Analysis of Taobao's Marketing Strategy

Analysis Marketing Strategy of Taobao
Marketing (Trường Đại học Sư phạm Kỹ thuật Hưng Yên)
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Analysis Marketing Strategy of Taobao
Marketing (Trường Đại học Sư phạm Kỹ thuật Hưng Yên)
Scan to open on Studocu
Studocu is not sponsored or endorsed by any college or university
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Analysis Marketing Strategy of Taobao
Shiyu Zhang*
School of Worcester Academy, Worcester, U.S
*Corresponding author: [e-mail]
Abstract. With the rapid development of the Internet and the epidemic's impact, the transaction
scale and practitioners of online shopping in China have repeatedly created new heights. In addition,
people have favored online shopping because of its low cost, convenience, and product diversity,
which has become a new shopping trend. As a result, Taobao, a subsidiary corporation of Alibaba,
has proliferated to become China's leading e-commerce site. This article studies the marketing
strategies of Taobao through literature articles review and field investigation of five marketing
methods Taobao implements: Tao Coin, 88 VIP, limited-time discounts, Double 11 shopping festival,
and live streaming. Meanwhile, this article uses the SWOT method to analyze Taobao has low price,
variety of goods, and safe payment method; it also has potential opportunities with convenient and
fast internet development. However, Taobao has issues with the unequal quality of goods and non-
uniform delivery. Based on the analysis, this article offers suggestions for future improvement of
Taobao.
Keywords: Taobao; E-commerce; Marketing strategy; SWOT analysis.
1. Introduction
In the past decade of rapid development in China, e-commerce has occupied a place in the market.
People prefer online shopping to offline shopping. Many e-commerce companies are slowly rising
here, including Taobao, Jingdong, and Suning shopping platforms, and the rise of the WeChat
business. However, under the impact of the epidemic, China's economy has been affected, making
the competition of e-commerce fiercer, and many industries are facing the problem of survival.
According to the article by Wenting Fan, if an enterprise wants to survive and develop in the cruel
market, it must work hard in the market and do an excellent job in marketing [1]. In-depth market
research and grasping consumer preferences are fundamental to business development and operation.
There is an example from Nike. The price of some Nike shoes has risen to a high value and raised a
heated discussion. However, this is a marketing strategy. Nike catches the phycology of consumers
that pursuing limited products can bring a sense of satisfaction and make them look fabulous so that
consumers will pay for the high price of shoes. However, the price is over it should be. Nike is a
successful case of marketing and shows how effective marketing can play a role in selling.
In recent years, many scholars have studied Taobao, the leader of electronic commerce. Shuhua
Li researched the vital function of the Tao Coin on the Taobao Platform [2]. Next, Guojian Xing
claims the importance of perceived value in time-limited discounts [3]. Additionally, Yuzhao Zhang
points out the analysis of spreading marketing strategies of Double-11 [4].
This paper summarizes the business, financial situation, marketing methods, advantages, and
disadvantages of e-commerce giant Taobao in China through the study of previous academic papers
and the investigation of daily life and puts forward an optimization plan.
2. Firm Description
Online shopping and retail platform Taobao is popular among Chinese people, which Alibaba
established in May 2003. Taobao has nearly 500 million registered users in China, more than 60
million regular visitors daily, and more than 800 million simultaneous online items daily, with an
average of 48,000 items sold every minute. Among the development of online shopping, Taobao has
become the first and biggest website that offers a platform that provides sales opportunities for
customers and businesses service in China, which contains three different departments:
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• Taobao offers customers to customers service.
• Tmall is a platform-type business to customers e-commerce service provider.
• Etao is a promotional shopping guide website that offers consumers more discounts on top of
Alibaba Group's rich offerings on Taobao and Tmall.
Moreover, Taobao has a safe payment method, Alipay, from the same parent company to protect
the transactions between sellers and consumers.
Taobao's parent company, called Alibaba, in its financial results for the year 2021, has an operating
income of 7172.89 billion yuan and a net profit of 1503.08 billion yuan. In the industry comparison
of the net profit in the 2021-year financial result, Amazon is number one, Alibaba comes second, and
Taobao has declined 58.78% by 2020. In Alibaba's financial results for the year 2022, the first quarter
has a net profit of 451.41 billion yuan it was down 5.15% year on year, and the midterm has a net
profit of 53.67 billion yuan, declining 81.34% compared to 2021. The third quarter has a net profit of
204.29 billion yuan, decreasing about 70.32% compared to 2021. It can be seen that the epidemic has
had a significant impact on Alibaba's economy in the past two years.
Alibaba's latest stock market showed the latest 92.62, up 2.52%, the highest at 94.87, the lowest
at 88.20, and the average price of 92.53. Its outer disk has 18.15 million yuan; the inner disk has 16.28
million yuan. The total market value of Alibaba's stock is 245.3 billion yuan, and the total capital is
2.648 billion yuan.
3. Evaluation of Marketing Strategies
Previous academic articles and field investigation of the daily use of Taobao summarizes five
marketing implements that benefit Taobao.
3.1 Tao Coin
Tao Coin is one virtual currency on Taobao. The mechanics of gaining Tao Coin is like a game:
Every day, the system will have some missions for consumers to complete, such as daily sign-in,
browsing goods for 20 minutes, buying a product, or posting a comment for a completed order. Each
mission will have 20-200 Tao coins as an award, and the missions will update daily. These Tao coins
can partially offset money when people buy goods, which provides consumers with favorable prices
and a good shopping experience. One-coin equals 0.01 yuan and is limited to one order, but it attracts
consumers to continue completing the missions to get awards and be willing to share with others so
that it can promote sales. Almost every store on Taobao accepts the Tao coins, making consumers
happy when buying and improving their satisfaction. It expands the influence of sellers, increases
stores' browsing and clicking volume, and increases the interactive experience and communication
between customers, platforms, and sellers [2]. The game mechanics of Tao Coin benefits consumers,
sellers, and the platform at the same time.
3.2 88 VIP
Taobao has launched 88 VIPs for consumers. As the name implies, 88 VIPs only need 88 yuan to
open the service for a year, which includes rights and interests such as discounts on some products,
exclusive gifts, and discounts on VIP fees for cooperation with other platforms. However, this price
is only for the consumer who has over 1000 Taoqi values. For whom do not reach 1000, the price is
888 yuan for one year. The way to get more Taoqi is by shopping more, timely posting comments for
orders, and using Taobao family payment. Thus, if customers want to have more rights on Taobao at
a low price, they should gain more Taoqi value, which promotes more consumption and brings profit
to the Taobao platform. Also, boosting consumers' comments on orders makes others feel Taobao
provides truth for all consumers while purchasing goods on Taobao, so it will attract more and more
people to use Taobao. Furthermore, when consumers get 88 VIPs at a low price, they would feel they
are getting the "insider" place of the platform, which offers more service to them. This exclusivity
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makes consumers feel fantastic and willing to share with family and friends, so other consumers will
follow the step to get an 88 VIP, which brings more benefits for Taobao.
3.3 Time-limited Discounts
Limited time discounts mean a certain amount of goods will only sell for some time, like 15
minutes, at a meager price. This method will attract more customers to consume at this time in order
to make a meager profit but high turnover to earn more benefits from it. The reason that limited-time
discounts are successful is it is making good scarcity. When the demand exceeds supply, “it helps
products catch on by making them seem more desirable” [5]. Consumers feel satisfied and superior
when they get goods at a lower price than others who need a higher price to get it. Therefore, people
will share it with others to make them look good. Meanwhile, limited-time sales enhance the
perceived value of consumers. Perceived value is one of the crucial factors leading to consumer
consumption. When the customer perceives that the cost of consumption is far less than the benefit,
then the customer has an outstanding possibility to buy. According to the article by Guojian Xing,
time-limited discounts positively impact consumers' perceived value, which makes the consumer
more willing to buy goods [3].
3.4 Double-11 Shopping Festival
Double 11 is the biggest shopping day in China; almost everyone knows the discount will be the
greatest of the year. Sales on Taobao's Tmall's Double 11 have increased yearly, reaching 540.3
billion yuan in 2021. Double 11 is a flourishing cultural marketing campaign. At first, double 11 is a
sub-culture of young people. It is a campus culture meaning a single day created by contemporary
young people to entertain themselves and spread quickly on the Internet. So, before it became an
online shopping festival, it was well known by young Internet users [6]. When the shopping day
double 11 facing the public, it struck a chord with young people. The initial audience is the younger
generation of Internet users, and many young people treat themselves to consumption on this day to
relieve loneliness [4]. However, huge discounts give consumers a heated discussion which helps
Taobao win word of mouth, making more people who know about this big shopping festival and
would like to shop on Taobao.
3.5 Live Streaming
Since the pandemic, offline stores have decreased selling profits when people go out less, so live
streaming has become a smart way to sell goods. Taobao also started the live streaming function for
all sellers on the platform. One of the most famous hosts of live streaming on Taobao is Jiaqi Li, who
has been watched by a maximum of 240 million people simultaneously. The reason people choose to
shop in live streaming is complex. First, the cost for both sellers and consumers decreases because
sellers do not need to pay the rent for offline stores, and consumers can save time and money in
getting the store. Thus, the price of the goods will be lower than in offline stores, and consumers can
save energy; they just wait for the goods to be delivered to their homes. Second, live streaming can
react to consumers' comments so that the seller can display more details of the goods. Consumers can
more comprehensively perceive the commodities' quality and understand the user experience of
commodities. This feature of live streaming makes up for the lack of comprehensive understanding
of the goods before the arrival of traditional online shopping, [7] so more consumers choose to buy
products from live streaming. Third, Live streaming often invites some Internet celebrities to bring
the goods. People usually buy products recommended by Internet celebrities during live streaming
based on their love and trust for them.
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4. SWOT Analysis
SWOT analysis is a situation analysis based on internal and external competitive environment and
conditions. Taobao's strengths, weaknesses, opportunities, and threats are listed through research and
analysis to propose feasible optimization schemes.
4.1 Strength
Taobao has high brand awareness, and the goods are wide and cheap, so many customers use
Taobao to shop daily. In the age of rapid technological development, online shopping has become the
primary trend of one-way people choosing. With its high popularity, Taobao has won the favor of
many brand partners, resulting in a wide variety of Taobao goods, which can fully meet people's
everyday needs [8]. Also, sellers sell goods directly to consumers, and Taobao offers many
discounting activities, so goods have lower prices than other selling ways. Moreover, the payment of
Taobao is Alipay, one of the most secure payment methods in China. The wide variety of products,
inexhaustible discounting offers, and safe payment methods have attracted the attention of many
consumers.
4.2 Weakness
Because Taobao has many mixed merchants, it is common to see uneven product prices, poor
quality of some products, and rampant fake goods [9]. In the long run, it undermines consumer trust,
leads to customer loss, and impedes the growth of platforms and merchants. Taobao does not crack
down as hard on fakes, but there are strict fines for selling fake goods abroad. So, if Taobao is facing
the international market, it must improve the situation of fake goods. At the same time, Taobao's
evaluation system is not perfect. In Liu Tian and Liang Yongqi's article, they mention that "more than
80% of consumers believe that Taobao is a serious phenomenon, and more than 70% of consumers
believe that there is a proliferation of sunshine or cashback for good reviews" [10]. which means
sellers are weakening at integrity side.
4.3 Opportunity
In the increasingly stressful contemporary society, people are often too busy to go to offline stores.
So Taobao offers online shopping to make contemporary people save time and get good quality goods
at low prices. Furthermore, with the development of the Internet and technology, more and more
people, including the elderly, have gained the popularity of online shopping, and the most critical
payment method in life has become electronic payment. Many offline stores have also gradually
developed the e-commerce market, and Taobao has introduced the function of live streaming to meet
the preference of contemporary people [11].
4.4 Threat
Other platforms compete in the e-commerce area, such as Jingdong and Suning. For Taobao, the
biggest competitor is Jingdong's express. Jingdong offers the second-day express, meaning most of
the goods on Jingdong will deliver on the second day since Jingdong has centralized warehouses in
different parts of China and its Jingdong express. However, Taobao did not have its express delivery.
In the case of Taobao's non-uniform delivery, consumers are likely to go for faster and more secure
delivery of Jingdong shopping.
Thus, in the future, Taobao should keep its advantage that continues to make the goods multiple
and inexpensive and protect transactions and payments. Also, Taobao needs to create more selling or
discounting activities like live streaming and double 11 to keep consumers and attract more to shop
on Taobao. Meanwhile, to increase efforts to ensure the quality of platform products, make policies
to fight against counterfeit goods, and develop its delivery system or strengthen the delivery
management to ensure Taobao's evergreen status in the e-shopping market.
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5. Conclusion
Under the circumstances of fierce competition in the electronic market, Taobao can still become
first place in its field in China, which shows the success of Taobao's marketing strategy.
This paper researches the marketing methods of Taobao through academic articles review and field
investigation and finds that Taobao promotes its sales through the application of five marketing
methods: Tao coins, 88 VIP, time-limited discounts, double 11 shopping festival, and live streaming.
These five strategies highlight the exclusivity and scarcity of products, seize the characteristics of
contemporary network development and young people's preferences to capture the taste of
contemporary people, which makes consumers have large discounts, and lets them feel like an insider
of the platform and willing to discuss Taobao with family and friends, that raises the awareness of
Taobao and will have more costumers. Furthermore, this paper analyzes Taobao has multiple goods
and low prices, with increasing opportunities in the age of the internet through SWOT analysis.
Nevertheless, disadvantages also are concluded which are the unequal quality of goods, rampant fake
products, and uniform delivery. Based on the SWOT analysis suggests plans that make regulations
for fake products and improve unsecured delivery to keep Taobao developing.
However, this paper researches the aspect of Taobao's marketing method but does not have
multiple resources on consumers' thoughts. In the future, papers could focus more on consumers'
psychology while choosing a good. Thus, more effective marketing ways would emerge.
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