E-commerce gets a shot in the arm

Look out, world: Here come the Chinese online shoppers.In case you haven't heard, consumers in China can now buy the latest products from Paris, London, New York and Hong Kong, without stepping out of their homes.

Look out, world: Here come the Chinese online shoppers.

In case you haven't heard, consumers in China can now buy the latest products from Paris, London, New York and Hong Kong, without stepping out of their homes.

Alipay, China's leading online payment provider, announced this week a new service that enables foreign currency transactions between Chinese consumers and foreign retailers.

This is big news because Alipay's service solves several issues for foreign retailers eyeing the China market.

For example, Saks Fifth Avenue has had to find a licensee partner in order to expand its international retail footprint into China. In April 2006, the American luxury retail brand signed an agreement with Roosevelt China Investments which will own and operate the stores. The first Saks Fifth Avenue store in China is expected to open in Shanghai in 2008. The outlet will boast a massive 300,000 square feet of floor space over four floors.

Therefore, Alipay's new service saves retailers like Saks Fifth Avenue the pain and high cost of setting up brick-and-mortar stores in the mainland. This, of course, doesn't mean that the retail chains do not need to have a physical presence in the world's most populous nation. What this does mean is that they don't need to set up shop to tap the Chinese market, and they don't need to wait for the Chinese to travel to New York or Paris to buy their products.

China Market Research Group (CMR) estimates that Chinese consumers spend US$6 billion on luxury goods every year, of which only one-third is spent at home. Statistics also rank shopping as the major reason Chinese nationals travel abroad. Chinese consumers, it seems, prefer to shop overseas because of the wider product selection and cheaper prices.

Of the 172 million Internet users in China today, 20 million are online shoppers, according to CMR estimates. MasterCard is also forecasting that 19 million travelers from mainland China will make overseas trips in the second half of 2007.

If these numbers are right, that's a huge untapped market--one that foreign retailers can easily reach now. All a Chinese consumer needs is an Internet connection and an Alipay account.

The upshot of this also spells big money for logistics companies like FedEx and DHL. I don't have the numbers, but I'd image that there will be a corresponding increase in business-to-consumer e-commerce logistics.

Alipay President Jonathan Lu has invited the world's leading retailers to partner with them. So, who isn't interested?