E-commerce Evolution

Chinese consumers seem to have fully embraced the idea of online shopping, and, if figures released by market analyst firm iResearch are accurate, over 105 million of them now make regular purchases over the Internet. Some analysts are predicting that this number will double by 2011.

Chinese consumers spent RMB 190 billion shopping online in 2009, the majority of which was channeled through the e-commerce platform Taobao, which holds an approximate 82% market share. Paipai, Tencent's e-commerce offering, and Eachnet, eBay's Chinese site, are second and third respectively, with less than 10% of the market each.

By mid 2009, Taobao was claiming 143 million registered users, roughly 43% of the Chinese Internet population, with thousands of new sellers, whether large brands or one-man operations, signing up every month.

"Taobao has clearly found the right mix," wrote Duncan Clark, chairman of research firm BDA, in a recent report entitled "2010: Taobao & China's 'Me-Commerce' Revolution."

While Taobao has been among the main benefactors to date of changing Chinese shopping habits, it is an industry-wide revolution, benefiting heavily from China's vast geography, the country's more price-sensitive consumers, and Internet-embracing youth open to experimenting.
"Innovative entrepreneurs have built ventures in a range of niches and business models which are now having the transformative effect on China's economy that was predicted a decade ago," Clark continued in his report.

E-commerce's success in China was not guaranteed, however. In fact, until recently many analysts and experts felt that the lack of credit card users in China would handicap the spread of online shopping and stifle growth before it had even begun.

"For ten years we have been hearing that e-commerce won't work in China because there are no credit cards," says Chris Reitermann, president of OgilvyOne China, Ogilvy & Mather Group's digital and one-to-one marketing network. "Then overnight it is the hot topic."
Online retailers now sell everything from books, clothing and electronics, to phone cards, cosmetics and fake goods. Many of these retailers remain small operations, earning just a few thousand RMB a month, with their owners experimenting with various ways to gain more business - like paying for Taobao marketing add-ons in an effort to boost visitor numbers - while juggling a full time job on the side.

There are inherent benefits for online stores versus the traditional bricks-and-mortar approach. "You don't need cash or loans, it fits the entrepreneurial spirit of China," says Ogilvy's Reitermann. "You leapfrog huge expenses and can have an immediate nationwide reach."
That being said, it is an increasingly competitive environment, with many rival stores fighting for the same consumers. CIB spoke with several smaller Taobao store owners to get a better understanding of the online shopping ecosystem, and the trials and tribulations of trying to make money from an online store.

more information :-http://www.cibmagazine.com.cn/Features/Focus.asp?id=1298&e-commerce_evolution.html