E-commerce offers development opportunities

With more than 450 million Internet users in China, which is about 50 percent more than the entire population of the United States, discussion regarding e-commerce development was certain to come up during the annual sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) National Committee.

E-commerce is the next economic frontier to many, and China is now leading the pack in terms of maximizing the potential of the Internet compared with Western countries.

In the US, Amazon.com Inc, a major online retailer, was founded in 1994, Yahoo! Inc, one of the earlier Web portals, started operations in 1995, as did online auction website eBay Inc.

Websites offering the same services in China were slower to develop. E-Commerce China Dangdang Inc was established in 1999, Baidu Inc started up in 2000, and Taobao.com, an online auction subsidiary of Alibaba Group, was founded in 2003.

In many cases, the Chinese websites have now reached the same, or exceeded, the popularity of their peers. Alexa.com, which ranks Internet traffic, ranks Baidu.com as the sixth most popular website and Yahoo.com as the fourth. Taobao.com, at 15th, is ranked higher than both Amazon.com and eBay.com.

The latest trend that has grabbed the attention of the Chinese market and the international community is group buying, which allows online users to receive coupons for huge discounts from businesses provided a certain volume of purchases is assured. The popularity of group buying has drawn Groupon.com, the largest group-buying website in the US by market share, to the Chinese market, hoping for a slice of the action.

However, Groupon faces many tough challenges. In addition to the potential of failing to understand the Chinese market, which is a problem many international companies encounter, Groupon has more than 1,700 competitors in China, who have sprung up since the introduction of the group-buying concept in late-2008.

The scale of group buying in China has reached a point where cracks have started to surface. Recently, meituan.com, a popular Chinese group-buying website, filed a lawsuit against International Dairy Queen Inc for failing to honor group-buying coupons, which Dairy Queen claims to have never issued.

The growth in e-commerce has spurred Xu Xiaolan, deputy director at the China Center for Information Industry and a member of the CPPCC, to suggest laws be passed during the annual session of the NPC. The proposed "e-laws" would not only help regulate e-commerce but also promote it by establishing an "Internet Economic Zone". Xu hopes it will recreate the success of the special economic zones, which have been widely recognized as a major contributor to China's rapid growth.

However, great ideas usually don't progress without meeting a few bumps in the road. On Feb 28, the Office of the US Trade Representative named Taobao.com and Baidu.com in its Notorious Markets List, claiming the companies routinely infringe on intellectual property rights by trading counterfeit goods.

But industry analysts and researchers say that considering the explosion of Internet users and the online market, property rights remain are a problem for e-commerce globally, not just in China. Many experts point out that eBay has also had an ongoing problem with counterfeit goods. Such business issues would be better resolved between companies, rather than having US politicians use them to gain political points.

However, the incident highlights the opportunity for China. Similar to the establishment of special economic zones, Chinese lawmakers have a chance to go where no other country has gone before - guiding and promoting Internet and e-commerce development to economically benefit everyone.

(China Daily 03/14/2011 page7)