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Taobao Mall suffers from growing pains

By Pang Zili (People's Daily)

16:42, October 18, 2011

Edited and translated by People's Daily Online

China's Ministry of Commerce intervened on Oct. 15 in a bitter dispute between small business owners and Alibaba Group's Taobao Mall over sharp membership fee increases. The ministry said that Taobao Mall should actively respond to the legitimate needs of small business owners, and small business owners' protests against the fee increases should be within legal parameters.

During the past week, an anti-Taobao union made up of thousands of discontent small business owners and netizens caused certain large sellers of brand-name products to suffer heavy losses by placing orders and canceling them after leaving disparaging remarks. The union has stopped protesting after the Ministry stepped in.

The bitter dispute was directly sparked by a new rule issued by Taobao Mall that would sharply increase the 2012 annual membership fees and cash deposits for registered businesses. In other words, all businesses registered in the mall must pay at least tens of thousands of yuan over their budget by the end of 2011.

The small business owners protested against Taobao Mall in an extremely inappropriate way by "attacking" innocent large businesses owners in the mall, but they do deserve sympathy. They have worked hard to make a living by selling barely profitable products, and made important contributions to the early development of the online mall.

The hikes in the annual membership fees and cash deposits have undoubtedly placed quite a few business owners in a dilemma: they can hardly afford the price hikes, but if they quit, their early investments will be completely wasted. Given that the central government is encouraging the development of micro, small and medium-sized businesses, Taobao Mall should give greater consideration to the rights and interests of these small business owners.

It is completely in line with market logic for Taobao Mall to elevate the access threshold in order to dismiss substandard shops and raise its brand value and services. Because Taobao Mall has long been faced with a flood of fake goods and endless complaints, elevating the access threshold will greatly benefit Taobao Mall and consumers. The move will also help small and medium shops to enhance product quality and marketing levels and create an honest and sound commercial environment in the long run.

The contradictions in the appeals of both sides appear to be "terrible pain" amid the development of China's e-commerce sector. Alibaba.com founder Jack Ma has insisted that they have "acted as it should." Although many people regard Taobao Mall’s new regulations as the "direction of e-commerce," many people have still blamed Taobao Mall for its "immoral practices." How to get rid of the objective contradictions between the needs of enterprises to expand and the protection of numerous small and vulnerable shops? The “pain of transition” needs a rational solution.

Currently, the annual turnover of the e-commerce is more than 4 trillion yuan. The operation modes of the platform enterprises holding dominant positions in e-commerce, including transaction services and service standards, play a significant role in the development of the whole business. From this viewpoint, the Taobao Mall’s attitudes towards the small and medium sellers are like a wind vane of the business. That is why the Ministry of Commerce of China said that it hopes the Taobao could respond the reasonable requirements from the small and medium sellers by more productive actions.

This incident, together with the previous "3Q dispute," is certainly a warning to the relevant departments: Since the e-commerce is soaring, they had better accelerate their steps to establish a proper legal environment based on the interests of the platform enterprises, sellers and consumers for the development of the e-commerce, and they also had better strengthen the market supervision of the e-commerce under the network background, safeguard the order of the e-commerce and build up an outstanding environment for the development of the e-commerce.

For whether the e-commerce or the economy of China, China should not only encourage more enterprises to grow bigger and stronger but also protect the subsistence and development rights of the great number of small and medium enterprises operating legally. That is the right road of China's development.

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