it can focus on being the high-end destination site for fashion and accessories.

The core Xiu.com site offers a small discount on in-season merchandise, and provides a gateway to two outlet sites it operates, with one offering a flash-sale type of selling pattern, Mou said.

Richard Kestenbaum, partner at investment banking firm Triangle Capital, said, “It makes sense for eBay to partner with Xiu as Xiu has the strongest metrics with the right Chinese demographic than any other site in China, as well as a higher average sale price with more high-end Chinese consumers than anyone.”

Michael Zakkour, chief China consumer and retail market strategist for Tompkins International, said the timing is right for eBay to reenter the Chinese market, given that it is the largest e-commerce market and soon will be the largest apparel market in the world.

Data from market research firm iResearch pegs China’s online shopping revenues at 766.6 billion yuan in 2011, or $121.7 billion at current exchange, which is expected to grow at a compound annual growth rate of 30 percent over the next five years.

“For eBay, this is as much a China play as it is a response to [catching up with] Amazon in China,” Zakkour said.

He added that while the Chinese economy has slowed, many consumers who have jobs are aspirational shoppers who would be attracted to the price and product selection available at the eBay-Xiu site.

According to a McKinsey Consumer & Shopper Insights report from March, “Meet the 2020 Chinese Consumer,” China could overtake Japan to become the biggest luxury market by 2015. The report noted that trading up is an important trend by “consumers aspiring to improve themselves, the way they live and their perceived social standing. Just like their Western counterparts, many Chinese judge themselves and others by what they buy.”

David Zhao, chief executive officer and founder of competing firm Shangpin, believes that the eBay arrangement isn’t necessarily a home run because consumers will have to wait two weeks to receive their orders given the constraints of “just-in-time inventory for goods shipped from the U.S.”

As for the e-commerce market in China, Zhao said about 20 percent of online shoppers are buying from their smartphones, although “online shopping [in general] is growing at about 50 percent a year and online fashion shopping is growing even faster than that.”

Internet access in China in second-tier and first-tier markets is “very inexpensive and there’s very widespread access,” Zhao added.