In its second-largest acquisition, Amazon buys the company for $970 million.
One unit will be Taobao Marketplace, which will allow consumers to buy and sell products.
China-based e-commerce operator Alibaba Group Holding Ltd. said today it would split its Taobao online retail arm into three units.
Alibaba says the Taobao Mall will serve consumers making purchases from retailers; eTao will focus on searches related to shopping; and Taobao Marketplace will enable consumers to buy and sell goods from each other.
Alibaba also is considering going public, according to a letter that CEO Jack Ma sent to employees. The letter said the split will help the e-commerce operator compete better amid what Ma called dramatic changes in online retailing.
In 2005, Yahoo Inc. bought a 40% stake in Alibaba.com. The company, which was founded in 1999 and had its initial public offering in 2007, has often been called the eBay of China.
Earlier this year, U.S.-based apparel retailer Gap Inc. opened an online store on Taobao Mall. Gap says the mall reaches 370 million registered users. Gap is No. 24 in the Internet Retailer Top 500 Guide.
Other brands such as Levi Strauss & Co. and adidas also operate stores on Taobao.