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Hong Kong: Asian Online Retailers Try A Different Route To Success

Mary Swire, Tax-news.com, Hong Kong

12 January 2001

It is a rare Internet company in Asia that has not felt even a tinge of anxiety over the recent dotcom failures that have swept across the region.

Retailing through traditional venues has been poor let alone via the Internet; people just don't have the money to spend and many in Asia do not possess, or cannot afford, the technology. Those who can just don't seem to be making up for those who can't. The general feeling among the industry's analysts is that users in Asia do not make much use of credit cards and this, combined with the region's sometimes unstable economies, is a major factor in the significant lack of Internet sales.

In a study released this week by Iamasia, growth of Internet users in Hong Kong is flagging. Despite Hong Kong consumers' use of credit cards, the number of users in mainland China grew by 15.4 per cent last year compared to a growth of 9.7% in Hong Kong.

The study revealed that a paltry 13 per cent of Hong Kong residents made online purchases last year, and a total of 66 per cent of Internet users in the region were found to be either 'uncomfortable' or 'very uncomfortable' with e-commerce. This can be compared to 41 percent in mainland China and 35 per cent in Taiwan.

A recent example of the result of Hong Kong users' apathy is the failure of AdMart, the leading Hong Kong online and phone retailer. AdMart closed down last month which added to the general gloom and doom over the future for local 'dotcoms'. The company, owned by Jimmy Lai, the Hong Kong media magnate, is expected to lay off most of its nearly 350 employees by the end of this month. Mr Lai admitted he was losing $10m a month, although the company's estimate at one point was (only) $4m a month.

Despite the ominous signs, many dotcoms refuse to let go of their dreams of achieving online success. Some, like the Hong Kong portal Tom.com, have begun advertising through the traditional media while others have sought to re-launch as Internet professionals offering consultancy and application services. A prime example is Asiacontent.com, which recently changed most of its business model from that of a regional internet content provider into a web solutions business.

Johnny Chan, CEO of Techpacific.com, a venture capita firm based in Hong Kong, is of the opinion that: 'If you work with traditional channels and all you're trying to do is carve 2-3 per cent off their client base, yu're in business.' The best solution for dotcoms aiming to make the transition, he said, is either to broker a collaboration with advertising groups or to approach other professional services businesses and their customers.

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