Ebay has lost half its market share in China in only three months as the online auction giant struggles to get to grips with local competition in the world's largest market. News of the shocking reversal comes less than a month after eBay CEO, Meg Whitman, claimed Chinese operations were 'going well'.
New market data from Beijing-based research firm, Analysys International, shows eBay's share of revenue in China's consumer-to-consumer (C2C) auctions market slumping from 16 percent in the first quarter of the year to only 7.2 percent three months later.
$4 billion market
China's people now spend more than $4 billion a year on consumer auction websites like eBay, according to China-based analysts.
The US and European internet auction leader has been criticized for its lack of local knowledge in China. But despite giving up control of its China operation to a local firm this year, eBay has been unable to fight off an onslaught from Yahoo's joint venture partner in China, Alibaba. Instead, the move appears to have accelerated the collapse of eBay's Chinese operation.
Alibaba's consumer auction service, Taobao, increased its share of the market from 74 percent to almost 83 percent in the second quarter – with its new revenue growth coming almost entirely at eBay's expense.
CEO statement at odds with analysts' data
The market data appear to sharply contradict recent rosy statements from Ebay executives. “In China, our joint venture with TOM Online continues to go well, with the new website going live last week,” the company's president and CEO, Meg Whitman told analysts last month.
Ebay made a strong start in China's online auction market, but rapidly lost market share to Taobao after the local startup began offering auctions free of transaction costs. Despite eventually following suit, eBay's market share never recovered, and the company was forced to join forces with local internet firm TOM Online last December.
Ebay loses control
Under the deal, TOM Online owns 51 per cent of the firm. Analysys said the abrupt drop in market share may have been worsened by the upheaval of transferring eBay's Chinese auction services to the new company.
TOM Online has faced troubles of its own recently, with the parent firm deciding to delist the company's once-profitable mobile information and entertainment arm after it suffered a dramatic slump in revenues following regulatory changes in China.
Analysys estimated total sales by China's consumers at online auction sites to have reached $1.32bn in the second quarter.