U.S.-Asian E-Commerce Alive and Clicking

While still facing language and cultural challenges in the international e-commerce arena, Asian e-commerce is set to boom at home, and U.S. companies smelling opportunity are already diving into the region with big-dollar investments.

According to research firm Forrester, the surge in Asia-Pacific e-commerce will result in $1.6 trillion (US$) of revenues by 2004. This volume of business will make the region a powerhouse in the overall global Internet economy, said Stuart D. Woodring, vice president of research for emerging Internet economies at Forrester.

The study forecasts that worldwide online spending will reach $6.9 trillion in 2004 -- with the Asia-Pacific market accounting for more than 20 percent of total sales.

Fueling the Fire

Recent trade agreements between Asian countries designed to promote e-commerce are expected to fuel the Internet ecomony there. For example, the first regional e-commerce alliance in Asia, connecting the markets of Hong Kong, Taiwan and Singapore, was formed this week.

A memorandum of understanding (MOU) was signed by three government-backed e-commerce facilitators: Tradelink Electronic Commerce Ltd. of Hong Kong, Singapore Network Services Pte. Ltd. (SNS), and Trade-Van Information Services Co. of Taiwan. The MOU covers recognition of digital certificates, cross-border marketing and other e-commerce issues for the countries.

U.S. Investors Place Asian Bets

U.S. investors are entering the Asian market armed with millions of dollars of venture capital. For instance, Internet incubator CMGI has sealed a $380 million deal with Pacific Century CyberWorks (PCCW) to create and run a network of Internet businesses in the Asia-Pacific region. In announcing that deal, CMGI CEO David Wetherell described Asia as "the hottest emerging market for the growing Internet economy."

Microsoft (Nasdaq: MSFT) and Compaq are taking part in "IgniteAsia," a competition for non-public Internet companies in Asia looking for first and second round funding. IgniteAsia offers Asian Internet entrepreneurs access to U.S. investors, including both venture capitalists and private equity companies. The program also gives the U.S. investors access to the decision makers of Asia's most prominent Internet technology providers.

Giant Alliances

Microsoft is not waiting for the contest to be completed, and has already announced specific partnerships with Asian high-tech giants. In June, Microsoft announced that it is teaming up with Hitachi to focus on the development of Microsoft 2000-based enterprise solutions and related consulting services.

At the same time, Hewlett-Packard (NYSE: HPQ) has also announced a partnership with Internet investment firm Softbank Corporation to create a new Asian-based e-commerce company to sell HP computers and printers to Japanese consumers.

Forrester researcher Woodring believes that similar plays are likely to continue in the region.

"Asia-Pacific enjoys a number of advantages that will accelerate its development as a major contributor to worldwide e-commerce," including localized development efforts and "tight links to supply chains" in several major industries.

In yet another deal announced in late June, the founders of Consortio and Admerasia said that they will launch AsiaCentral, a multicultural e-community and digital marketplace that focuses on the global Asian community. Consortio's partners include U.S. tech Titans Computer Associates, Dell Computer Corp., First Manhattan Consulting Group, and Microsoft.

John B. Evans, co-chairman and director of AsiaCentral observed, "Three great barriers stood between Asia and the West: distance, culture, and language. This company will remove almost all of these three."

Opening China's Doors

Arguably, China is the largest of all untapped markets in Asia, if not in the world. After the U.S. House of Representatives voted in May to grant China permanent normal trade relations, American high-tech CEOs had high praise for the decision.

"The outcome of this vote was critical, not only to U.S. high-tech companies, but also to the economy," said Intel (Nasdaq: INTC) chairman Andrew Grove.

Indeed, China has a lot to offer U.S. high-tech businesses. Statistics released by the China Internet Network Information Center (CINIC), China's official Internet research group, reveal that the number of Internet users in China has increased four-fold since 1998, from 2.1 million to 8.9 million, and that nearly 10 percent of users make purchases on the Net.

Creating Local Properties

To date, translation of software programs to Asian languages has been a major challenge to e-commerce growth in the region. For example, there are coding problems with converting many U.S.-based e-commerce applications to the Chinese or Japanese languages, which have "double byte" characters.

As newer versions of Operating Systems are released with Asian-language support, custom applications have been developed and deployed in local e-commerce sites. For example, Seven-Eleven has expanded its Asian e-commerce offerings with the launch of a Web site called 7dream.com that will follow that local payment custom. According to the company, 7dream.com shoppers will be able to browse through more than 100,000 items, including music CDs, flowers, and photo supplies, place their orders online, and then go to their local 7-11 stores to pay for and collect their purchases.

U.S. portal Yahoo! has also launched a number of local Web properties in the Asia-Pacific region, including Taiwan, Singapore, Hong Kong, China, Korea and Japan, as well as Yahoo! Asia, an overall Internet guide for Southeast Asia.

Local businesses are looking to the popular Yahoo! Asia to develop brand awareness, much in the same way that emerging U.S. businesses have relied on portal agreements with Yahoo! or AOL.

And, "Name-your-price" pioneer Priceline has also created local properties to bring its e-commerce services to 2.6 billion consumers in China, Hong Kong, India, Taiwan, Indonesia, Singapore, Thailand, Korea, Malaysia, the Philippines and Vietnam.

Moving Forward

All in all, e-Business in Asia is emerging with vigor, and U.S. businesses are now looking to the Far East as the new West -- a place for major expansion. As language barriers are overcome, and home PC ownership in the region increases, Asian e-commerce is set to explode.

However, the Forrester study points out that development will not be strong everywhere in the region. Hong Kong is in the forefront, with low trade barriers, while India's high taxes and China's weak infrastructure are hindering the growth of e-commerce in those countries. Still, the whole region will "benefit greatly from the efforts of several leaders," said Forrester analyst Matthew R. Sanders, as will Western investment in ground-level opportunities.