E-commerce in China
E-commerce in China will lead that country’s economy into a new era where customer focus, responsible business practices and innovation are the determinants of success rather than cultivating relationships with people in high places.
As the western world began to embrace e-commerce in the mid-1990s, China could do little more than watch. The concept of buying from strangers at the click of a mouse was the stuff of science-fiction.
There was no online banking available, no credit cards, and internet access was only possible if you were one of the few with a phone line – and even then it was painfully slow, and expensive.
What westerners consider a simple task – posting a package – mean long waits in long lines at the post office. State run organizations, which included the whole Chinese retail system, were inefficient, and low disposable incomes meant improvements were a low priority.
In its infancy, China’s e-commerce was driven by businesses that saw the opportunity for finding both suppliers and buyers. When it entered the World Trade Organization, companies on the fertile east coast of China, where businesses had begun to flourish, saw the internet as key to connecting to trade partners.
2003 is seen as a milestone year for e-commerce in China for two reasons. Firstly, the country’s first generation of internet users was graduating from universities, and they were quick to grasp the concepts of online commerce, shopping and gaming.
A healthy consumer culture was the result of increasing disposable incomes, and the previously state run retail outlets were no longer able to cope.
Secondly, major investments in China were being made by international e-commerce companies. This created real competition for the first time between local and foreign companies.
To instill trust in both buyers and sellers of online traders, escrow systems were developed, and real-time chat enabled them to get to know one another before confirming deals.
This was a very important feature, because the cultural history of the Chinese society saw relationships as one of the most important channels in establishing trust.
By 2007 for the first time the amount spent on online transactions surpassed the cash taken by physical retailers in China. And in a departure from the way online purchasing progressed in the west, users of online payment systems exceeded the number of credit card holders.
2008 has seen the trend towards a new type of business, conducted by entrepreneurs, niche marketers who deal directly with niche retailers, cutting out the middlemen. Many of these are buying in bulk from China and selling to the west. Individuals from the west are embracing the “drop, ship” concept – marketing products that are fulfilled and shipped from China.
Tags: Business, E-commerce, Investments