What works here doesn’t always work everywhere else
How adaptable is the “Silicon Valley approach” in foreign markets?
Well, the approach(es) are plenty adaptable. The real question is — How adaptive are the people employing it?
The business practices developed in Silicon Valley are revolutionary, but they’re no silver bullet. Strategies tried and true in one market are worth nothing in another, if those implementing them don’t consider the cultural nuances that may affect them.
Back in the early 2000’s, while working at eBay, I learned this firsthand while trying to aid the company’s failing efforts in China.
Our CTO sent a number of us Product and UX Design leads over to live in Shanghai for the summer (2005) to see if we could figure out what was going on, and how we might turn things around. That summer ended up serving as a masterclass in how to lose the Chinese market as a US company.
Upon entrance into the Chinese market, eBay followed its international expansion playbook, previously validated in Europe.
- Acquire leading local marketplace brand (given it’s a 2-sided marketplace)
- Migrate local marketplace to global platform, standardizing on global policies and features
- Market the heck out of it
But as it turns out, China was very much not Europe in the early 2000’s.
One of the biggest problems eBay had in China was not understanding the Chinese e-commerce customer — buyers and sellers alike. EBay’s management failed to listen (including some key local leaders who didn’t speak Mandarin) to the native employees who spoke up, only to be assured in vain that eBay’s global approach was better
Well, it wasn’t.
By the time we all showed up in Shanghai in 2005, we surely each had our own ideas of what had been going wrong for eBay in China over the past three years. But seeing it first hand painted an entirely more vivid picture of the situation.
EBay’s competitor, Alibaba, focused on helping small Chinese businesses sell their goods online. While eBay unleashed a barrage of online ad space, Alibaba’s founder Jack Ma knew that, even though his product was online, his customers spent more time watching TV than surfing the web. So he, instead, purchased advertisements on the major TV channels for his C2C offering Taobao.
In the Western world, an auction with no bids was viewed as an opportunity to get a good deal, and thusly were shown prominently on eBay’s site. In China, however, users equated bids with authenticity — an auction with no bids was thought to have been deemed fraudulent by previous viewers, and best avoided. The Chinese competitor (Taobao), knowing this, focused more on fixed-price items which did not have this issue.
In the West, a vibrant design approach was called “cluttered”. In China, the festooned homepages of local websites (including animated GIFs) told users there was a lot happening on their site – much more inventory and deals than that American company donning hardly anything but a logo and a search bar on their digital storefront.
Most Chinese customers either didn’t have a credit card or were just uncomfortable using them online for concern of fraud risk — a founded concern for them at the time. eBay’s feedback system for reviewing a users reputation on the site, and then submitting card information wasn’t going to work for them. Customers actually preferred to go through an escrow service or make exchanges in person where they could more fully establish trust. Management felt this went against the fluidity of our platform and delayed solving for it.
There really is no substitute for seeing things for yourself when entering a foreign market. Speaking with local customers. Getting a comprehensive understanding of advertisements and design trends one sees on the streets and in daily life. Watching cash exchanges everywhere, in place of what would mostly be credit transactions in the West. It was quickly evident that the local Chinese staff were perfectly competent, and only needed more support from management, rather than having their input dismissed.
In the end, all of these issues were solvable, and we did implement solutions, but it was altogether too little, too late.
To establish a place in a foreign, emerging and developing market, a company has to be scrappy, and it has to be patient. It has to be agile and responsive. In effect, eBay pulled out to get a problem country off their books. They could have dug in and reset. In time, things may have turned around.
I certainly will never underestimate the effects of a home-court advantage and local knowledge in business — nor the proverbial words of Alibaba’s Jack Ma:
Takeaway: never bring a shark to a crocodile fight.
Preston Smalley produced in collaboration with Mark Mizera.
More on the eBay China Case Study:
- NY Times: eBay Expected to Close its Auction Site in China (2006)
- Stanford GSB Case Study (2010)
- Forbes: How EBay Failed in China (2010)
- Former eBay China Exec Retrospective (2013)
The best business practices in the world are worth nothing if those implementing them don’t have a deep understanding of their market. In the early 2000’s, when eBay went to do battle in the Chinese e-commerce market, a summer in Shanghai taught me this first hand.