eBay Still Has More Than 200 Employees in China Working on "Haitao." What Do They Actually Do?

E-commerce giants are building cross-border businesses in China. eBay is going the opposite way.

On May 21, the "eBay Seller Annual Summit" opened at the Ritz-Carlton in Chengdu. One hundred sellers who had each sold several million yuan or more over the past year were invited to the annual seller awards.

That's right: the eBay that fought Taobao for the market a decade ago is still in China. Of its more than 2,000 employees in Shanghai, over 200 still run its China e-commerce business.

But they will not be joining the mid-year e-commerce war that JD.com's "6·18" sale recently set off. The "haitao" (overseas shopping) that eBay China handles is "overseas" only when seen from abroad. In practice, these 200-odd employees work on export e-commerce aimed at foreign markets, which eBay China prefers to call "reverse haitao."

The low-profile eBay China

In 2002, eBay entered mainland China by acquiring EachNet. After losing to Taobao, it formed a joint venture with Tom at the end of 2006 and handed over its China consumer business. eBay all but vanished from the Chinese public's view.

Yet even leaving aside Chinese shoppers who buy on eBay through "haitao," eBay never left China. It simply changed whom it serves there: no longer Chinese consumers, but the sellers who ship goods overseas.

eBay China's data, customer service, legal and intellectual-property teams now mainly give sellers a trading platform and support services, helping them sell Chinese car parts, toys, festival lights and even drones around the world.

One question on Zhihu asks: "What do the top ten eBay sellers in Guangzhou sell?" The only answer is short: "Everything."

As Lin Yizhang, CEO of eBay Greater China, said in an internal talk at the summit, US$55.2 billion of transactions on eBay over the past year were cross-border, meaning buyer and seller were not in the same country or region. That is 22% of total transaction volume. And for the great majority of new eBay users, the first order they place comes from a seller in Greater China.

Most of the "big sellers" invited to the summit had ranked among the top 200 in the country over the past year. They range from large trading companies such as the listed LightInTheBox to young sellers who started out selling model aircraft part-time at university and built their way up to more than 100 million yuan in annual sales.

Zhang Li is a typical eBay China seller. Before he registered a personal eBay account in January 2013, he ran a clothing shop in Chengdu. Online shopping hurt the business, and after a few years the shop closed. Prompted by a junior-high classmate who also sold car parts, he set up some lights and photography gear at home and began selling car parts on eBay.

Recalling his first eBay order, Zhang told QDaily: "I had just finished uploading my first item, and while I was editing the second one, the first order came in."

At first Zhang did everything himself, from listing products to packing them and taking international parcels to the post office, much like a typical Taobao seller. The difference is that nearly all his buyers are in the United States, so he keeps American hours.

As his monthly sales grew by 50% and even 100%, Zhang contacted eBay China five months in. On his account manager's advice, he registered an eBay business account. Two years on, he is one of the big sellers in the Chengdu area.

Stories like his are common among eBay's Greater China sellers. In one session at the summit, sellers split into groups and had half a day to shoot short films about being a seller. Of the seven films that reached the final judging, nearly all told the same story: a nobody turns his life around through eBay, starting with nothing, selling goods overseas and finally "reaching the peak of life." In between come several years of adjusting to the platform, living upside-down hours and, at last, growing steadily.

In fact, individual sellers in China were already selling on eBay in 2002 and 2003. Lin told QDaily: "From 2007, when we pulled out of the Chinese consumer market, we already saw that Chinese sellers could sell to a lot of places. Back then they mostly sold fairly light goods, because once a product got heavy, shipping costs went up. It was mainly a business of price differences."

eBay then slowly began to support sellers in China. "At first it was basic help with language and culture. Later, once a seller started making money, he started investing, selling heavier things, selling to more countries. If a seller sells electronics, for example, we'll also ask him: do you want to sell clothing, home goods or other categories?" Lin said. eBay's role is to train sellers. For instance, it uses past years' data to predict which products will be in demand in a given country over the coming holiday, and passes that to sellers.

In recent years the number of eBay sellers in mainland China has grown by double digits every year, and by sales volume alone Greater China has long been one of eBay's top five markets worldwide. Quite a few eBay employees are also thinking about selling something on eBay in their spare time. One former eBay engineer, who declined to give details, sells Sanguosha cards to Chinese living overseas and already makes more than 100,000 yuan a month.

eBay has not disclosed what share of its cross-border trade comes from Greater China sellers. But in its full-year 2014 report, eBay said cross-border trade is a very important source of both revenue and profit. Overall, cross-border transactions clearly bring in more revenue and profit than sales completed within a single market. And in markets such as China and Brazil, cross-border exports are the only form in which eBay exists at all.

eBay forecasts that cross-border trade in markets such as the United States, Germany, Brazil, China and Australia could grow for eight years in a row.

eBay's global business is in trouble

According to eMarketer, the global e-commerce market grew 19% in 2014 from the year before. eBay, the pioneer of online trading, slowed down: its e-commerce business grew just 6.5% over the past year.

A friend who works at eBay once complained to me: "Why is it that Amazon, which has never made money, sees its share price rise whenever it loses a few million dollars less than expected, while we (eBay) earn a few million less than expected and our share price falls?"

Share prices of Amazon (top) and eBay (bottom) over the past two years. eBay's rise came after the news that PayPal would be spun off.

It was a joke, but it is also true. Amazon, which has spent twenty years single-mindedly not making money, remains investors' darling. eBay is starting to look tired, and its e-commerce business in particular no longer gives investors much to dream about. PayPal may be the part investors care about more.

eBay was founded in 1995. For years it has given users around the world a platform for trading online, like a giant flea market. Amazon, the other e-commerce giant, was founded at about the same time, though at first it was just a website selling books.

Twenty years on, eBay is still that giant online bazaar: 25 million merchants use it to sell more than 800 million items to 220 countries. In 2014, total transaction volume on eBay reached US$255 billion, and its market value stood at US$73.29 billion.

Amazon, meanwhile, has grown into a tech giant worth US$199.2 billion. Beyond the e-commerce business it started with, Amazon turned cloud computing into the foundation on which every industry moves onto the internet, leaving even Google and Microsoft far behind.

When the future of printed books was in doubt, Amazon launched the Kindle reading platform and upended its own print-book sales. Even in e-commerce, where eBay long held the lead, Amazon overtook it by investing for years in warehouses and logistics and speeding up delivery. Today Amazon has 270 million active buyers worldwide; eBay has 157 million.

Twenty years in, eBay's most eye-catching business is PayPal, which it bought in 2002. The fees that buyers and sellers pay through PayPal have become an important and growing source of eBay's revenue. In the last quarter of last year, PayPal's revenue overtook that of eBay's e-commerce business for the first time. In the first quarter of 2015, just ended, nearly every bright spot in eBay's earnings came from PayPal. Compared with a year earlier, the e-commerce business not only failed to grow but fell 4%.

Last September, eBay's board decided to spin off PayPal so that it could stay nimble in the payments race ahead.

"We caught the era of electronic payments," eBay CEO John Donahoe said when announcing the spin-off to investors. In other words, once freed from eBay's e-commerce business, PayPal will do better and bring investors bigger returns.

After the spin-off, eBay will be a purer online marketplace. Earlier this year it also announced plans to cut 7% of its workforce.

Two days ago, eBay issued new financial guidance, forecasting that after the spin-off its e-commerce business will grow only 0%-5% this year and next, while PayPal may keep growing at 15%-18% this year.

That is not the only bad news lately.

According to Ad Age, many eBay merchants are moving their business to Amazon.

Some merchants who got their start on eBay have found that when they list a product on both Amazon and eBay, sales on Amazon grow startlingly fast. eBay still has far more sellers, but the gap is narrowing. Over the past two years, eBay's merchant count has held at around 25 million. Amazon's doubled in 2014, to about 2 million.

In the import market, eBay China is running out of time

eBay's first years in China are not a happy memory.

Asked about the withdrawal, Lin Yizhang, who was Asia-Pacific CTO at the time, prefers to explain it by eBay's vision: "At that time we had a vision that China would become the world's largest e-commerce market."

Lin believes eBay hoped to use a single global platform to realize the vision of "letting Chinese buyers buy things from all over the world," and that it failed because it was "too far ahead of its time."

Now that eBay's old vision is coming true in China, the company bringing large volumes of foreign goods into the country is not eBay.

According to a report on global trade published by China's Ministry of Commerce, China's cross-border e-commerce imports and exports reached 3.1 trillion yuan in 2013, up 31.3% from the year before. The ministry forecasts they will reach 6.5 trillion yuan in 2016, growing more than 30% a year.

The e-commerce giants still active in China, such as Alibaba, JD.com and Amazon, have all moved into "haitao." eBay, which in China concentrates on training sellers, still seems to be missing China.

Cross-border e-commerce is eBay China's main business. But clearly the largest market for cross-border e-commerce in the future will not be foreign consumers buying Chinese goods. It will be Chinese consumers buying foreign goods.

As Jack Ma noted in an article he published in The Wall Street Journal this week, cross-border shopping by Chinese online consumers has grown tenfold since 2010, from less than US$2 billion to US$20 billion in 2014.

Before 2014, Chinese consumers' "haitao" was still fairly niche, or done mostly through personal shoppers buying on their behalf. From 2014 on, more and more e-commerce companies started to bite into this cake.

In 2013, Amazon China started a "direct import sourcing" program: Amazon in the United States, Europe and elsewhere bought goods in bulk, shipped them to China, cleared customs, and stored them in warehouses to await sale.

In August 2014, Amazon announced it would set up an international trade headquarters in the Shanghai Free Trade Zone to develop cross-border e-commerce.

In September, the beauty e-commerce platform Jumei launched an overseas shopping service.

In October, Amazon announced that goods from its six global sites could be shipped directly to Chinese customers.

In November, Alipay announced an "overseas direct purchase" service, with four major U.S. department store groups, including Macy's, Bloomingdale's, Saks Fifth Avenue and Neiman Marcus, as partners. Amazon used Black Friday to launch a Chinese-language haitao service called "Overseas Shopping."

In December, Suning's overseas shopping channel officially went live.

In 2015, e-commerce companies moved into "haitao" even faster. In February, Suning's overseas shopping channel opened its back end to overseas merchants. At the same time, Liu Qiangdong led a JD.com buying delegation to France and launched JD.com's "France Pavilion."

In March, JD.com's cross-border "Korea Pavilion" went live. The day before, Vipshop had launched a Korea channel, while Alibaba entered the Korean direct-purchase market by moving into Korean logistics.

A month later, JD.com officially launched its Global Shopping service, which works two ways: JD.com sources goods overseas itself, and overseas brand merchants open stores directly.

In May, Tmall Global signed deals with nine supermarket groups including Costco, emart, Lottemart, RT-Mart and Countdown. Big names from different industries were brought onto Tmall one after another, including LAOX, Japan's largest electronics chain; AKASUGU, a well-known mother-and-baby website; Chuangjianshe, the largest health-food company; and Ligu Co., the largest household goods company.

By then, Amazon's "Overseas Shopping" had expanded its range from 80,000 items to 2.2 million, and sales had grown 300% in three months.

In June, the Ministry of Finance announced it would cut import tariffs on clothing, skincare products and diapers by more than 50% on average. JD.com launched the third site of its Global Shopping service: Japan.

Beyond the big e-commerce players, cross-border e-commerce companies focused on categories such as mother-and-baby, fashion, electronics or beauty have also sprung up over the past year.

Amid this flood of news, eBay, the first company to try e-commerce in China, still looks very cautious. In the second half of last year, eBay quietly launched a curated WeChat account selling foreign goods. The account stopped selling in late March.

Today, the only place Chinese haitao shoppers see eBay at all is its eBay Global Picks section on JD.com's Global Shopping.

Whether for eBay's global business or for China alone, if eBay still wants a voice in import "haitao," this round of the cross-border e-commerce war leaves it little time.

Yet for now, eBay China shows no sign of planning to join this round of the fight over imports into China.

Cover image from jossat