EBay starts to gain traction with new approach in China

SHANGHAI -- Just as the Sirens of Greek mythology lured sailors to their doom on a rocky coast, China's fast-growing Web has drawn Western companies to its shores, where they have seen their business hopes dashed in a treacherous market.

Until recently, eBay was among the disappointed.

Eight years ago, it paid $150 million to buy China's top e-commerce site, EachNet, then plowed an additional $100 million into its operations. But it was foiled by local rivals who offered similar services for free. In 2006, eBay handed over its operation to a competitor in a joint venture.

But eBay, based in San Jose, Calif., reinvented itself in China by turning to a model that is helping it and its online payment business PayPal navigate the new Internet world.

A few years ago, the company quietly resurrected its China business by letting exporters of everything from wedding dresses to camera equipment sell directly to eBay's 97 million overseas users.

"We asked ourselves, 'How can we participate in the Chinese e-commerce market?' " said Jeff Liao, CEO of eBay Greater China. "The answer is so obvious: Play to our strengths, leverage our global franchise."

The results are promising. Greater China -- mainland China, Hong Kong and Taiwan -- now represents an important market for eBay and PayPal. Last year, PayPal, whose largest online partner is eBay, reported $4.4 billion in transactions for the region, a 44 percent jump from 2009.

Foren Fu, general manager of e-commerce consulting for the iResearch Group in Shanghai, called eBay's new direction "very promising. It has a very good future in China. EBay spent time to understand the local market and find out how to differentiate itself."

EBay's pitch to Chinese vendors is that it can virtually deliver millions of individual customers to their doorsteps, creating new business beyond providing goods for Walmart and other companies in the West.

To individual overseas consumers, the company says it offers a safe way to get discounts on products made in China with some degree of assurance they are not fakes. "We do the vetting," Liao said. "This is our job in China."

EBay believes it is creating a new global business platform. While 55 percent of the business of its Asian vendors comes from the United States, the company said it is positioning itself to facilitate trade within Asia as well as between Asia and other countries.