Lu Bowang, managing partner of China IntelliConsulting Corporation, shares his opinion of e-commerce development in China with METRO. The company has been publishing in-depth reports of online shopping and online payment in China since 2006.
Q: The Beijing Tongzhou district government raised the slogan to develop the city into "the capital of e-commerce." What do you think of it?
A: E-commerce is a very hot saying for the moment, but I don't see the necessity of making it a spotlight for the city, since online business is not limited to a certain place, a certain city. Unlike a traditional business, it doesn't need plants, supporting facilities or employees. All it needs is a large-scale logistics center, which is able to deliver products from the seller to the customer.
Q: As you said, e-commerce doesn't employ many people. What then is its contribution to a city's economy?
A: It's true it's not a labor-intensive industry, but it brings products from provinces and cities where manufacturers gather to the rest of the country, and brings money back. Beneficiaries are the well-developed areas and Beijing is one of them. It's like in foreign trade. Export surplus is obviously better for the country's economy than import surplus.
Q: How do you see e-commerce developing?
A: I see enormous growth. Last year, online shopping totaled 267 billion yuan, an increase of 90.7 percent over 2008. The figure will reach 490 billion yuan this year, our analysis say. The number of net users has grown. Among the 400 million users in China, people in the middle and western provinces have been taking larger proportions in the past three to five years, so there is also a great potential in for people to shop online.
Clothing and digital products are the main products sold online, accounting for half of all items. However, the percentage of clothes sold online take up only 6 percent of clothes sold last year, with digital products taking only 10 percent. We expect it can grow to more than 30 percent, so there are tremendous potentials to be developed.
Q: What are the challenges that e-commerce faces?
A: E-commerce in China is still in initial stage, so it faces lots of challenges.
First, credit issue is essential for online shopping. It was barrier for e-commerce development until 2005, when the biggest domestic online audition and shopping company began to introduce Alipay, a third-party payment platform. It was not until then that net users turned to online shopping and e-commerce began to boom. But still, a better and more complete credit system is needed to guarantee healthy and smooth development of online shopping.
Another challenge comes from offline business operators. Take clothing industry, for example. It has its traditional distribution channel, dealers authorized to sell a certain brand, with dealer covering a certain area. Online selling obviously broke this arrangement and affected the interests of dealers. That's the reason why clothing brands were cautious about building up their own online selling channel and did not stepped into the business until 2008.
Now they have realized the importance of e-commerce and are afraid to fall behind in this new battle, so dealers' oppositions don't work anymore. But in digital products, manufacturers are still looking on; huge price difference is one of the reasons.
CHINA DAILY
