Service vendor website no pig in a poke

Starting his working life as a local newspaper reporter, founder Zhu Mingyue in the mid-2000s was fascinated by the ever-expanding reach of the Internet and e-commerce.  [Photo / China Daily]

Zhu's story is typical of many startups: excited by a "great" idea, but soon affiliated by a lack of experience, fierce competition and shortages of money.

In the early years, Zhubajie's business grew, but the revenue only covered daily operating costs. The money didn't match Zhu's vision.

Many of Zhu's competitors faced the same problem: Websites only got commissions from online transactions. Not only that but the transactions were small, and only a relative handful of service buyers trusted e-commerce enough to seek bids online.

Early entrepreneurs' enthusiasm quickly faded and many websites closed or turned to more lucrative businesses.

Some websites hung on, backed by a few venture capitalists who were bullish on the potential of the business. But according to Zhu, many competing websites were too eager to make money quickly.

They burned through their funding, spending heavily on marketing and product innovation in hopes of expanding their market share swiftly. But most other websites in the sector didn't achieve their goals. Their cash dried up, and they died.

"Their practices were in tune with the 'rules of the Internet', but they didn't take into account of the users," Zhu said.

What are the "rules of the Internet"? According to Zhu, the Internet industry demands quick returns.

The industry also requires automation and standardization: This means that when buyers order or vendors bid, they have to deal with a standard interface, instead of people.

Unlike users in the West, Chinese users are terribly uncomfortable dealing with computers.

"You might not believe this, but it is true. Three or four years ago, half of our daily phone calls came from buyers who didn't know how to operate through the website.

"But these operations were quite easy and straightforward. If we hadn't set up a call center, these deals would surely have been lost," Zhu said.

Zhu and his team also paid a lot of attention to overcoming the "trust gap". They developed an online payment system that ensures buyers remit the money to Zhubajie before it's transferred to successful bidders.

They established a rating system for vendors: the more deals they get, the higher their scores. Those scores are now a critical reference when buyers make decisions.

Also, initially, vendors had to compete against all other bidders for every deal. Now, they can have one-on-one project arrangements with longtime customers.

Zhang Yong, a veteran vendor on Zhubajie, said he earns more under this new arrangement. The website itself gets less.

Work offers on the website have boomed. Zhang's design business has developed to the point where he's hired about 10 people. His monthly income now reaches 200,000 to 300,000 yuan.

Zhubajie's perseverance has attracted investors. In 2011, it received a $10 million investment from International Data Group Corp, a United States-based technology, media, research and events management firm. IDG is also engaged in venture capital investment.

Zhubajie plans to make an initial public offering within two or three years.

Looking to the future, Zhu said he believed that online goods trade has nearly peaked, while service trade will surge and make up half of the e-commerce market.

"For a platform website like Zhubajie, it must be a 'slow business' and seemingly stupid methods should be applied. You can't assume your customers are too clever; neither can you assume they're too stupid.

"You should treat them with integrity" and the business will grow, he said. "That brings economies of scale."