Worldbeat: Bo knew Chinese auctions; eBay didn’t

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Description: After three years of pioneering e-commerce work in China, and seeing its subsidiary’s market share drop from 90 percent to about 30 percent, eBay Inc. put eBay EachNet on the block Wednesday, choosing to sell at a fixed price rather than make it available by auction.

Although it entered into a joint venture with Tom Online Inc., into which it injected its local subsidiary EachNet along with US$40 million in cash, eBay did what its users have been doing for years: selling off old junk that doesn’t make money for them anymore.

Back in the late 1990s, eBay was nowhere in sight in China. EachNet was clearly the ruler of the fledgling online auction business. A former China national math champion and Harvard University graduate named Shao Yibo started the company. Shao, known more affectionately as Bo, was one of the nicest guys I ever met in the technology industry. Smart, modest, articulate — I’m not sure I ever met anyone who was not impressed when they first encountered him. I remember conducting an interview with Bo at EachNet’s offices in Shanghai, where in between slurps of noodles at a conference table we talked about how metropolitan Shanghai was better wired than metro Boston. Corporate dining rooms weren’t for Bo. One thing was certain — Bo knew auctions.

At that time, the naysayers said that an auction site couldn’t succeed in China because people didn’t use credit cards. That was one of the better examples of failing to think out of the box during that era. EachNet created a model that was the standard until recently — buyer and seller would call each other and meet to complete the transaction, often at an EachNet customer service center. EachNet also employed customer service representatives to help arbitrate disputes over product quality and deadbeat buyers. For China, it was a good model. Even now, most e-commerce transactions in China are concluded without the use of a credit or debit card.

For once, the biggest winner in the eBay-Tom Online deal is the consumer. Neither EachNet nor its rival Taobao, owned by Alibaba.com Corp., currently charge customers transaction fees. That will likely continue, perhaps even beyond 2008, the point at which Taobao said it may consider charging.

Tom Online Chief Executive Officer Wang Lei Lei said while announcing the deal that he wanted his company to attract more “major buyers and sellers.” If by major sellers he means more big companies selling directly to consumers via their site, then Tom EachNet, as the new entity is known, could attempt to gain market share by offering consumers low prices on new goods.

Tom’s greatest advantage could come from its experience as a mobile content player. Potentially, it could outflank Taobao by offering auctions and mobile commerce opportunities to China’s more than 400 million mobile users, many of whom may never have made purchases that way before.