The Fall of A “Taobao Village”

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The Shanghai-based Xin Wen Chen Bao (Morning News) visited Qing Yan Liu, the village that has been referred to as “Taobao Village” since 2008 when it was crowded with thousands of Taobao retailers who were making a good living. But this time the journalist finds some store owners there having a hard time and some left. Golden times are gone.

Liu Wengao, a Qing Yan Liu villager and current deputy head of Zhejiang e-commerce merchants association, says currently only a dozen out of one hundred entrepreneurs can survive in the Taobao ecosystem. But years back almost every Taobao store set up ran by people in the village was successful.

Qing Yan Liu, with about two hundred local households, is located in Yiwu, a city in central Zhejiang province and where  has been known as one of the biggest small commodity wholesale markets in the world. For years merchants from all over the world flied into this city. There was a wholesale market next to Qing Yan Liu till 2008 when merchants doing business in the market were asked to move to a bigger and farther commercial area, leaving with rental village houses empty.

At that time several young villagers set up Taobao stores. Liu Wengao saw potential in it reasoning that most goods sold on Taobao then were what Yiwu markets could provide with at low prices.

To make their stores look fancier, Liu got designers from Yiwu Industrial & Commercial College. Later, the help of Liu and support from the school, students at Yiwu Merchant School were encouraged to run Taobao stores. They were allowed to do business at school time or move out of campus altogether to register companies for their Taobao stores. The school even provided a classroom with Internet access and inventory warehouse for those students. Even better, students can get a credit for running a Taobao store.

Those empty houses were filled in and crowded again. It is said that the Yiwu Industrial & Commercial College alone, with an accumulated two thousand students involved, have set up fifteen hundred stores since 2008.

Liu Wengao said that they created a variety of marketing approaches and got well experienced in operating online stores. Then everyone made a fortune from it.

Now  the village accommodates over eight thousand people who run a total of one thousand Taobao stores.

Even local grocery stores feel the decline in business and find the familiar faces disappeared.

Outsiders like delivery men have witness the ups and downs. One of them found out that stores who manage to last for more than half a year can gorw big and strong.

Jin Wenjin, a teacher at the Yiwu school, concluded that, in the past couple of years, there was consolidation process that 20% of stronger sellers would take 80% of the whole market, while the 80% weaker sellers could barely make a living and their stores would eventually die.

Not a plain game anymore. When average sellers find sales started declining, they would possibly be told that marketing was needed. On Taobao, there are paid search and targeted display ads for sellers to buy. Advertising helps. But to small sellers, even if the rise in sales compensates for marketing spending, the effect doesn’t last. Reasons? 1) too many stores selling similar goods; 2) customer demand changes faster than what ordinary sellers can offer.

image credit: Xin Wen Chen Bao