Young Chinese Strike Gold in E-commerce

Huang Bing, a 28-year-old chemical engineering graduate, is modest about the thousands of dollars he brings in each day selling lotions, mascaras and masks on China's leading online auction site.

Huang's store on Taobao.com has had much success since the soft-spoken entrepreneur, who now employs 30 people, launched it alone two years ago. Huang, a former sales representative for a state-owned pharmaceutical company, now sells up to 50,000 yuan (US$7,300) in make-up each day on Taobao. He stores his goods in an 800 square meter (8,600 square foot) warehouse in Hangzhou, the scenic Chinese city where Taobao and its parent company, Alibaba Group, are headquartered.

But Huang says the success of his store is small compared to others on Taobao.

"Many people have done this much better than me," Huang said in his booth at an Alibaba trade show in Hangzhou. "Many are younger than me."

Huang is one of many young Chinese who have created full-time jobs for themselves on Taobao, often reselling products bought wholesale from manufacturers. Taobao created employment for 570,000 people selling items on the site last year, Chinese Internet consultancy iResearch estimates.

Taobao has boomed as Internet access has spread in China and more users have started buying everyday items online. The e-commerce site, which allows users to sell items either at auction or in online retail stores, reported a transaction volume equivalent to $11.8 billion in the first half of this year, a nearly twofold rise from one year earlier. The most popular items bought on the site include laptops, mobile phones, make-up and clothes.

Companies are also increasingly turning to e-commerce to reach more buyers in China, Daniel Zhang Taobao's chief financial officer, said in an interview. Major brands like Lenovo, Nokia and Hewlett-Packard all have stores on the same Taobao retail platform used by entrepreneurs like Huang.

"The coming one or two years will be a golden period of the online business," said Zhang. "Today more and more people realize that they cannot wait, they have to explore this new market."

Taobao has aggressively expanded its services for companies to draw them onto the site, said Dave Carini founder of technology consultancy Maverick China Research.

"Taobao really is more of a combination of eBay and Amazon," Carini said.

Taobao has drawn such an influx of sellers since early last year that merchants have had to push prices down below the bargains they already offered, making it harder for them to profit on the site, said Huang and another owner of a small Taobao store.

"The fast growth of e-commerce in fact is also a tragedy," said Boni Yang, who has had to lower prices on items like stationery and pens that he sells on Taobao. Other gadgets in Yang's store, which include a motorized mop and a cockroach-zapping floor trap, highlight the wide range of items sold on Taobao.

China officially had 338 million Internet users at the end of June. That number, bigger than the population of the U.S., indicates the massive room for growth in a country of over 1.3 billion people.

Taobao may seek to debut overseas in the long term. Its parent company has said it wants 1 billion people worldwide using Taobao in 10 years. But Taobao could have trouble winning users from established e-commerce players like eBay and Amazon in other countries, said Carini.

"They're doing very well in China and their challenge is going to be outside," he said.

Taobao makes almost all of its revenue from advertising and does not charge listing or transaction fees. The company expects to break even this year.

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