E-Commerce set to rise among China SMBs

SINGAPORE: Small and medium businesses (SMBs, or companies with up to 999 employees) in China will see a 45 percent increase in numbers with e-commerce-enabled websites this year as compared to 2007. About 200,000 companies in China will have an e-commerce-enabled website this year, compared with about 135,000 last year. By 2010, the number of e-commerce-enabled businesses in China will reach 370,000.

This is from the latest study by New York-based Access Markets International (AMI) Partners, Inc. AMI defines e-commerce as the use of information and communication technologies by businesses to transmit business-related information and to transact business activities with either business entities or individuals. The online transactions can be either with customers, suppliers, channel partners or a mixture.

“Ever since the Internet bubble burst and failures of many dotcom companies, e-commerce businesses have reduced significantly in China,” says Daniel Sim, AMI’s Shanghai-based Country Manager of AMI-Partners in China. “This is because negative publicity has driven more e-commerce sites to cease operations. However, the Internet as an information exchange medium continues to flourish and web activities continue to increase now in China.”

The rise in e-commerce websites comes largely from small businesses (SBs, or companies with up to 99 staff). SBs rely on the Internet as a marketing medium and have now progressed to the next level to integrate e-commerce features such as online shopping, e-payment gateways and even web-surveys for better customer relationship management. In addition, web portals are also sprouting up on the Internet. These portals act as agents for SBs and offer catalog and payment gateway services to facilitate for e-commerce transactions.

“The availability of Internet infrastructure and wireless Internet access in key cities in China has created a positive environment for e-commerce to grow,” Mr. Sim says. “Moreover, the surge of Web 2.0 sites that offer social networking, blogs, podcasts, etc., has created a new paradigm of information exchange for networking and marketing. This is helping create a new level of comfort for SMBs to map out e-commerce activities.”

Despite the numbers showing positive signs of increase in e-commerce-enabled web sites in China, the projected penetration rate of e-commerce businesses in 2008 will only be 6 percent (up from 4percent in 2007). While continuous growth is expected, SMBs are more cautious in their approach towards e-commerce investments.

“SMBs are no longer rushing to launch e-commerce projects and the focus is no longer dot-com-driven,” Mr. Sim says. “Rather, it is now an extension of the business model. This is on top of their existing brick and mortar structure. SMBs are learning from past failures and are taking one step at a time. Some of the e-commerce initiatives that have taken off well in China include online retail stores, online travel and accommodation services, and commercial e-portals for supplies and materials.”

Moving forward, the China market will see growth in more e-commerce activities that will encompass CRM (customer-relationship management) features such as online order management, and web surveys. Spending relating to website development and maintenances is expected to increase.