dot.com in asia objectives: to study the current situation of online commerce in asia, and china in...

Dot.com in AsiaDot.com in Asia Objectives:

To study the current situation of online commerce in Asia, and China in particular.

To understand the legal matters of operating an online business in China and its implcations.

Dot.com in AsiaDot.com in Asia

Contents:

• Introduction

• Internet in China

• Useful sites

• Case Study

1. INTRODUCTION

Currently, there are 66 million Asians hooked up to the Internet, BCG's study (1999) predicts 375 million by 2005, drawn by cheaper access charges and more interesting stuff to read on the web. They could be spending as much as US$25 billion by 2003.

The development in Asia almost identically follows that of the US, only it's 2-3 years behind, and Asia is catching up with lightning speed.

Internet user penetration (per capita): 1 = estimate

Country 1999 2000 2001 20021 20031 20041

China 0.5% 1.0% 1.8% 3.0% 4.4% 6.0%

India 0.1% 0.4% 0.8% 1.5% 2.6% 3.8%

Korea 19.6% 26.5% 33.0% 39.2% 46.1% 51.8%

Taiwan 20.5% 27.2% 33.3% 38.8% 45.1% 50.4%

Australia 31.9% 36.4% 40.8% 45.1% 48.7% 51.2%

Malaysia 4.7% 7.2% 10.3% 14.2% 18.8% 23.6%

Hong Kong

22.2% 28.0% 33.8% 38.8% 43.7% 48.2%

Philippines 1.0% 1.4% 1.9% 2.6% 3.4% 4.4%

Thailand 1.6% 2.2% 2.9% 3.8% 4.5% 5.1%

Indonesia 0.5% 0.6% 0.7% 0.8% 0.9% 0.9%

New Zealand

25.4% 31.1% 36.4% 41.6% 45.3% 48.4%

Singapore 28.7% 34.8% 40.3% 45.6% 49.2% 52.0%

Rest of Asia-Pacific

0.4% 0.6% 0.9% 1.2% 1.6% 2.0%

Total 1.1% 1.7% 2.4% 3.4% 4.6% 5.8%

1 INTRODUCTION

• Internet in Hong Kong

1. http://www.info.gov.hk/itbb/english/fact/index_n.htm.

2. Almost one in six people will do their shopping over the Internet by 2003 and sales will then rise dramatically, according to the Jan 2001 survey by the University of Hong Kong. The Telecommunications Research Project of the university interviewed 514 randomly chosen residents in their homes by telephone for its survey.

3. Only 3.5 per cent of the 6.8 million population ordered or purchased goods or services online in 2000. The figure was nevertheless almost a tenfold increase in 1998, when just 0.4 per cent shopped online.

1 INTRODUCTION


4. The study forecasts that more than 90 per cent of them would be able to purchase online by the end of 2008.

5. Food and groceries are the most popular category in Internet transactions, with 40 per cent of those households shopping online making orders under this category in 2000.

6. One third carried out online stocks trading. About a quarter purchased books, over one-tenth bought computers or computer products, and another one-tenth bought furniture and other household products.

1 INTRODUCTION


• A more recent study by Nielsen/NetRatings shows that almost 800,000 people in the SAR visited a site that offered e-commerce last month, an increase of 46 per cent from the same period the previous year. But at the same time, only 4 per cent of Internet users said they had made an online purchase during the past 12 months(SCMP January 22, 2002, HK lags Asia in e-shopping by Doug Nairne).

Comparison of Average Internet Usage in the World Ranking

Country/Region

Average time spent on Internet /

month

Time spend on Internet /time

No. of page browse / month

No. of page browse / time

No. of website visited

Hong Kong 1 (10hrs 12 min) 1 (37 min 4 sec) 1 (870 pages) 2 (54 pages) 2 (22 sites)

Singapore 9 (6 hrs 8 min) 5 (31 min 33 sec) 6 (650 pages) 1 (56 pages) 3 (21 sites)

United States

2 (10 hrs 4 min) 4 (31 min 53 sec) 4 (720 pages) 12 (38 pages) 17 (10 sites)

Canada 3 (8 hrs 58 min) 7 (29 min 20 sec) 5 (651 pages) 15 (35 pages) 5 (19 sites)

Germany 6 (7 hrs 32 min) 6 (30 min 1 sec) 2 (802 pages) 3 (53 pages) 1 (26 sites)

Netherlands7 (6 hrs 52 min) 12 (27 min 36 sec) 7 (596 pages) 4 (48 pages) 3 (21 sites)

Source: Nielsen/NetRatings Statistics (29 Dec 2000 Ming Pao)

1 INTRODUCTION

Key statistics from McKinsey’s e-commerce survey in 2001:

Asian e-tailing sites spend on average 10 cents in marketing money for each visitor every month, compared with US$1.50 in Europe and US$2.30 in the US.

Each Asian online customer conducts 1.5 transactions a month, the same as those in Europe and slightly ahead of the US’s 1.3 transactions a month.

1 INTRODUCTION

Key statistics from McKinsey’s e-commerce survey in 2001:

Asian consumers spend on average US$40 for each online transaction, compared with US$66 in the US and US$79 in Europe.

30% of visitors to Asia’s B2C e-commerce sites will pay repeat visits to the sites, while only 18% of European and 28% American visitors would do the same.

E-tailers in Asia only manage to convert 0.8% of visitors into spending customers, compared with 2.3% for US sites and 2.5% for European sites.

How do you feel about the future of dot.coms??

1. It’s quite ridiculous that the market value of an online ticketing company can be greater than the value of an airline.

2. Value addition is the key.

Dot.com in AsiaDot.com in Asia

Contents:

• Introduction

• Internet in China

• Useful sites

• Case Study

2. Internet in China2.1 Introduction

Semi-Annual Survey Report on Internet Development in China by the China Internet Information Centre (CNNIC).

China will have the most people online in Asia, supplanting Japan. Doubling every 6 months. Fastest growth in Asia.

2. Internet in China2.1 Introduction

By 2005, China will have the largest population of web surfers in the world after the US.

The Economic Intelligence Unit (EIU), in their latest report in May 2000, ranked China no. 51 in the e-business readiness rankings. The evaluation is based on 2 major factors: the general business environment and “connectivity”. The U.S. is the world’s most “e-business-ready” country, which is followed by Sweden, Finland, Norway, Netherlands, UK, Canada, Singapore, Hong Kong (rank #9).

2. Internet in China

Chinese portal sites:1. www.sina.com.cn

2. www.sohu.com

3. www.263.net

4. www.yahoo.com

5. www.netease.com

6. www.163.net

7. Yahoo! Chinese

8. www.cpcw.com

9. www.online.sh.cn

10. www.21cn.com

11. www.china.com

12. http://www.corp.china.com/index.htm

13. http://www.chinaweb.com/

2. Internet in China

Top ten most popular sites: 1. www.sina.com.cn

2. www.163.com

3. www.sohu.com

4. www.163.net

5. www.yahoo.com

6. www.263.net

7. http://cn.yahoo.com

8. www.china.com

9. www.21cn.com

10. www.east.net.cn

2. Internet in China2.2 Profile

• B2B websites specializing in China trade:

1. www.alibaba.com

2. www.chinatradeworld.com

3. www.meetchina.com

2. Internet in China2.2 Administrative

Control of the Internet in China

• The regulatory framework advanced significant in the latter part of 2000 with the promulgation of the Telecommunications Regulations of the People’s Republic of China (Telecom Regulations) and several companion regulations.

• These regulations marked the beginning of a more ordered system of government regulation and established the Ministry of Information Industry (MII) as the principal, though not the only, regulator of the Internet and related business.

2. Internet in China2.3 Administrative Control of the

Internet in China

• Foreign investors in the sector will need government approval and licences.

• The most wide-ranging restrictions recently published target content on Chinese websites, making portals liable for any information posted on their pages that can be deemed a state secret.


Internet in China

• Prohibited Internet content refers to information that:

1. is contrary to the basic principles laid down in the constitution.

2. endangers state security, discloses state secrets, subverts state power or disrupts ethnic unity.

3. infringes upon the honor or interests of the State.

4. incites ethnic hostility or racial discrimination, or disrupts ethnic unity.


Internet in China

5. disrupts the religious policy of the State, or propagates heresies and feudal superstitions.

6. spreads rumors, disrupts the social order or breaks down social stability.

7. disseminates obscenity, pornography, gambling, violence, murder or terror, or instigates others to commit offences.

8. insults or defames others or infringes upon the lawful rights and interests of others.

9. contains other content prohibited under laws or regulations.


Internet in China

• ICPs are required to record the content they make available, the time of release of such content, and the related Internet addresses or domain names. These records must be maintained for 60 days.

• Any internet information service provider that discovers prohibited content on its web site must cease transmitting it and report it to the relevant State authorities.

• ISPs have to maintain records for 60 days of the log on times, account numbers, Internet addresses or domain names, and originating telephone numbers of online users.


Internet in China

• Firms are also required to disclose details about the encryption software used.

• The State Administration for Industry and Commerce designated the Beijing Municipal Administration for Industry and Commerce as the registration authority for web site names throughout China.


Internet in China

• A number of companies - such as operator China Unicom and dozens of Internet content providers (ICPs) - had skirted the ban on foreign investment. Foreign investment - the decreed 50% limit on foreign equity holdings has already been exceeded by many market leaders.

• Foreign investment in ICPs is estimated to be worth as much as US$100 million dollars. Most Chinese ICPs are based in the mainland and staffed by locals but have significant foreign funding.


Internet in China• Erratic policy. The current situation seems to be:

1. Online content will be treated like regular print media, under the aegis of the State Secrets Bureau, the State Press and Publications Administration and the Ministry of Culture. News must be approved before being posted online. Web journalists must have state accreditation.

2. Licensing - the Radio, Film and Television Administration will monitor online video and sound, while the State Press and Publications Administration will oversee Net publishing and bookselling. Fees may be levied.


Internet in China• Erratic policy. The current situation seems to be:

3. Encryption - all encryption technology must be registered.

4. E-commerce - unclear policy. Domestic transactions are the reign of the Internal Trade Ministry and possibly the Finance Ministry. Export business is the jurisdiction of the Customs Bureau and the Ministry of Foreign Trade and Economic Cooperation.

5. IPO listings will likely need approval from the China Securities Regulatory Commission, the Ministry of Information Industries and the relevant office of the State Council.


Internet in China• China’s accession to the WTO means that limits on foreign investment in the

telecommunication sectors, including internet, are to be raised in the following ways:

1. For electronic mail, voice mail, on-line information and data base retrieval, electronic data interchange, enhanced/value-added facsimile services (including store and forward, store and retrieve), code and protocol conversion, on-line information and data processing (including transaction processing), and paging services, foreign service suppliers may hold a 30% equity share in joint ventures upon accession, the ceiling will be raised to 49% a year later and to 50% in two years.

2. For analogue/digital cellular services and personal communications services, foreign services suppliers may hold a 25 % foreign equity share one year after accession, 35 % after three years, and 49 % after five years.


Internet in China

What is the future potential

of electronic shopping in

China?

1. RMB501-2000 pay scale most common.

2. Overall China has 8.7 fixed phone lines per 100 people, though in urban area the figure jumps to 27.7.

3. China's e-commerce payment and delivery systems are still underdeveloped.

4. Lack of coherent policy. Erratic. Power struggle over who will supervise what on the Net.

5. Postal system.

3. Useful Sites

http://www.virtualchina.com/matrix/background.html

Case Study

Case Solutions:

1. What are the critical success factors for online person-to-person auction sites?

Make it cost effective to sell low-end/garage sale items/white elephants that would not be worth a $25 classified newspaper ad.

Large number of buyers and sellers.

Security.

Case Solutions:

2. The number one problems of an auction site are protection against fraud, illegal and distasteful items on the site, shill bidding on one’s own items directly or through the use of multiple identities, deadbeat bidders, and other safety issues. What are the measures that can be taken to ensure trust and safety in dealings between users? How do you feel about the current measures used by Red-Dots.com in ensuring satisfactory completion of a transaction?

Case Solutions:

2. Verified user program: different icons for different levels of verification. The more information supplied,the more properly the user behaves, the higher the level. A sign of creditworthiness. Information protection guaranteed for verified user.

Insurance.

Feedback forums: comment on the experience with another individual, rating.

Case Solutions:

2. Warning and suspension (20-day suspension, indefinite suspension) for shill bidding and deadbeat bidders.

Very clear usage guidelines and agreements esp for illegal items. Immediate removal of illegal and distasteful items.

Proactive screening team for illegal items that work closely with the police, post office etc.

Case Solutions:

3. Since sellers were attracted to an auction site as a result of the large number of potential buyers there, and buyers in turn were attracted to the site because of the broad selection of goods listed on the site, how can Red-Dots attract new users to build up traffic?

Establish relationships with leading sites, like the Associate program of Amazon.

Help users make their full-time living selling on the site (25% of eBay sellers work full-time).

Bonus points for heavy traders. CRM – customized appeals to traders. Events marketing.

Case Solutions:

Advertise: you don’t need a lot of money and a business degree to earn a living on red-dots.com. Anyone who is willing to work hard and provide customers with personalized, friendly and reliable services can succeed on red-dots.com, and thousands are doing it every single day.

eBay has been developing technology ( eBay API) that will let Web companies display eBay auctions on their own independent sites..

Case Solutions:

Other Internet companies have made similar attempts to expand their services beyond a single site. Google, for instance, allows independent sites to use the google search-engine technology. The technology allows users to search google’s vast index of Web sites without going to google.com.

Using XML, eBay has created a standard set of instructions that make it easier for independent software companies to hook into the eBay site.

Case Solutions:

4. Besides traffic, how can Red-Dots foster stronger customer relationships and longer-length user visits?

Community building: provide a venue for buyers and sellers to socialize, to discuss topics of common interest, and to provide feedback on one another. (especially useful for collectors).

Make the community self-policing, form neighbourhood watch groups to help guard against misuse or violations of site etiquette.

Bonus points for heavy traders.

Personalization.

Case Solutions:

5. eBay generated revenues in two ways: the fees sellers paid for listing their items, which accounted for about 45% of eBay’s total revenue; and final value fees, a percentage of the final sale price of the item that accounted for 55%. Consequently, eBay do not need to rely on advertising. Which revenue model do you think is most suitable for Red-Dots, the user-pay model or the advertising support model?

Probably the user-pay program.

Case Solutions:

6. If you want to set up an auction site yourself, which direction would you go?

Specialized in one area eg. Model cars, rare and out-of-circulation items, art auction site for Chinese painting/calligraphy, computer and technology products.

Price comparison service – lowest price.

Credit-card service for small sellers on the site.

dot.com in asia objectives: to study the current situation of online commerce in asia, and china in...

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