ASIA BOUND

In some ways, China is an unlikely hotbed for e-commerce. Only 38 percent of online buyers pay with credit or debit cards, using instead an army of bicycle messengers delivering cash. There are no reliable credit ratings, or postal services, so some online auction customers still want to meet the seller in person. Yet none of this deters America's e-commerce giants--Yahoo, Amazon and eBay. All are moving rapidly into China and the rest of Asia, driven by a rather startling fact of the digital age: the survivors of the Internet bubble in America are already mature businesses at home.

Consider: eBay is posting record profits, and Amazon is in the black for the first time in its eight-year history. Yet U.S. growth rates are starting to slow. This year eBay expects to post more sales outside the United States than within. The e-commerce market in Europe is starting to take off, but Asia has the biggest potential. Researchers at IDC forecast that annual Asian sales outside Japan will rise at 38 percent a year through 2007, topping 61 percent in China. William Cobb, head of eBay's international business, expects China to overtake Germany and the United Kingdom as eBay's biggest overseas market "sooner rather than later."

The population of Internet users in China is now 87 million, and growing fast. That explains the bidding: last spring, Yahoo teamed up with Sina.com, China's largest Internet portal, to break into the online auction business. In August Amazon.com paid $72 million for Joyo.com, one of China's top online retailers. And last month, eBay fully plugged EachNet--the online auction site it bought last year for $180 million--into its global network.

To maneuver in Asia, American giants are seeking out local partners. Microsoft has had a hard time cracking Chinese e-commerce on its own, and AOL had an ill-fated venture with computer-maker Legend. But now local entrepreneurs have built customer bases strong enough to entice global acquirers. Many of them, like Harvard-educated EachNet founder Bo Shao, copied the American e-commerce giants, meticulously setting out to be the eBay or Amazon of China.

E-commerce in Asia could develop along European lines, says Forrester Research analyst Hellen Omwando. In Europe, established retailers were hesitant, leaving the market to start-ups, which were bought up by U.S. giants. That forced traditional retailers to respond. One big difference: eBay came to dominate auctions in Europe, and Amazon rules retail. But China has even more niche markets, leaving room for three to five major players. That's encouraging for the contenders, since there are at least that many from the United States alone.

© 2004