Auctioneer EachNet’s Success in China

A WSJ story on how EachNet, founded in 1999, has made things work in China. eBay bought a 33% stake in it a year ago for USD 30 million.

Straight out of the eBay playbook are the site’s system of having buyers and sellers rate each other to build trust, and its staggering diversity of products. But EachNet hews closely to the realities of the Chinese marketplace. Many of its services are geared to help buyers and sellers exploit the huge inefficiencies in many sectors of the Chinese economy — exactly what the Internet had always promised to do.

For example, on the EachNet Web site, with its trademark lime-green and bright orange colors, the largest category of goods sold is clothing. Unlike in the U.S., with its national clothing chains that also run their own online operations, China’s clothing market suffers from fragmented distribution and huge price differences between cities. And because clothing bought in stores is often marked up sharply to cover store rental and overhead costs, many cost-conscious consumers shop for clothes online.

Other top-selling categories include computers and consumer electronics, another market characterized by huge price differentials; electronic goods tend to be cheapest in the southern province of Guangdong, which is home to most of the factories where the goods are made.

EachNet relies on the old-fashioned but serviceable postal service to handle the bulk of deliveries and payments between buyer and seller. It uses China’s growing ranks of private courier services, which benefit from a vast pool of cheap labor to deliver goods door-to-door for pennies, often by motorcycle or even bicycle. And it puts a great deal of faith in the ingenuity of buyers and sellers to reconcile logistical problems and endure hassles that might scare off the average American consumer.

“Our model relies on the entrepreneurial nature of people. Buyers and sellers are more resourceful than you think,” says Shao Yibo, the company’s 29-year-old co-founder and chief executive.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.