Size and growth dynamics of online stores: A case of China’s Taobao.com

• We use the system GMM estimator to analyze the size–growth relationship of 21,948 stores from 14 industries on Taobao.com.
• Data analysis shows that Gibrat’s law tends to be rejected and the smaller stores grow faster.
• The applicability of the law is contingent upon store age and size: it tends to hold for larger and older stores but fails for smaller and younger ones.
• We explain the size–growth relationship from the viewpoints of trust building and store survival.

This study examines Gibrat’s law regarding size–growth relationships in the consumer-to-consumer (C2C) online marketplace. Using dynamic panel data models, we analyze 21,948 e-merchants from 14 industries on Taobao.com. The data analysis shows that Gibrat’s law holds for large and mature stores when their size and age exceed certain threshold, but it generally fails to apply to stores whose size and age are below certain threshold. For those small stores, they grow faster than large ones in the C2C e-commerce. Results of the study provide insights into the competitive dynamics and industry structure of the C2C online marketplace.