Web site business in Asia, from conglomerate to corner store
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, eachnet.com 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
Amazon.com and Priceline.com.
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 Books.com 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 8848.net
and dangdang.com, 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.
MeetChina.com 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 ebabyasia.com 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.
Bababazaar.com 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."