Booming marketplace reminiscent of the early days of eBay.

By DAVID BARBOZA


YIWU, China - In the months leading up to his college graduation in June, Yang Fugang spent most of his days away from campus, managing an online store that sells cosmetics, shampoo and other goods he often buys from local factories.

Today, his store on Taobao.com - China’s fast-growing online shopping bazaar - has 14 employees, two warehouses and piles of cash.

“I never thought I could do this well,” said Mr. Yang, 23, who earned $75,000 last year. “I started out selling yoga mats and now I’m selling a lot of makeup and cosmetics. The profit margins are higher.”

Taobao fever has swept Mr. Yang’s school, Yiwu Industrial and Commercial College, where administrators say a quarter of its 8,800 students now operate a Taobao shop, often from a dorm room.

Across China, millions of others - recent college graduates, shopkeepers and retirees - are also using Taobao to sell clothes, mobile phones, toys and just about anything else they can find at neighborhood stores and wholesale markets or even smuggle out of factories.

Internet analysts say this booming marketplace - reminiscent of the early days of eBay, when Americans started emptying their attics for online auctions - has turned Taobao into China’s newest Internet sensation.

Though just six years old, Taobao (Chinese for “to search for treasure”) already has 120 million registered users and 300 million product listings. Its merchants produced nearly $15 billion in sales last year.

The company claims that sales through its Web site are already larger than any Chinese retailer. And, Internet analysts say, sales on its site this year will surpass Amazon.com’s expected sales of about $19 billion.

“This is the next big segment for China’s Internet,” said Jason Brueschke, an Internet analyst at Citigroup in Hong Kong. “It’s their Amazon and eBay combined.”

Like eBay, Taobao does not sell anything itself; it simply matches buyers and sellers. It has a firm foothold in China because many parts of the country still have poor transportation and some local authorities favor their own government-owned outlets, making the retailing system inefficient.

The global recession also left oncebooming factories overflowing with goods the rest of the world does not seem to want.

The so-called Taobao addicts are helping to pick up the slack in a sluggish economy. “I can’t live without Taobao,” said Zhang Kangni, a graduate student in Shanghai. “First, it’s cheaper. I found a dress at a store in Shanghai. It’s a Hong Kong brand that sells for $175. I found it on Taobao for $33.”

The company is not publicly traded and therefore does not disclose financial information, but listings are free on Taobao and the company makes no money from online transactions. Almost all of Taobao’s $200 million in revenue comes from advertising, which the company says covers virtually all its operational costs.

“Taobao is dominant,” said Richard Ji, an Internet analyst at Morgan Stanley in Hong Kong. “They’re like an online Wal-Mart.” Mr. Ji says Taobao is a threat not only to traditional retailers but also to big Chinese Internet companies, like Baidu, a leading search engine, because they are competing with Taobao for many of the same advertisers.

Taobao has thrived, Internet analysts say, because people do not need much capital to start online stores. This year, Taobao says its site could help create half a million new jobs, mostly among young people opening new online stores.

Here in Yiwu, which claims to be the site of the world’s biggest wholesale market, Taobao has started to change the look of Yiwu Industrial and Commercial College.

Every afternoon, even this summer, when the school should be relatively empty, one can hear the ripping sounds of tape being wrapped around boxes in a building that could pass for a United Parcel Service shipping terminal.

Mr. Yang, the cosmetics seller, has become a campus hero. He operates his own warehouses not far from the school, in the basements of a pair of residential buildings.

Standing in his crowded warehouse, near boxes of Neutrogena sunblock, hairpins, toothbrushes and a wide assortment of cosmetics, Mr. Yang says business could not be better.

“Soon, I’ll reach $150,000 a month in sales,” he said, flashing a big grin.


Yang Fugang has found success selling cosmetic products from local factories through the site Taobao.