Way back in 2003, China Daily “predicted great potential for the development of China’s electronic commerce websites,” citing the successes of online bookstore dangdang.com and Chinese domain service provider 3721. Since then, dangdang.com hasn’t exactly positioned itself as a stellar model of e-commerce, losing out to its competitor by rejecting a takeover bid and violating China’s copyright laws, which has subsequently landed them in some pretty hot water. 3721 has managed to shield itself under Yahoo’s umbrella and, as a keyword navigation and search provider company, should hardly be considered an e-commerce platform.

It’s been over five years since China Daily’s brave prediction and, while e-commerce has become a recognized source of economic growth in China, it still remains a fledgling industry in a country that has only recently begun to use credit cards (about 1 in 20 adults has one). To address this issue, many of China’s e-commerce providers have offered a COD option for online shoppers who prefer paying with cash. While this poses certain risks for the business, it also encourages a transactional trust between the buyer and seller and forges loyalties distinct from the U.S. version. Online payment service providers- Alipay and AsiaPay are two- are also breaking new ground by offering a customer care experience far superior to traditional financial institutions like Bank of China.

Although life keeps getting easier for existing and future e-commerce storefronts, online consumption now appears to lag behind supply. According to the China Internet Network Information Center (CNNIC), China’s online spending amounted to a mere 0.6 percent of total retail sales in 2007, compared with the U.S. at 3.4 percent of total sales. Given incredible industry prospects, even the U.S. figure seems very low when assessing potential revenue opportunities.

Will e-commerce in 2009 save China from its current economic mudslide? Probably not. However, very promising prospects in e-commerce exist for domestic and international B2B, particularly those that have pre-established face-to-face relationships and that share PSP networks. AsiaPay is banking on this. Entrepreneur.com has a great article on this dating back to 1999, so if you really want to geek out, click here.

For more on this topic, check out:

An informative dialogue moderated by Shaun Rein, China Market Research Group

Ecommerce Journal’s article on use of AsiaPay to develop e-commerce in China

Commentary B2B, china, E-Commerce, providers, service