eBay invests in China through EachNet

Buying a piece of Chinese auction site EachNet will give eBay instant access to a recognisable brand and some online trust. The deal also signals the start of the third phase of ecommerce development in China.

Event

On 18 March 2002, eBay said it will pay $30m for one-third of EachNet, an online trading site based in Shanghai.

First take
Since it retreated from Japan - the first time it left a market - eBay has looked for a less competitive market in Asia with potential for ecommerce growth. EachNet reputedly leads among Chinese online auction sites, so buying a piece of EachNet will give eBay access to an instantly recognizable brand and a certain amount of pre-established online trust. Online auction site traders like to feel part of a community.

EachNet has grown steadily since its inception in August 1999. In June 2000 it acquired 5291, the largest mobile device retailer in Shanghai, and mobile devices continue to be among its more popular products. Apart from consumer-to-consumer transactions, EachNet's acquisition of 5291 has strengthened its capability for selling products to consumers. EachNet has also acquired many similar (but smaller) auction sites, such as ChinBid in August 2000.

From year-end 2001 through year-end 2008, China will be in the third phase of ecommerce development. This period will see an increasing maturity in China's business-to-consumer (B2C) and consumer-to-consumer sectors. The involvement of foreign investment from foreign enterprises such as eBay will help drive the market. China offers tremendous opportunities because of:

More relaxed foreign investment regulations as a result of China's entry into the World Trade Organization
The market's immaturity and lack of dominant players
Lower cost to invest in and acquire high-quality B2C websites

The third phase will involve a majority of the survivors of the first two rounds of consolidation, most of which will be dot-com or pure B2C players. The viable ones will take the form of horizontal or general portals, or sites addressing a specific niche or vertical market with a targeted audience.