analysis Staking a claim to e-commerce

Two new shopping portals in Korea and China hope to cash in on Asia’s nascent e-commerce market. Both are set up as online department stores, connecting brands with potential buyers. Michael Hoare assesses their chances

Two big roll-outs of online shopping ventures in mainland China and South Korea are the latest attempts to kick-start the region’s hitherto sluggish e-commerce market. SK Telecom rolled out its retail service The 11st Avenue at the end of February. Meanwhile, on the mainland, Taobao.com has launched the Taobao Shopping Mall. Both offer brands and retailers the chance to sell to customers via a dedicated online platform. But the revenue models differ. Taobao – a subsidiary of Alibaba.com – will charge retailers based on the volume of transactions they complete. This is a one-way transaction, and is built specifically as a destination for buyers. A Taobao official said the site would become a source of “quality products for buyers of good taste, like traditional department stores”, thereby distinguishing its wares from the fake or cheaply made goods that litter other e-commerce sites on the mainland. Korea’s The 11st Avenue is a grammatical hodgepodge where the “st” represents the abbreviation for street. It uses a so-called “open-market platform” that allows both individuals and companies to list items for sale. It will also offer value-added services such as interactive chat, how-to courses for online retailers and a mobile service that allows consumers to track deliveries. SK Telecom’s research shows that South Koreans shop online and use the internet to research products, but there is scope to make online shopping

20 digital media april 2008

E-commerce... 55m Chinese web users shopped online in 2007, up from 43m in 2006

more fun – a gap The 11st Avenue hopes to fill. As a business, the online marketplace is expected to grow beyond conventional revenue sources, such as transaction fees, by developing products of its own, building partnership with other industries and carrying online advertising. A full mobile version is next for SK Telecom, which it says will appeal to its roughly 20m mobile phone subscribers. In developing markets these plays make sense. Of mainland China’s 200m-plus internet users, 55m shopped online last year, spending Rmb59.4bn (US$8.5bn), according to the China Internet Research Center in Beijing. It was a substantial increase over the 43m online shoppers in 2006, but the levels of e-commerce still pale in comparison with markets such as the US, where

SK Telecom’s retail gambit

b The 11st Avenue has 2.6m products on sale from 13,000 sellers. b An SK Telecom spokesman said the unique visitor count per day had already reached more than 300,000, with an average total of 1.6m visitors a week. It has 120,000 registered subscribers. b The overall e-commerce market in Korea is expected to grow at 16% annually and expand to US$36.9bn by 2012, according to SK Telecom.

about 71% of all internet users shop online. While there is a certain optimism about rolling out in a developing market, from Australia there are signs that ecommerce can easily stagnate. A March survey by consultancy The Leading Edge found that consumer worries about refunds and the costs of shipping applied to about half and one-third of the people surveyed, respectively. The consultancy attributed the findings to the poor design of online catalogues. But online safety, shipping costs and difficulties in obtaining refunds have been common concerns since Amazon and eBay first began to grow almost a decade-and-a-half ago. These are some of the key concerns the two new ventures must combat. Mindful of the fears of customers, both have gone out of their way to stress integrity as the cornerstone of their operations. The other constituency that must be won over is the brands and retailers themselves: a common issue across the region. “There is no easier way to go global. E-commerce as an industry can help retailers take their business to a higher level, and they should definitely look into investing in this area for their future business growth.” says Kerry Wong, eBay Hong Kong managing director. The fact that they still need convincing shows how far the e-commerce sector still has to go in Asia. But if Taobao and The 11st Avenue can make a success of their ventures, many more will surely follow. I

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