E-commerce evolving as growth in exports falls

China's e-commerce market has long been dominated by Alibaba.com, which has become an online giant by connecting millions of Chinese exporters with overseas buyers.

But the company faces tougher times as the global economic slowdown reduces demand for Chinese exports.

And the pressure is on from within China as well as some Alibaba competitors are attracting smaller foreign buyers that are charged directly - rather than charging sellers as Alibaba does - attracting new users during current economic difficulties.

Others are striving to help export-reliant clients sell goods on the domestic market.

They hope that by adopting new approaches, they can survive the crisis and thrive to challenge Alibaba for the title of China's largest e-commerce company.

Alibaba.com has become an online giant by connecting millions of Chinese exporters with overseas buyers. Bloomberg News

"The financial downturn has had a great impact on the old ways of international trade - where only big exporters and importers are involved," said Dianne Wang, founder and chief executive of DHgate.com. "We help small and medium-sized overseas buyers who could only stock from big importers before taking part in international trade."

Since its establishment in 2004, DHgate.com has built a platform through which small overseas retailers and wholesalers order a small amount of goods directly from Chinese exporters in a way similar to eBay.com.

The Beijing-based company consolidates small orders together and arranges for international shipping cost-effectively, reducing prices to a competitive level.

Different from Aliababa's foreign customers, many of which are big companies such as Wal-Mart and Procter & Gamble, DHgate.com's clients are often operators of corner retail shops or even individual buyers. The company also gains most of its revenue from its foreign buyers as it charges 3 to 7 percent in fees from each deal.

"Alibaba is not an e-commerce website in a strict sense as it only provides an online platform for buyers and suppliers to share information," said Wang. She contends that e-commerce websites should be valued on how they cash in on transactions.

Since its establishment, DHgate.com has helped clinch more than 2 million international deals with its trade volume last year reaching 1.4 billion yuan. Wang estimates the number will surpass 10 billion yuan in the next three years, although China's export growth was reduced to a 10-year low last year.

According to domestic research firm Analysys International, the growth rate of China's business-to-business (B2B) market went into a sharp decline last year, with quarterly average growth dropping to 6.58 percent from 15.65 percent in 2007.

That resulted in a Alibaba's profit declining by 16 percent in the first quarter of this year as the company lowered its fees for product listings and increased spending on marketing to help its battered customers.

"China's exports have been severely impacted by the global economic slowdown and that directly hit Chinese B2B websites," said Li Ruixiang, analyst from Analysys. He said current difficulties have forced many Chinese e-commerce websites to reduce charges while providing new services to attract customers.

Guo Jiang, chief executive of HC360.com, another Chinese e-commerce website, said online trade in the domestic market has accelerated since foreign demand for Chinese goods plunged.

In remarks to Chinese media last month, he said HC360.com plans ride the boom in the domestic trading market by establishing a new platform for exporters to enlarge sales in the domestic market.

According to its financial report, revenue of DC360.com, which is listed on the Growth Enterprises Market in Hong Kong, reached 314 million yuan last year, an increase of 12.4 percent over 2007. Guo said the company will see faster growth this year although the economic slowdown has impacted many of its customers.

"I think the financial crisis provides unique opportunities for e-commerce websites that offer a more cost-effective way for companies to sell their products," Guo said. "So there is still a huge space here in China for the success of e-commerce websites."

(China Daily 07/06/2009 page5)