Global E-Commerce: Asia - Growth On The Way

Despite the obstacles, analysts were optimistic for the future of Asian e-commerce. IDC felt 2001 was the breakthrough year for online business in the region, with forecasted sales of $10.7 billion. In the interest of pushing global competitive strengths, the pressure to put business online in Asia was expected to accelerate rapidly. More than half of Asia's products were sold to North America and Europe, which represented the greatest amount of Internet connectivity, the most advanced infrastructure, and the strongest consumer taste for e-commerce. Thus, market pressures were bound to force Asian companies to scramble to avoid being left out of the international trading system by more Internet-savvy competitors.

U.S. businesses looking to invest in Asia faced a number of tempting opportunities tempered by serious obstacles. On one hand, the market potential was enormous and growing all the time, particularly in light of closer trading ties with China. That country's economy was growing rapidly in the early 2000s and was largely untouched by the Asian economic crisis. On the other hand, the number of high-tech employees available for employment by U.S. firms in Asia was rather thin, and navigating the nuances of the region's IT infrastructure, regulations, and cultural patterns entailed a significant investment in its own right. According to World Trade, outsourcing work to local Asian firms can help alleviate the costs and headaches of learning the ropes and nuances of conducting business in Asian countries. On the World Wide Web, the business Web sites need to reflect the U.S. business model translated to the languages and cultural needs of the Asian countries in which they hope to do business.

The Chinese market was relatively warm to e-commerce. Approximately 60 million individuals were expected to be online in China by 2005. However, credit card penetration was exceptionally slight in the Chinese market, and most online transactions were paid for by regular checks or wire transfers. Moreover, China's markets were still under the tight control of governmental regulation, despite opening up considerably in recent years, and there were many technological shortcomings.

Far Eastern Economic Review explained that the Chinese government was very aware that business-to-business digital marketplaces were an extremely positive development for the generation of sales to alleviate the excess capacity in many of the nation's state-owned enterprises and industries. Still, from the standpoint of international commerce, the relatively large degree of governmental control over the economy was a hindrance to regional e-commerce. With tight control over a range of key technologies—including the crucial encryption technologies upon which many e-commerce transactions rely—and even Internet content itself, it was still tricky for international firms, both inside and outside Asia, to fully tap into the potential offered by China's large—and growing—Internet user base and strengthening economic foundation.

Korea benefited from a healthy infrastructure for, and widespread use of, broadband technology. This facilitated high-speed Internet access, which is a key component of online shopping. By 2002, broadband Internet access was expected to reach approximately 2 million subscribers in Korea, mostly in South Korea. This translated into a dramatically higher proportion of the population with high-speed access than existed in the United States.

In South Korea, giant, diversified conglomerates called chaebols maintain the lion's share of control over economic output. The Internet was seen as a force for loosening this control and spurring renewed economic vigor. While the chaebols were fierce international competitors, their size, according to analysts, allowed them to become slow and unresponsive to domestic market forces. This provided just the opening that startup companies needed. Meanwhile, major conglomerates like Samsung reacted by spinning off large chunks of their Internet-based business. The country famously welcomed the Internet with open arms and incorporated e-commerce more quickly and readily than any other Asian nation. Its total e-commerce market was second only to Japan's. However, according to Boston Consulting group, South Korea's per capita online spending was significantly greater than that of Japan. By the early 2000s, small Internet startups were all the rage in South Korea and were attracting a steady flow of venture capital. Through 2005, Salomon Smith Barney noted that South Korea would boast the largest Asian e-commerce market outside of Japan and account for more than one-fourth of all Asian e-commerce revenues outside Japan.

Business leaders within Asia remained confident, predicting that Asia would emerge as a pivotal region, and eventually a leading region, in the new economy. At the World Economic Forum's Asia Pacific Economic Summit in Melbourne, Australia in fall 2000, several speakers proposed that, despite the region's slow acceptance of e-commerce, its economic strengths and emerging trends portended a bright e-commerce future. The firms, both Asian and otherwise, that supply the infrastructure, such as telecommunications firms and those trafficking in data networks, were pouring money into the region. The relaxed telecommunications regulatory structures through much of Asia, allowing for greater competition, were expected to continue to spur greater investment in that area. Meanwhile, with many of the world's leading manufacturers of IT hardware based in Asia shifting their business strategies to capitalize on software and other knowledge-based products and services, a new paradigm was emerging in the region. According to The Futurist, this would coincide with developing IT infrastructure to push Asia to the fore-front of the e-commerce world.