Lowe, Shanghai." /> BEIJING (AdAgeChina.com) -- In nearly every sector of China's internet industry -- search marketing, e-commerce, instant messaging and social networks -- foreign companies have failed to knock a Chinese player out of the No. 1 spot, if they are allowed by local censors to compete there at all. EBay, Amazon, Facebook, YouTube, Twitter and, most notably, Google have had trouble getting a foothold in the world's largest internet market.
So what will happen when two local giants compete head to head? Chinese tech watchers and consumers are about to find out. Eager to capture more of that country's online search and e-commerce revenues, recent investments by Baidu and Alibaba Group have turned two of China's largest internet companies into rivals.
They'll also have a new competitor: Wal-Mart Stores. The world's biggest retailer plans to launch an e-commerce site dedicated to the Chinese market and offering products available in Wal-Mart's Sam's Club warehouse stores. Wal-Mart currently has four Sam's Clubs in China.
"This is going to be an excellent time for consumers, who are finally getting a choice of trusted companies offering e-commerce platforms. This is also going to be excellent for brands who are looking for relatively painless ways to start selling directly to consumers online," said David Wolf, CEO of management advisory firm Wolf Group Asia.
Alibaba and Baidu strongly dominate the industry in their respective core businesses.
Hangzhou-based Alibaba controlled about 75% of all e-commerce transactions in China in the second quarter of this year, according to Beijing research firm Analysys International. Alibaba says sales transacted through its business-to-consumer site, Taobao, will double this year to reach $60 billion.
Baidu has an 80% share of all online search traffic in China, according to iResearch. And the company generated 70% of Chinese search-market revenue in the second quarter of this year, according to Analysys.
Now Beijing-based Baidu is looking for a piece of China's e-commerce market, forecast to be worth $65.9 billion this year.
Nearly 34 million Chinese shopped online for the first time during the first six months of 2010, bringing the total number of online shoppers to 142 million, according to the China Internet Network Information Center. Deutsche Bank predicts that online sales will grow to 7.2% of China's total retail market by 2013, from 2% now.
Baidu launches e-commerce site with Japan's
In late October, Baidu and Rakuten, Japan's largest e-commerce company, launched their own online shopping mall in China called Lekutian. The name is a combination of the Chinese words for Rakuten and the word used by Chinese youth to express the English word, "cool." (Le means "happy," ku means "cool" and tian means "day.")
The two companies announced plans in January 2010 to spend $50 million over the next three years to open an online retail site. In the past ten months, Lekutian has signed up about 2,000 registered merchants and plans to launch marketing programs, such as special shopping "marathons," a point rewards program and free shipping.
Lekutian also hopes to lure customers away from other sites by strictly screening merchants and monitoring their compliance to detect and eliminate counterfeit goods through the use of anti-counterfeit measures and expertise learned from Rakuten Group's PriceMinister in France. Rakuten also owns Buy.com, a big U.S. e-commerce site.
Wal-Mart Stores, meanwhile, plans to launch an e-commerce site dedicated to the Chinese market and offering products available in Wal-Mart's Sam's Club warehouse stores.
Alibaba relaunches Taobao
Alibaba is fighting back by relaunching Taobao Mall, its business-to-consumer e-commerce platform, on an independent web domain tmall.com.
The new site emphasizes product verticals, such as Electronics Mall, Hong Kong Design Gallery Mall, Taiwan Mall and Designer Footwear Mall. Future verticals will feature home furnishings, skincare and cosmetics, fashion accessories and an online supermarket. The new domain also has a standardized framework for supply chain partners and merchants and provides consumers with an easier shopping experience and better customer service.