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Squaring Off
Alibaba launched its preparations to enter China’s consumer e-commerce market
in 2002, initially as a defensive move sparked by eBay’s entry. As Jack later
explained, “I needed to stop eBay to protect Alibaba.” Although EachNet was
targeting consumers, not the businesses served by Alibaba, Jack was concerned
that some of the larger merchants active on EachNet could encroach on
Alibaba’s turf: “At that time, there were only two companies in China that
understood online marketplaces, eBay and Alibaba. I was particularly concerned
that eBay’s power sellers would grow their business to compete in the B2B
space.”
Jack’s plans to target consumers encountered resistance within Alibaba.
The B2B business wasn’t yet profitable, and the VC market was closed for the
time being. Could the company really afford to open a new front when they were
still fighting the B2B battle? Was Jack just being paranoid?
CTO John Wu adamantly opposed the idea, visiting Jack the night before
the new project was kicked off. John warned Jack that the move would harm
Alibaba: “How on earth could you fight against eBay?” Jack replied that the
market was still open: “There are one hundred million Internet users today, but
only five million people are doing online shopping.” Jack’s ambitious plans for
Alibaba also gave him a different perspective: “eBay wants to buy the Chinese
market, but we want to create China’s Internet trading market.”
With his firsthand experience as a small-business owner in Zhejiang, Jack
was adamant that the threat from eBay was real: “In China, there are so many
small businesses that people don’t make a clear distinction between business and
consumer. Small business and consumer behavior are very similar. One person
makes the decisions for the whole organization.” Jack also understood the
temptation for eBay, later reflecting, “We launched Taobao not to make money,
but because in the U.S. eBay gets a lot of its revenue from small businesses. We
knew that someday eBay would come in our direction.”
So it was decided. Alibaba would target the consumer e-commerce market.
Jack was emboldened after a trip at the end of 2002 to Tokyo, where he found
Masayoshi Son in a buoyant mood. Yahoo Japan had just repelled eBay from its
shores, boosting SoftBank’s standing after several painful years of dot-com
write-downs. SoftBank signed up to commit $80 million
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to Alibaba’s new
venture.
The project was kept highly confidential. Few within Alibaba were even
aware that the idea of targeting consumers in China had been contemplated, let
alone that a team had actually been formed to code a new website. Secrecy, and
some useful Alibaba folklore, was achieved by sequestering a handful of
employees, including Alibaba cofounder Toto Sun, in the original Lakeside
apartment where Alibaba had been founded.
Two years later Jack recalled the scene as he invited a half-dozen,
handpicked employees to his office: “Our COO, CFO, the vice president of HR,
and I were all there. We talked to them one by one: ‘The company has decided
to send you to do a project, but you are required to leave your home, and you
must not tell your parents or your boyfriend or your girlfriend. Do you agree?’”
Holed up in the small apartment, the team got to work.
In taking on eBay, Jack wanted to preserve the element of surprise.
Explaining his strategy, he dipped into his reservoir of martial arts stories: “I’ve
seen lots of people yelling ‘Fight the Shaolin Temple!’ at the foot of the Shaolin
Temple; that’s complete nonsense. However, if I reach your doorstep to
challenge you, I pretty much know that I will defeat you. In the future there will
be no need to yell; as soon as you stand on the doorstep, people will be scared.”
Throughout the project, Jack emphasized that their target was not EachNet
but eBay itself. Once the project became public knowledge, he wanted to ensure
the fight was seen as a David versus Goliath struggle. One team member
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recalled the mood: “We were just a group of country bumpkins, and our
competitor was eBay.” Reuters later summed up the culture as “kung fu
commerce with a dash of theater.”
To keep up morale the small group of software engineers took breaks
between coding to play video games or do exercises. Jack encouraged the team
to do handstands. As a child, he explained, looking at the world upside down had
given him a different perspective on life.
The new business was to be named
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“hunting for treasure,” or
taobao
in
Chinese. Taobao.com’s tagline was “There is no treasure that cannot be hunted
out, and there is no treasure that cannot be sold.”
Taobao was officially launched on May 10, 2003, celebrated each year as
“Aliday,” a “take your family to work” day and the date of the company’s
famous group wedding celebration. Aliday celebrates the team spirit that helped
Alibaba overcome an unexpected challenge that tested its employees as never
before.
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