E-commerce with Chinese characteristics

A million internet entrepreneurs will bloom, predicts the boss of China’s biggest internet company

In 2008 it will become clear that e-commerce will have a much larger impact in China than in the West. China will generate new models of internet business which will spill over to the West. And e-commerce will lead China’s economy into a new era in which innovation, customer focus and responsible business practices—rather than relationships with people in power—become the main determinants of success.When Western e-commerce was born in 1995, China could only watch with admiration. The thought of clicking a mouse to buy products online—often from complete strangers—seemed an impossibility in China. If you were lucky enough to have a phone line, internet connection was slow and expensive. Banks were inefficient, making payment difficult and time-consuming. Sending a package meant waiting in long lines at the post office. And consumer culture had not yet taken off, hindered by low disposable incomes and an inefficient, state-run retail system.

It was businesses—not consumers—which drove e-commerce’s early years in China. The most agile enterprises began to take notice of the internet as a channel for finding buyers and suppliers. As China entered the World Trade Organisation in 2001, a new “widget economy” was developing along the east coast of China, fertile ground for a multitude of small and medium-sized companies which made a living from trade. The internet proved to be the best way to connect these otherwise fragmented buyers and sellers, replacing trade shows and magazines as the medium of choice for sourcing products.

By 2003 two trends were converging to bring consumer e-commerce out of its long slumber. China’s first generation of internet users had graduated from universities and turned their attention from online games to online shopping. With ever-increasing disposable income and more products than ever to choose from, a healthy consumer culture had developed, and the physical retail infrastructure was unable to keep pace. Second, international e-commerce companies began major investments in China. The ensuing competition between foreign and local companies helped educate the market, attracting more online shoppers.

New modes of business arose to meet the unique needs of China’s consumers. Rating systems and escrow payment services developed to resolve the issue of trust between buyers and sellers. The integration of real-time chat into marketplaces allowed people to get to know each other before making transactions, a necessary function in a society in which relationships are still one of the most important channels through which trust flows.

In 2007 the leading consumer marketplaces counted 50m users and, for the first time, the value of daily online transactions surpassed the cash taken by major physical retailers in China, such as Wal-Mart. Moreover, users of online-payment systems exceeded the number of credit-card holders, showing that China’s e-commerce is taking a very different path from the West’s, which relied heavily on credit cards.

The most significant trend in 2008 will be the emergence of a new class of entrepreneurs

Whereas C2C and B2C models have remained largely distinct in the West, in China they will continue to blend together, with consumers visiting single marketplaces to buy from individuals, small retailers and large retailers alike. Credit systems will take new forms as individuals and companies develop track records, giving banks reliable information to make loans to businesses and consumers.

The most significant trend in 2008 will be the emergence of a new class of entrepreneurs. Niche manufacturers will link up with niche retailers, cutting out middlemen and out-competing larger, less specialised firms. A growing number of entrepreneurs will buy in volume from China on sites like Alibaba and sell to consumers on Western sites such as eBay.

China’s e-commerce is creating economic opportunities in China and around the world. A new class of businesspeople is emerging and the transparent nature of e-commerce means businesses are becoming more responsible as they further integrate into the world economy. This new generation of entrepreneur provides the best chance we have to encourage economic development at a grassroots level in China, and around the world.

Jack Ma: chairman and CEO, Alibaba Group

Source: Economist

Note: this article does not represent the viewpoint of this website.

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A million internet entrepreneurs will bloom, predicts the boss of China’s biggest internet company

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