Wed, 29 Mar 2000

Web site business in Asia, from conglomerate to corner store

By Joe McDonald

SHANGHAI, China (AP): Fresh out of Harvard Business School last year, Shao Yibo passed up lucrative U.S. jobs and came home to start a Web site that sells goods as varied as houses and hot- pink cellphones.

Six months later, is a Chinese dot-com star. Shao has raised US$7 million from investors and plans to raise $40 million more. And in an industry where profits are as rare as quill pens, he predicts the site will make money in two years.

"This is the year for e-commerce in China," says Shao, 26.

China's not alone.

Web surfers buy baby furniture in Hong Kong and books in Taiwan. South Koreans use the Internet to trade stocks and buy washing machines. To encourage e-trade, Singapore is offering to wire every home in the nation with a high-speed net connection.

E-commerce is taking off all across Asia, creating a new world of consumer choice and distinctly Asian versions of online giants and

Online wares suit local tastes and inventive payment and shipping options serve a region with few credit cards or reliable delivery.

Consumer e-commerce in Asia is on track to reach $8.4 billion this year, according to the research firm Gartner Group. Sales are growing by more than 200 percent a year and could pass $48 billion by 2003. By contrast, consumer online commerce in the United States in 1999 was reported by the Boston Consulting Group at $36.6 billion.

The boom isn't limited to high-tech economies. Despite the scarcity of computers, the fastest growth is reported in India, Indonesia and China, where mom-and-pop shops are going online to find new export markets.

Asian online offerings range far afield, from fortunetelling in Japan to Balinese furniture. Before the Lunar New Year, a Chinese site auctioned the services of chefs for family banquets.

In Taiwan, Chang Tien-li's online bookstore has grown to 60 employees. The former computer science student started in 1996 with a single PC, using the Internet to find information on how to run the business.

"It's amazing. You get everything free from anyplace," says Chang, 39.

E-commerce is also reshaping old industries -- nowhere faster than in South Korea.

Its conglomerates that rule manufacturing and other fields are racing to get online, hoping the Internet will rescue them after a string of financial disasters. The three South Korean automakers say they plan to put parts-buying online this year.

Investors are pumping millions of dollars into Asian dot- commerce, braving potential government restrictions and more basic problems: how to get paid and get goods to buyers.

Asian Internet investors are focused on securing direct links to Web surfers' wallets.

They don't have the patience of U.S. shareholders for seemingly endless losses at portals, the Web sites that aspire to be on-ramps by offering users news, entertainment and other services and trying to eke out a profit by selling advertising.

"There isn't that 'mad money' floating around Asia for free the way there is in the United States," says Lane Leskela, the Asian e-commerce analyst for Gartner. "Venture capitalists give companies a schedule of when they want to be repaid, and they are very specific."

In China, says Shao, "in the past half-year, everybody who's been doing portals supported by advertising is saying, 'Now we're doing e-commerce."'

International Data Group of Boston has invested $50 million in 40 Chinese Internet outfits, including department store and, a bookseller with 200,000 Chinese-language titles.

"E-commerce is more and more important to us. It's still in its early stages, but it has huge potential to grow," says Hugo Shong, International Data's managing director for Asia.

Japan's Softbank has invested $115 million in Internet ventures in Japan and $47 million in China. It says e-commerce is the biggest share of its investing.

Asia already boasts success stories to rival Silicon Valley's dot-com tycoons.

Azim Hashim Premji, chief executive of Indian software maker Wipro, is estimated to be worth $26 billion. Marshaling Indian programming talent, Wipro has equipped Home Depot, Nike and other multinational corporate giants to sell online.

Even bigger than consumer trade is business-to-business e- commerce -- known as "B2B" -- that links Asian suppliers behind the scenes to factories, stores and Western importers.

B2B e-commerce this year in Asia should total nearly $30 billion, according to Gartner Group, which predicts that flow could top $1 trillion by 2004.

The steel and petrochemical industries now have online markets to compare prices and products across borders. That has forced up Asian manufacturing standards "toward the highest levels in western Europe or the United States," said Gartner's Leskela. finds Chinese suppliers for foreign importers, listing prices for thousands of sources of toys, factory equipment and other goods.

"Trade in China has always been opaque. People try to find a market price, and it's impossible. We make it transparent," says Josh Cherin, the site's executive vice president.

The Internet also has created new markets by linking specialty customers regionwide.

Hong Kong-based caters to affluent Asians across 12 countries with a 550-item online catalog of premium, Western- made toys and baby furniture. Without any advertising, the site sold goods worth $4,000 in its first week online in February, says its American founder, Cameron Honarvar. Orders came from people in Japan, China, Hong Kong and Singapore.

"We are a threat to department stores and specialty stores because we don't have to pay rent," Honarvar says.

Despite such advantages, turning a profit in Asian e-commerce demands ingenuity. in New Delhi, an Internet grocer, skirts the problem of online payment by having its delivery drivers collect cash from customers.

China's eachnet sells for both companies and individuals and lists goods by city of origin. Customers can buy locally and avoid the risks of cross-border shipping. Big sellers are phones and computers. It also lists apartments for rent and featured a house in Shanghai that Shao said sold for $36,000 -- an average price for the city.

In some countries, enthusiasm for the borderless Internet is tempered, though, by economic nationalism and unease about its potential to thwart official censorship. Although it is pushing to extend its trade-hub status into cyberspace, Singapore blocks access to Web sites deemed pornographic.

China has proven an often vexing market. Chinese startups faced a political threat to financing in September when the nation's telecommunications regulator announced a ban on foreign investment, their biggest source of cash.

The government later relented, promising in trade talks with the United States to let foreigners own up to 50 percent of Internet firms. But details haven't been released, leaving major backers such as International Data Group and Softbank in limbo.

Shao of eachnet thinks regulators will settle such questions in favor of the e-commerce firms that are creating new jobs and wealth.

"Our position is that we're Chinese people doing things for China," he says. "We're pretty confident that in the long run, it will be no problem."