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Alibaba Group chairman and CEO Ma Yun speaks during a press conference on October 17, 2011 in Hangzhou, Zhejiang Provinceo of China. The value of transactions on Alibaba’s Taobao retail platforms doubled last year to hit $63 billion.

Alibaba Group’s Taobao websites are virtually synonymous with online shopping in China, but one venture capitalist with experience navigating the Chinese Internet says that may not always be the case.

In China e-commerce is all about discount shopping, said Hurst Lin, general partner at venture capital firm DCM and former COO of Chinese web portal and microblog operator Sina, but that won’t last. Mr. Lin believes that in several years, Chinese consumers will have more discerning taste and that online retailers with the best design and branding will challenge the dominance of Alibaba Group’s Taobao websites.

DCM has investments in several e-commerce companies focused on China, including online lingerie retailer La Miu and health and beauty seller Lumi. “Today, what you’re looking at is discount,” Mr. Lin said. “That’s what Taobao is all about—the cheapest stuff, comparison shopping.” What Taobao websites offer is similar to what eBay offered to online shoppers in the 90s, he said. “When I was in the U.S. in the 90s, I would go on eBay and check on the price first.”

Taobao Marketplace, a website for consumers to sell to other consumers, and Taobao Mall, where larger retailers can open online storefronts to sell their products to consumers, are currently the largest online shopping sites in China. But growing competition has recently begun to erode Taobao’s market share. Its share of online purchases in China slipped to 71% by value in the second quarter from 75% a year earlier, according to Analysys International.

But Mr. Lin said that “eBay is declining” in the U.S. and though Taobao is still on an upswing, its dominance will eventually decline as well. He and other venture capitalists are now looking for trends that will pick up two or three years down the line. Taobao “will have their heyday for another four to five years, then eventually consumers” will go to online retailers that specialize in specific product categories, Mr. Lin said, adding: “Taobao better go public.”

Alibaba chairman Jack Ma has said the company doesn’t have plans for an initial public offering of Taobao, but that he wouldn’t rule out an IPO for Alibaba Group. The value of transactions on Taobao had doubled last year to hit 400 billion yuan ($63 billion). Taobao sites didn’t disclose transaction numbers this year, but Mr. Ma said he expects the number to reach a trillion yuan in 2012.

Mr. Lin believes e-commerce companies, rather than simply competing on price, will eventually have to differentiate themselves by offering better design, more entertainment value and services that increase margins. For examples, he cited flash sales websites that add a sense of urgency by setting time limits for people to keep purchases in their virtual shopping carts or a website that offers buyers the ability to do swaps with other buyers if they have a last-minute change of heart after placing an order.

Mr. Lin said 360buy.com, also known as Jingdong Mall, another Taobao challenger, has done well to attract consumers with low prices and fast delivery service. “It’s fantastic,” he said, but it’s still unclear how the company will make money given its low profit margins. He said he believes 360buy “needs to go one step further,” adding “it’s not all about discounting. It’s about information, it’s about entertainment, it’s about social” and “when those things come you can charge incremental value.”

An Alibaba Group spokesman said the company is addressing the changing tastes of Chinese consumers with Taobao Mall, which “is focusing on service quality” and with its shopping search engine eTao which “provides info other than pricing,” including “product guarantees, user reviews, shipping options etc.”

– Loretta Chao. Follow her on Twitter @lorettac

Bloomberg News

The Groupon Inc. Gaopeng.com logo is arranged for a photograph in Beijing, China, on Monday, Feb. 28, 2011.

It wasn’t the enthusiastic cheer you might’ve expected from a partner.

Asked about his company’s joint venture with online-coupon website Groupon, the chairman of Chinese Internet giant Tencent Holdings replied in decidedly lukewarm terms.

“Groupon is our partner, so in a public setting we do not want to say much directly criticizing them,” Pony Ma said Monday at Disrupt, a conference hosted by Techcrunch at the China National Convention Center in Beijing, when asked about criticisms of Groupon and other foreign Internet companies looking to expand in China.

“We have an open attitude toward trying these new things, but once again it has proven that the China market is totally different from the U.S. or other markets,” Mr. Ma said.

The Wall Street Journal reported in August that the joint venture, which operates the website Gaopeng.com and is also funded by private-equity firm Yunfeng Capital, had closed offices in some cities and laid off hundreds of employees. Other U.S. Internet companies from eBay to Google have also had trouble expanding in China.

Mr. Ma did have some positive things to say about Groupon, arguing that the company had “proved this is a good business model, providing online marketing to local companies,” and that the market for that service has good prospects.

But one problem is that competition is usually tougher in China than elsewhere, as “dozens or even over a thousand” competitors will quickly crowd any new online industry, Mr. Ma said. “The same night or even the same hour, Chinese companies… will all act at the same time” to imitate a new business model once it becomes known, Mr. Ma said.

Analysts estimate there are hundreds of online deals websites like Groupon operating in China, including Lashou Group, which last week filed with U.S. regulators for an initial public offering.

The Groupon-Tencent joint venture had a net loss of $46.4 million in the first nine months of the year on revenue of $2.1 million, according a Groupon regulatory filing.

– Owen Fletcher. Follow him on Twitter @owenfletcher

Jason Lee/Reuters

The traditional cloth shoes of Jack Ma, chairman and chief executive of Alibaba Group, are pictured at a news conference in Beijing, January 19, 2011.

Behind the latest spat between Alibaba Group and Yahoo is a vexing irony for Alibaba founder Jack Ma: His company, one of China’s most prominent and successful Internet groups and an icon of entrepreneurial success in the country, is in at least one big respect a foreign company.

While Alibaba is headquartered in Hangzhou, and Mr. Ma and his management team are justly credited with turning it into a giant that dominates e-commerce—including online retail, online payments and transactions between businesses—it is Yahoo and Japan’s Softbank that own about three-fourths of the company, thanks to investments they made years ago that have exploded in value.

One thing all sides agree on is that foreign ownership of Alibaba Group was the reason it transferred Alipay, a PayPal-like online-payments unit, to an outside company controlled by Ma, a move Yahoo revealed last week.

Yahoo said it was blind-sided by the Alipay move, and wasn’t informed about it until seven months after it happened. Alibaba demurred, saying its board—on which Yahoo holds one of four seats–was told in July 2009 that “majority shareholding in Alipay had been transferred to Chinese ownership.” But Alibaba and Yahoo appear to agree that the move was needed to comply with new Chinese rules requiring local ownership for online payment businesses.

It’s clear, however, that Alibaba sees its foreign shareholding as a larger problem than just Alipay. The Chinese government increasingly sees data management on the Internet as a sensitive area, so it is “inappropriate” for a Chinese Internet company to have high foreign ownership, Alibaba Group Chief Financial Officer Joe Tsai said Saturday at the annual general meeting of Alibaba.com, the Alibaba unit that runs websites connecting buyers and suppliers.

The Internet industry is among China’s most dynamic, dominated by private-sector companies like Alibaba and online search provider Baidu that are run by self-made entrepreneurs. But it is also one of China’s least accessible to foreign involvement. Facebook and Twitter are entirely blocked in the country, and companies from Google to eBay to Yahoo have had trouble tapping China’s Internet market.

Yahoo gained its stake in Alibaba in 2005, when it handed over its China operations, plus $1 billion, to Mr. Ma’s company amid an outpouring of mutual admiration. The Yahoo China business, already struggling before the deal, has withered further, but its 43% stake in Alibaba is now worth many multiples of the cash Yahoo laid out for it, perhaps even ten times or more. Softbank, an early investor in Alibaba, owns about 33%, and also holds a board seat (Mr. Ma, who owns 7.5% of Alibaba, and Mr. Tsai hold the other two).

Other big Chinese Internet companies have foreign shareholders—especially those listed overseas. But none of Alibaba’s major rivals has so much of its equity in the hands of just a couple of big foreign owners. Tencent Holdings’ big foreign shareholder, South Africa’s Naspers, owned about 34% at the end of last year. Chairman Ma Huateng ranked second with just over 10%. Baidu’s biggest foreign shareholder held just 7.5% of the company at the end 2010, less than half the 16.1% owned by Chairman and Chief Executive Robin Li.

Tension between Alibaba and Yahoo has built for years. Whatever frustration Mr. Ma might already have felt over having created so much wealth for foreign shareholders that had bought in so cheap was apparently compounded by Yahoo CEO Carol Bartz’s comments in 2009 criticizing Alibaba’s handling of Yahoo’s brand in China.

Alibaba has made no secret of its desire to buy Yahoo out: Alibaba last year said it approached Yahoo about the possibility but talks collapsed after several months. Mr. Tsai on Saturday reiterated Alibaba is interested in buying the stake back.

Whatever the intent behind the handling of the Alipay transaction, the message that many observers took was that Mr. Ma had the ability and the willingness to move key assets out from under Alibaba with minimal involvement from majority shareholders—and that there’s little those majority shareholders can do about it. The question many asked: If he could do it with Alipay, what prevents something similar to happening with Taobao, the hugely popular online retail site that is perhaps Alibaba’s most valuable asset? In other words, Yahoo executives can hold onto their stake in Alibaba, but that stake might not end up being what they thought it was.

Mr. Ma on Saturday strongly defended Alipay move at the Alibaba.com annual meeting, saying it was “100% legal and 100% transparent.” Alibaba spokesman John Spelich on Monday disputed that the Alipay affair highlights challenges for foreign Internet companies in China, saying it was simply “global business.”

And Yahoo and Alibaba issued a joint statement late Sunday that attempted to paper over their latest spat, saying they are “committed to productive negotiations to resolve the outstanding issues” on Alipay.

So this latest battle between these two Internet giants may be ending.

But so long as China’s most vaunted e-commerce company remains a foreign possession, it’s a safe bet that the war isn’t over.

– Jason Dean and Owen Fletcher

The service would be welcome by many people for whom access to original copies of Chinese books is difficult or impossible. Previous options have been limited to going through a scattering of overseas Chinese book dealers, usually located in major cities with large Chinese-speaking populations, or buying them directly in China and hauling them back. China has a number of online document-sharing services through which users swap electronic copies of books, and some online merchants offer books cheaply in PDF-format, but many such copies are unlicensed.

The new service promises to make the process a lot more convenient. Still, buyers should beware of expensive, non-refundable shipping fees.

Operated by privately-held Beijing Jingdong Century Trading Co., 360buy will offer the books for the same price as it does to buyers in China, so “overseas readers will be able to purchase books at the most affordable prices,” the company said. Books will be delivered by DHL within one week and payments can made in U.S. dollars through eBay’s PayPal, based on an exchange rate set by 360buy.

Among the offerings are Huang Tieying’s popular “Haidilao: You Can’t Touch This” (海底捞你学不会), detailing the customer-first business strategy of one of China’s best loved hotpot chain (around $3.70), and Wang Xiaofang’s reliably entertaining fiction series, “Stationed in Beijing” (驻京办主任), about the corrupt dealings of local government representatives in the capital (roughly $10.50 for the box set).

China history geeks can now mail order one of three different versions of the Qing Dynasty classic, “Complete Library of the Four Treasuries” (四库全书) instead of lugging the tome back on the plane (between $50 and $130).

Meanwhile, fans of Tiger Mother Amy Chua can discover how her book on parenting sounds when translated into Chinese (我在美国做妈妈; roughly $2.50) or compare it with Yi Jianli’s perennial parenting best-seller “A Good Mom Beats a Good Teacher” (好妈妈胜过好老师; around $2.60)

A scan of the company’s shipping rates, however, shows that delivery fees would be hefty. For standard air shipping, customers in North America will have to pay 50 yuan per item ordered, plus a 150 yuan shipping fee. The fees “include order-based freight, export duties and other taxes,” according to 360buy’s website, though customers would be responsible for any fees collected by destination countries, the website says.

The company estimates delivery time to be one week, but warns that it will not bear responsibility for any time or money lost if shipments are embargoed by Chinese Customs or held up by other customs procedures. Customers entitled to refunds may request returns within 15 days, but only product payment and collection charges can be refunded, not the cost of shipping.

In addition, overseas customers will not be entitled to pricing guarantees, coupons, order discounts, promotional offers or gift card payments.

Dangdang, a 360buy competitor that listed on the New York Stock Exchange last December, ships outside Greater China for a fee of 50% of the order total, with a minimum fee of 50 yuan, and delivers in four to eight weeks, according to its website.

A 360buy spokeswoman said that the company had received many requests for the company to ship its products internationally from overseas Chinese customers who couldn’t easily find Chinese books outside of China. Like Amazon, 360buy’s online offerings for consumers inside China include a broad range of products such as electronics and cosmetics. The company was founded in 2004 by the owner of a brick and mortar electronics retailer, and has become one of the biggest e-commerce websites in China.

– Loretta Chao. Follow her on Twitter @lorettac

It may seem odd for a basketball shoe named for a long-retired American to go heavy with a Chinese zodiac motif, but apparently the decision is timed to coincide with a momentous year for Michael Jordan himself. Perhaps unsurprisngly for a man known for his hops, Mr. Jordan was born in the year of the rabbit, 1963. Today, as he turns 48 years old, he enters the year of his birth sign for the fourth time with a shoe slathered in Chinese symbolism.

The Year of the Rabbit Air Jordan shoebox is designed to echo the red envelopes used to give lucky money at Lunar New Year, in red and metallic gold with iconic geometric designs and Chinese characters, all revolving around the ubiquitous Jumpman silhouette logo. The shoe itself bears a “white/metallic gold-varsity red-wolf grey colorway”—at least two of which are popular colors in China—and would match well with a Chinese national team uniform, a Chicago Bulls uniform and… not much else. The special edition shoe also features an insole that reads “Brooklyn” — the New York borough where Mr. Jordan was born and, er, home to many Chinese people.

One other possible explanation for the color scheme: According to popular superstition, the year of one’s birth sign, or benming nian, is chock full of potential misfortune, and one of the only ways to counter the bad luck is to wear, you guessed it, red. While Chinese men typically fulfill this requirement by stocking up on crimson underwear, it may be that Mr. Jordan–who, as spokesman for Hanes, likely has access to all the red briefs he could possibly need–wanted a way to lay down some extra protection while playing pick-up games.

The special edition shoes were released to only a handful of stores in China at the beginning of February and will land in a few more in China and a handful of stores in the U.S. on Feb. 19. Nike stores in Beijing and Shanghai this week reported selling out of them instantly, if they received any at all, and in Hong Kong they were available only via a lucky draw.

Such limited edition Air Jordans are rarely made for the average consumer anyway—they are released in very short supply and quickly snapped up by collectors, where they enter cult status online and are auctioned—at last look eBay had a number of these for upward of $400.

In the NBA, the likes of Dwayne Wade will be sporting the Air Jordan 2011, though not in the Year of the Rabbit colors. The special editions aren’t as hideous as last year’s model, which featured a plastic window on the side to give the sock some display, but they are far from 1993′s Air Jordan IX, known to many as the design that got cool years after its initial release. With their gold laces, red tongues and translucent soles, it may be a while before the Year of the Rabbit Air Jordans are looked on so fondly.

–Miguel Gonzalez Jr., with contributions from Yolanda Zhang