China’s Internet Retailers Want You to Trust Them

More than 1,000 suppliers, publishers, and Internet retailers, including Dangdang.com, Microsoft, Aigo, Wyeth, Lock & Lock, Commercial Press, and the People’s Literature Publishing House, have jointly published an “Internet Retailing Honesty Declaration” in China.

Under the declaration, Dangdang.com and its suppliers promise that following the basic principles of integrity, security, and responsibility, they will provide quality products and services to customers. The declaration calls for the authenticity of goods, honest advertising, complete after-sales services, and no leakages of registration information of users.

Li Guoqing, joint president of Dangdang.com, told local media that the honesty declaration is a self-discipline declaration promoted by Dangdang.com along with its suppliers. The company consistently adheres to the principles of no selling of fake goods and no fraud in online shopping, aiming to provide a safe Internet shopping environment for customers in China. (ChinaTechNews)

When companies do this sort of thing in the U.S., it usually means that they are afraid of government intervention. Afraid of being regulated, industries will preemptively engage in a bit of self-regulation (sometimes real, sometimes bullshit). When the government finally decides to check out consumer complaints, industry can respond with “we already took care of this problem, so you needn’t bother.”

China is different. It is doubtful that this move had anything at all to do with government regulations, which will happen here irrespective of some honesty pledge. That being said, I’m sure folks in the government felt a nice warm feeling when they were told about this little PR stunt. Sounds so harmonious, you know.

Here’s the deal. Online retail is growing by leaps and bounds here, but it has expanded so fast that a lot of questionable practices are being tolerated. Consumer complaints are mounting, and the reputations of enterprises are at stake, directly and indirectly. No one wants to see a loss of trust with respect to online transactions – it took a long time for people here to adopt the new tech in the first place.

I don’t think consumers are going to care one way or another about this honesty pledge. Frankly, I don’t see much value to this in the first place, although I assume a PR guy could explain how these things actually help enterprises (keep reading for one possible explanation).

What it does show, however, is that some folks out there in Net Commerce Land are sufficiently concerned about the problems associated with identity theft, counterfeit goods, privacy concerns, and outright fraud. That suggests to me that there is a widespread problem that is, in some ways, getting worse.

It also begs the question whether more firms will actually do something substantive about it. I suspect that at least some of the companies that signed that honesty pledge already have internal measures in place to protect their customers (the pledge is one way to advertise these measures), and they want to make sure that they are not automatically grouped together with the scoundrels out there. Whether more firms will follow suit remains to be seen.

http://www.chinahearsay.com/

Sequoia Capital Buys Into Chinese E-Commerce

From the Dow Jones Venture Capital Dispatch blog:

When figuring out the reasoning behind Sequoia Capital’s latest $10 million investment in online retail in China, there’s only one thing to keep in mind: It’s gotta be the shoes.

The shoe fits for Sequoia’s latest China investment. AP Photo

Sequoia Capital China was the sole investor in the Series A round for online shoe and apparel retailer Okaybuy. The Beijing-based e-tailer is already profitable and is processing more than 1,000 orders a day after launching its service in early 2008, according to Glen Sun, a vice president in the Hong Kong office of Sequoia Capital.

Sun said an average online purchase made on the Okaybuy.com site was somewhere between CNY300 ($43.94) and CNY500 ($73.23).

“We think the market opportunity is pretty exciting. The shoes and apparel market is enormous,” Sun said.

The market for luxury consumers is certainly growing. A study published earlier this year by consulting firm McKinsey & Co. said the number of wealthy Chinese households stands at 1.6 million, but by 2015 that number will grow to more than four million, making it the fourth-largest country in terms of wealthy consumers, behind the U.S, Japan and the U.K.

According to the McKinsey study, half of wealthy Chinese consumers who now buy luxury fashion goods only started their spending spree within the last four years.

Okaybuy isn’t the first time that Sequoia has decided to slip into the shoe business. Nearly a decade ago, the firm backed Henderson, Nev.-based Zappos.com Inc., which, after raising more than $35 million, was acquired in November by Amazon.com Inc. in a mostly stock deal initially priced at $847 million. Amazon shares have soared since then.

Sequoia has made at least two other recent online retail investments in China: catalog and online shopping site Mecox Lane International Mailorder Co. and diamond seller Hiersun Co.

Two big changes have shaped the way Chinese consumers have approached buying online, according to Sun. “Logistics services have improved rapidly over the last five years, and people are getting more and more comfortable with making purchases online,” he said.

Sequoia is taking a hard look at the online retail market to see if there may be other investment opportunities, especially around logistics services, Sun said.

–Jonathan Shieber

http://blogs.wsj.com/chinarealtime/2009/11/30/sequoia-capital-buys-into-chinese-e-commerce/

Alibaba E-Commerce + China 3G = M-Commerce?

$200 million US dollars… Wait let me clarify – Alibaba Group announced last week that it intends to spend AT LEAST $200 million US dollars on new acquisitions. Here at The China Observer blog we have examined Alibaba Group’s organizational structure, taken a closer look at its C2C marketplace, Taobao.com, and even checked out the man behind the scenes Jack Ma. I believe this recent announcement is of particular significance because of the possible implications it holds for the future of mobile commerce in China.

With the emergence of 3G mobile capabilities in the Chinese marketplace, everyone from service providers, telecom operators, handset manufacturers, and web-based e-commerce companies are trying to position themselves to take advantage of 3G and benefit from the eventual widespread use of mobile commerce. Alibaba.com and Taobao.com have extensive operational experience and can potentially extend their current framework to the mobile realm; however, what they lack is mobile know-how and industry experience.

A strategic investment program aimed at acquiring mobile expertise may be exactly what Alibaba needs to take its success from web-based e-commerce and extend it into the mobile space. In fact, it has already started to do just that. According to China Tech News, Alibaba recently acquired an undisclosed portion of Guangzhou-based UCWEB, a mobile phone software technology provider. Zhang Wei, who heads strategic investment at Alibaba, was quoted saying that Alibaba plans to focus its future investments on areas like mobile Internet and e-payment over the next 2-3 years.

The Observer’s Thoughts

I believe we are still a long way from seeing widespread acceptance of mobile commerce in China. Beyond the simple fact that Chinese consumers need to grow accustomed to using their mobile phone to do more than simply place calls, send SMS messages and play games; myriad technical issues remain surrounding transaction security and potential for fraud. Everyone is learning. The users need to recognize why they could benefit from mobile payment and then they need to feel safe and comfortable using it. Companies need to figure out just exactly how to design their business models to maximize return on investment.

Who will become the biggest winner? Some gawk at Jack Ma’s brazen ambition, yet I admire what he seeks to accomplish. This is a man who not that long ago was teaching English and leading English language tours around Hangzhou. He now heads one of the most powerful e-commerce companies in the world and his team is allocating a significant portion of its resources in an area of extreme growth potential. I do not know who will become the winner, but I will surely be observing what Jack Ma and Alibaba continue to develop.

http://thechinaobserver.com/