UrMart.Net

UrMart.net is an e-Commerce website designed to allow for individual entrepreneurship by registered agents and by customers. Registered agents bring suppliers to the site to list their product inventories. In exchange, agents receive a small commission percentage of supplier sales made through the site. Customers register to join the site and immediately receive a basic discount on purchases made. If they enrol by using an existing customer's registration number, they receive a larger discount and the referring customer receives a small commission on purchases made by the new customer. In all cases UrMart purchases products from suppliers at a large discount and pays discounts and commissions to its various agents and customers. The site is now operational and full scale promotion and advertising of the site will begin in third quarter 2010. Over 1000 supplier inventories are expected to be listed in the site by fourth quarter 2010.

The Online e-Commerce Industry in China

Many analysts argue that Chinese consumers are reluctant to make online purchases because, culturally speaking, they are conservative savers who refuse to buy on credit. They believe e-commerce will not work in China; its citizens distrust vendors because they fear piracy and poor quality. Thus, Chinese consumers need to feel a product before buying it.

Historical data seem to support their arguments. For example, nationwide savings rates hover around 40%, less than 5% of the population owns credit cards, and Chinese business-to-customer Web purchases make up less than 1% of America's $127 billion in 2007 Internet sales.

In interviews, the China Market Research Group (CMR) has conducted with young adults in six cities across China, nearly 80% of respondents said they had made an online purchase in the last six months. The vast majority expected to buy something again in the next quarter. Seventy percent said they weren't putting aside any money in savings accounts and that they would use a credit card for online purchases if they had one.

Research suggests it is a lack of credit cards and other payment options, rather than a cultural aversion to buying online, that has curtailed the growth of e-commerce in China.

But the problem of payment is resolving itself. Credit card use is booming as domestic banks like Bank of China and China Merchants Bank roll out services targeting consumers in China's smaller cities. The number of credit cards in China is expected to increase fivefold, from 56 million at the end of 2006 to 250 million by the end of 2013. The financial institutions that become the winners will be the ones that focus on customer service and develop strong loyalty programs.

Successful firms are finding success selling online because their customers trust their products; they have good return policies and make it convenient for consumers to resolve disputes or complaints about online purchases. Chinese consumers are curious about buying online, even if they haven't done it before; if they encounter no hassles, they will surely continue to make purchases online.

Some critics have argued that Chinese consumers will resort to online purchases only for cheap items, like a book or a DVD. Yet many companies are having excellent success in selling clothing--a complex product that more conservative shoppers might demand to touch or try on before purchasing--proves the increasing sophistication of Chinese consumers, their growing comfort in online shopping and their willingness to shell out sizable sums for brands they trust.

Not only should companies utilize the internet for marketing purposes, but they should look at it as a critical sales channel to Chinese youth who are increasingly turning to the internet to buy not just cheap items like books and DVDs but more complex and expensive products like electronics, luxury items, and clothes.

The biggest threat to the success of a Chinese shopping mall is ineffective marketing. Anywhere in the world, marketing is hugely important to the success of any product, and shopping malls are no different. If you don't market a mall effectively, no one takes the time to visit the mall, tenants aren't able to turn enough revenue to pay their rent, management companies are unable to fill retail space, and it isn't long before the entire mall goes under. It's a vicious cycle.

You keep consumers interested by ensuring that the more interactive it is for consumers, the more likely it is that they will revisit the mall, tell their friends and spend more money.

Market Forecasts

China's online retail market has grown rapidly in recent years. According to statistics released by Zero2IPO Research, China's netizens reached 384 million in 2009, of which 108 million conduct online shopping, with internet purchase penetration rate reaching 28.1 percent. While countrywide savings rates hover around 40%, Chinese youth in urban areas have effective savings rates of 0 as they consume and want to enjoy the good life now. This optimistic and demanding mindset drives how Chinese youth consume.

The willingness of Chinese youth to trust online purchases combined with the explosion in the number of credit cards sends a clear message: since young peoples' spending is driving China's retail growth--20% in 2008--companies with focus on increasing revenues should target that demographic.

In 2009, China's internet retail turnover topped 202.6 billion yuan, representing a seven-year average growth of 128 percent, and the turnover in 2010 is expected to hit 342 billion yuan.

If China continues robust development of its e-commerce industry, which sees the market size doubling every year, China's e-commerce market size may exceed that of the United States in two years.

And, for the interest of investors, starting from the second half of 2010, there will be at least 10 Chinese e-commerce firms each with annual sales valued at one billion U.S. dollars going public in local and foreign capital markets.