On May 5, Eachnet, which just a few years ago controlled 90% of China's C2C online auction market, announced a permanent shift to free services for its users. One of the main reasons Taobao overtook Eachnet several years ago was by offering no-fee auctions. Eachnet has been charging for its services since 2001. Interestingly, it was only last month that Taobao launched a B2C platform and started charging fees to some merchant B2C sellers on it.
Will Eachnet regain its market share through the no-fee services? I think it's unlikely. When Alibaba came on the scene several years ago, the main need was to build up the habit of online shopping in consumers and ensure a wide selection of products online. These days, China's e-commerce sector continues to show strong growth, and trust and security have become key concerns for the tens of millions of Chinese netizens who already shop online. The success of C2C auction sites depends largely on how well they can keep consumers' trust.
With such a strong position in the market, Taobao should be able to hold onto its lead. Eachnet's announcement may produce marginal gains in users, but the company is unlikely to regain its previous position.
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