Small Enterprises

So far, the mood swing hasn't really spread to the mainland. Here, small businesses rule the roost in traditionalcommerce, and much of the action for the foreseeable future will be along the lines of trying to get businessessuch as Shandong Meat and Eggs Import and Export to figure out ways to use the Web effectively to move more food.

So far, the mood swing hasn't really spread to the mainland. Here, small businesses rule the roost in traditional commerce, and much of the action for the foreseeable future will be along the lines of trying to get businesses such as Shandong Meat and Eggs Import and Export to figure out ways to use the Web effectively to move more food. Sui Bing, Sun Ya Nan and their colleagues have no ambitions to create an Asian version of GroceryWorks. They just want to sign up more institutional buyers for their livestock products. Delivery is to a loading dock, not a kitchen.

That's hardly surprising, given the state of transportation and information systems in China. A native Amazon.com is hardly conceivable at this stage, said David Michael an analyst at Boston Consulting Group. Right now, he noted, it's "virtually impossible" to create a system that can see if a book is in stock, much less locate it, pick it and deliver it to a packing lane automatically. Nor are there speedy overnight package delivery services. Promising two-day delivery to the doorstep is not feasible; six to eight weeks is more the norm.

That's one good reason why a service economy has not quite taken root, yet. Another is that there's little disposable income to foster the creation of personal conveniences or vast consumer markets. Where the value of all goods and services generated by the U.S. economy amounts to US$31,600 per resident per year, China's annual per capita output is barely a tenth of that - just US$3,600. Which is why it may indeed be the B2B exchanges that kick-start use of the Web in China, rather than gateways to Internet content - which is still restricted - or entertainment, such as multiplayer games.

Alibaba, for instance, is concentrating on serving what in the U.S. would be considered mom-and-pop businesses: service companies with fewer than 50 employees and manufacturers with fewer than 20. For these businesses, Alibaba won't replace the Guangzhou trade fair. Instead, said the site's marketing vice president, Todd Daum, it will extend it. "Now there's someplace else to get trade contacts the other 11 months of the year."

That may be sinking in. After a year in operation, Alibaba is adding 1,000 customers per day, with about half of its total of 400,000 still residing in China, its country of origin. And so far, it's the count that matters. Almost like the personals in an alternative weekly or the organic growth of eBay auctions, it is people's attraction to other people that counts. "Why do they come back?" Daum asked. "Trade leads."

Which can be frustrating to other upstart exchanges. Eddie Choong, for instance, said Alibaba modeled much of its early Web site and operations on a free demonstration site he developed four years ago as a computer consultant. He was only trying to show what Web technology could do - he didn't build a business based on it.

Now, he's trying again, as chief technologist at Asian-Trader.com, a new site that intends to bring industrial-strength software to bear on business markets. In half-day and full-day pitch sessions to mainland Chinese and Taiwanese businesspeople, he's offering to automate the entire business cycle, from ordering goods to tracking their arrival to providing customer service - and including keeping tabs on competitors.

Even China's internal information and transportation systems conspire to discourage all but the most limited business exchanges. A competitive market to supply parts to automakers hardly makes sense, because there's no way to complete the transaction. "Even if somewhere someone else makes headlights," BCG's Michael said, "there's no road between him and me."

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