Earlier proposed increases slashed but small vendors vow to fight on

HANGZHOU - Taobao Mall, the country's leading online retail platform, announced revised fees on Monday and a 1.8 billion yuan ($282.2 million) investment plan to aid the development of small- and medium-sized enterprises, in a move seen as a conciliatory gesture following a bitter online fee dispute.

But some small vendors insisted that the "fight for their rights" will continue.

The revised measures include a 9-month grace period for regular sellers, who have maintained good ratings, before new fees kick in, Jack Ma, chief executive officer of Alibaba Group Holdings Ltd, the parent company of Taobao Mall, told a news conference on Monday.

But those who register after the revised policy will have to pay the new fees from Jan 1.

The online dispute was sparked when the company earlier announced an up to 10-fold increase in membership fees, along with a maximum 15-fold increase in cash deposits, from next year. The proposed fees ignited a storm of protest online and the owners of some small businesses disrupted the site's operation.

The company believed that some of those responsible for the disruption had been fined by Taobao for selling fake products, Ma said.

The cash deposit paid by vendors will also be cut in half, and Alibaba will pay 1 billion yuan to make up the shortfall and invest that money to help small businesses.

Alibaba said it would pay another 500 million yuan as a guarantee fund to help small online traders obtain loans from banks, and it will spend an extra 300 milllion yuan on technical support and promotion.

However, stores at the bottom 10 percent in terms of customer satisfaction rating will not be eligible.

Alibaba's online retail unit split into three sections in June. Taobao Mall enables businesses to sell to customers and Taobao Marketplace allows customers to trade with each other. The third section is a shopping-related search engine, eTao.

Data from Analysys International, a domestic Internet research firm, showed Taobao Mall accounted for nearly a third of China's online retail B2C market share in the second quarter, followed by 360buy.com's 12.4 percent and amazon.cn's 2.3 percent.

Taobao Mall, the business-to-customer (B2C) section, connects consumers in China with retailers ranging from small operators to retail giants like Gap Inc of the US and the Uniqlo brand of Japan's Fast Retailing Co.

But vendors who participated in last week's online campaign still argued that the new rules "disproportionately hurt them".

"This is not sincere. They (Taobao Mall) simply want to delay the implementation of the rules. Nothing really changed," said one vendor on yy.com, an online chat forum where thousands of angry sellers gathered.

A female vendor from Henan province said smaller merchants were originally responsible for Taobao's growth.

"We must continue the fight, otherwise they are likely to levy more fees," the woman, who sells stationery on Taobao Mall but declined to be named, said.

Online buyers have been divided. Zhou Lulu, who works in a telecom company, said he supported Ma's determination to take a stance against some of the businesses.

"Taobao Mall should be different from Taobao Marketplace in terms of the scale and qualification of the sellers. That said, there is every reason to elevate the threshold of Taobao Mall to ensure customer rights."

He Xiao, an analyst with CCID Consulting, said that smaller businesses will feel the pressure.

"Taobao Mall is drifting away from mom-and-pop merchants and is attracting bigger players. The strategic layout is clearly manifested in the recent company restructuring, and the current move only aims to persuade smaller vendors to go back to Taobao Marketplace," he said.

Ma also revealed that the company has "been fully prepared" to acquire Yahoo!, which currently owns roughly 40 percent of Alibaba.

"Alibaba has the biggest cash flow among Chinese Internet companies and has been fully prepared to acquire Yahoo!," he said.

Ma denied that fee hikes were to finance a takeover of Yahoo!.

Ma and Alibaba were put under the spotlight in September as he publicly expressed a wish to buy the US company at a forum in Silicon Valley.

CCID analyst He said that the price hike will win more bargaining chips for Alibaba in future capital-intensive endeavors but it will also squeeze out small-sized firms to its online rivals.

Daniel Zhang, CEO of Taobao Mall, said it welcomes small businesses but will continue to have zero tolerance for fake or low quality products.

"We are not trying to squeeze small businesses out of the market," Zhang said.

Alibaba said that a total of 50,000 traders are registered with Taobao Mall, and some 5 percent of vendors will be affected by the new policies.

Chen Limin contributed to this story.

China Daily

(China Daily 10/18/2011 page1)