The challenges of C2C Platform in Taiwan

With the dynamic growth of e‑commerce, consumer-to-consumer (C2C) platform providers are facing fierce competition. Their Web sites are easily

21

emulated, while switching costs are trivial to their members. This is a serious threat to C2C platform providers because they do not hold their own merchandise, but serve only to offer an intermediary platform for members to conduct exchanges. When a C2C platform’s members switch to another C2C platform, they will take their merchandise and their social networks with them, both of which are core competitive resources of C2C platform providers. In contrast, business-to-consumer (B2C) vendors can still rely on their products as a key competency.

Despite the continued growth of the online shopping market in Taiwan over the past few years, the most representative is that the share price of two e-commerce companies keep declining: PChome⁶ (Mother Company of Ruten) and momo⁷, whose revenue are growing almost every month. And according to the above, C2C growth rate decreased year by year, also means that C2C platform in Taiwan suffered a growth limit, see Figure 2-4 and Figure 2-5.

6 PChome Online Inc(http://www.pchome.com.tw/) is one of Taiwan's three major entry sites and operates both B2C and C2C e-commerce platforms

7 momoshop (http://www.momo.com.tw), launched in May 2005, is now one of the top 2 B to C shopping websites in Taiwan.

Figure 2-5: The share price of PChome and momo in 2016 Source: smartm, from:

https://www.smartm.com.tw/article/32393632cea3

Figure 2-6: The revenue and operating profit performance of PChome in past eight seasons

Source: Smartm, from

https://www.smartm.com.tw/article/32393632cea3

Nevertheless, the impact of cross-border e-commerce is not news. There are not only Alibaba's Tmalls⁸, Taobao⁹ from China, but also more and more

8 Tmall.com is a Chinese-language website for business-to-consumer (B2C) online retail, spun off from Taobao, operated in China by Alibaba Group.

9 Taobao is a Chinese online shopping website similar to eBay, Amazon and Rakuten that is operated in

23

platform industry or brand industry influx of Taiwan market from around the world. According to the latest survey of MIC, in Taiwan, 37% of users have cross-border online shopping experience, and whether the future will be cross-border online shopping, the percentage of willingness as high as 84%.

"This means that Taiwan's cross-border online shopping behavior will become increasingly active and it is a big crisis of Taiwan’s platforms because consumer demand will be moved abroad." In such a competitive environment, how can those platforms attract customers to trade, and profit are worthy of discussion.

From the report of BUSINESS NEXT, 62% of buyers have the seller's experience at the same time, more than 50% of members in Ruten have been the sellers for more than three years; amateur sellers sold the number of goods accounted for only 15% of total station, but to create 23% of the turnover. And reported by 2016 E-commerce cloud innovation application and basic environment construction plan, 75.1% of sellers posted the same commodities in different platforms. As the rise of Shopee, the seller can get lower costs, and at a lower price to attract customers, and the platform who lost customers will not be able to earn fees.

An interesting example is the competition between Ruten¹⁰.com and Yahoo bid¹¹ (Taiwan) in Taiwan. When Ruten.com first launched its C2C platform in 2006, it was a questioned company with a market share of only 9.2

Hangzhou, Zhejiang by Alibaba Group, it is one of the world’s top 10 most visited websites according to Alexa .

10 Ruten.com is an online auction joint venture by PChome Online Inc. and the U.S. –based eBay Inc., which has been regarded as the top C2C market place in Taiwan.

11 Yahoo! Bid is a service set up by the online search giant Yahoo! in 1998 to compete against eBay, it has been the second of market share rank in Taiwan.

percent, compared to 89.9 percent for Yahoo bid (Taiwan). Two years later, however, Ruten was able to surpass Yahoo bid (Taiwan). In 2015, Ruten announced that the 2014 annual turnover of the platform has exceeded 50 billion NT dollars, 103% growth over the 2013 year, 8 years to grow 125 times, becoming the largest GMV of the C2C platform in Taiwan. It was obvious that many former Yahoo bid (Taiwan) members had switched to Ruten. Thus, how to build and maintain members’ loyalty is an important question for C2C platform providers in the face of fierce competition. Members’ loyalty to a C2C platform provider is different from their loyalty to a B2C vendor. In B2C e‑commerce, an on-line vendor has its own brand or store name, and deal in direct economic exchanges with customers. Online consumers can identify with the brand and develop a strong, lasting bond with the brand or the store name. However, in C2C e‑commerce, the platform provider is an intermediary and offers members a trustworthy and convenient trading environment.

Another interesting thing we found in this example is that not until Yahoo bid raise the transaction fee to 4% in 2013 and cause a number of users to transfer could Ruten reach this achievement for that endless problems of Ruten security making users couldn’t be assured. What worse is that fraud cases frequently occurred in recent years, leading to many people prefer to deal with brick-and-mortar stores or choose private transactions, resulting in platforms cannot profit from transactions.

According to an Appledaily report (2016) of online fraud, scam phone calls from C2C e-Commerce site information leaked and fake auction goods were still the top three cases of fraud of Taiwan in 2016. Apple daily reported

25

in 2015 that Ruten blocked over 4000 accounts in seven days due to the account exception. And there are over 300,000 issues about the security of C2C e-commerce site on the BBS in Taiwan. Therefore, the guarantee and convenience of the trading system are important factors for customer to use the platform.