A joint survey made by Progress Strategy Company and Horizon Research Company indicates that online shopping has been of considerable scale in China, but a bottleneck remains.

The survey was carried out among 1,639 persons aged 18 to 60 from Beijing, Shanghai, Guangzhou, Taiyuan, Chengdu and Changsha. Following are some findings of the survey.

Growing business

Online business firms are staging big promotions to lure more enterprises to adopt the new business mode.

The news that Amazon.com acquired Joyo, the largest online retailer in China, at the cost of 622.5 million yuan (US$75 million) in late August, added more fuel to the online business fever, leading analysts and investors to wonder whether the heady days of online shopping have really arrived.

After years of effort, the online shopping industry chain has matured and consumers have gradually become accustomed to the mode.

The joint survey reveals that in big cities, 3.4 percent of consumers often shop online, exceeding the number of people who place mail orders. But 6.5 percent of consumers said they will convert to online shopping in the future, which means market potential exists.

Although online shopping will step into the fast growing stage, regional imbalances remain a major concern for enterprises. Selecting big cities to expand online shopping may prove a better choice.

However, the survey also indicates that among people who once shopped online, only 70.8 percent said they will continue to adopt the new purchasing mode. Quite a number of them said they do not plan to shop online again.

Moreover, the frequency of online shopping remains incomparable with standard store shopping.

A shortage in modes of online payment, lagging logistics and inefficient website management hinder the development of online shopping.

How to adopt new strategies to expand the variety of available products, attract more consumers and improve the online business volume are now the major challenges facing online shopping websites.

New strategies

Experts say building up competitiveness and improving brand awareness is the best strategy for online shopping firms to overcome barriers on their way to prosperity.

As the "eyeball economy" bubble broke, seeking profits was regarded as the Bible in the business world. But when to enter the market to go after profits remains a question.

People tend to believe the first one into the market will be the winner, but it is an oversimplification to say only those first into the niche market can turn a profit.

When the whole industry is in its infancy, a forerunner's operation mode can easily be imitated and even surpassed. It also has a low threshold in respect to capital and techniques. That is why first comers are often at a disadvantage.

Therefore, enterprises should devote more effort to building up their competitiveness. Such efforts can be made in fields such as integrating information to providing correct and complete information to customers; adopting new techniques to better display products; improving the safety of online payment and credit; offering more attractive prices; and optimizing the supply chain.

While gaining a competitive edge, enterprises should also establish a unique brand image.

Chinese enterprises usually slash prices to undercut rivals, online shopping enterprises also attempt to launch price wars.

Dangdang.com, a leading online bookstore, is such an example. Dangdang was once regarded as an online price killer by launching an "online intellectual price comparison" system which enabled them to offer the lowest prices for the same products.

Of course, a comparatively low cost is the striking advantage and price competitiveness helps online shopping malls to lure more customers. Aside from price, online shopping firms must forge close links with customers through building up their own images and brands.

More and more online enterprises are now placing image advertisements in media.

Expanding the variety of merchandise is also important for online shopping firms.

The joint survey also reveals that online merchandise is limited to the following categories: books and audiovisual products, including CDs and software; household products food, cosmetics and clothes; electrical appliances, computer and telecommunication products; tickets and booking; financial services and online education.

The limitation of merchandise scope indicates that enterprises should strive to provide more choices and improve customers' buying frequency.

Moreover, enterprises should do more to segment the online market, choose a proper business scope and dig out the potential of loyal consumers.

Dangdang.com is a pioneer. "We are not only a bookstore but also a audiovisual shop. Actually, the book sales hardly account for a half of our total sales, over half consists of CDs, software and games," said Yu Yu, chairwoman of Dangdang.

In respect to products' life cycle, books, audiovisual and household products have been in their cash cow stage. This category, run by quite a number of enterprises, has a low unit price with similar quality. Therefore, newcomers should think twice as competition has been white hot and enterprises attempt to launch further price wars to stand out, kicking out the weak ones.

But a deeper look reveals that in this cash pie, the market for books and audiovisual products has been nearly saturated, while clothes, cosmetics and household electrical appliance still have huge potential.

As a whole, only ticket booking falls into the future star stage. Although this category of products has a limited market now, enterprises have less rivals and more opportunities to expand the market.

Most of the online products, however, belong to question mark merchandise. This category has a limited market and potential, such as cars and insurance policies. But water, electric, natural gas and telephone bill payment services are a noticeable niche market.

Analysts also noted that some enterprises are adopting the combination of online and traditional shopping.

Compared with traditional shopping, television and telephone shopping and mail orders, online shopping boasts of a big advantage in lower costs, but its disadvantages are also obvious it cannot provide shoppers the shopping experience and delivery often lags.

A breakthrough has been achieved by a combination of traditional and online shopping.

Bertelsmann, a tycoon in the international publication field, joined hands with 21st Century Bookstores in late 2003. In less than half a year, over 20 Bertelsmann member stores sprang up and the figure may increase to 40 or 50 this year.

Joyo also plans to adopt a similar method, struggling for market shares with Bertelsmann.

Tangible member stores, as a supply and service center, offset online shops' limited warehouses.

Recently, a retailing mode named B (shopping website) to B (community property management company) to C (consumers in the community) mushroomed, forming a platform between retailers and service centres in the community.

Under the B to B to C mode, the community property management company (B) helps the residents to place orders online. The shopping website (B) will then deliver the goods to the community property management company (B) who will send the ordered goods to the residents (C).

This B to B to C mode is a combination of information and logistics, capitalizing on the rich information of online shops and supply convenience of community stores.

Online shopping, in a narrow sense, can be understood as getting online information and inking online deals. In a broad sense, however, once one section of shopping is finished online, it can be regarded as online shopping. In that way, traditional or burgeoning online enterprises may seek a combination, mingling two modes' advantages.

(China Daily October 22, 2004)