Friday, March 22, 2013

E-tail therapy
Though many are skeptical about the future of electronic shopping in Hong Kong, a select few have proved the ‘bricks and mortar’ crowd wrong. Emma Dai reports.
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n a Thursday morning soon after Lunar New Year, office worker Joey Chui clicked “buy” on the webpage of a Guangzhou retailer during a break in her routine. A budding fashionista with a penchant for high heels, Chui was looking for some orthotic insoles — arch supports recommended by physiotherapists for the relief of foot and heel pain — an indispensable accessory for all glamorous ‘fashion victims’. Such products cost at least HK$100 at Dr. Kong, a local health-driven footwear chain, and Chui was aghast to discover similar products tagged at just 2 yuan on Taobao. “It’s more than 50 percent off even including the delivery fee,” Chui said. “Furthermore, some stores are selling such products for just 1 yuan.” Since discovering online shopping three years ago, Chui has been an e-votee of Taobao, the mainland’s e-commerce giant, founded by Jack Ma’s Alibaba Group in 2003. On average, she spends over HK$200 monthly at Taobao, and her expenditure can top HK$1,000. Her majority purchases are dresses, handbags, necklaces and ear rings, which sometimes include essentials like laundry bags. “They are such great bargains I can’t resist grabbing them,” Chui says, giggling at the recollection of her purchasing pleasure. There was a time when Hong Kong people grimaced at the mention of online shopping — especially in connection with mainland websites which gained reputations as sources of cheap knock-offs. But that was then, this is now. Today, Hong Kong’s e-shoppers can’t kick-up their heels fast enough to get online with mainland emporium Taobao. It is the eighth most-visited website by the city’s netizens, according to information database Alibaba Group announced last December that the number of Hong Kong-registered Taobao users surpassed 1.2 million — some achievement for the city of seven million. A 2012 MasterCard survey illustrated the growing importance of online shopping to Hong Kong consumers, showing 58 percent shop online and that threequarters of that number will continue to e-shop in the next six months, reflecting the potential ahead. “In the past two years, Hong Kong consumers have been very active,” said Daphne Lee, director of Taobao International Business. “Compared with other markets, Hong Kong buyers have fewer problems with payments and shipping, as

Online shopping spending percentage of total the city is the closest overseas market to the mainland and cross-border monthly spending financial services are easier to combine.”
To lure more locals, Taobao introduced more payment channels. Alongside the ubiquitous Visa, Master and JCB cards in the city, Taobao launched the Alipay card — its version of PayPal — via convenience store chain 7-Eleven late last year, which lets users without credit cards recharge their Alipay accounts. In January, it partnered with PPS, a local electronic payment service with a user base of 1.5 million. “We see users of this new method rocketing,” said Lee. Shipping headache One big headache for online transactions is shipping. “Cross-border shipping is complicated,” Lee said. “We are working with mainland and Hong Kong logistics firms to simplify and speed up shipping procedures. We want to provide more information to vendors so they will find it easier to cater to Hong Kong buyers. We are integrating information online and offline to make delivery processes more efficient and easier for customers to track, thereby reducing shipping fees by more than 20 percent.” To make the website more user-friendly, Taobao is localizing its offerings too. “Not all of our six million vendors and 800 million items online are suitable for overseas markets,” Lee said. “So focusing on popular categories, we send out invitations to vendors and select a batch of matured goods for promotion. Following Hong Kong’s calendar, we run special promotions and seasonal campaigns.” While the female-to-male ratio of Hong Kong users on Taobao is roughly 6 to 4, Lee says young office ladies dominate the fashion sector. Accessories for personal electronic products such as iPhone covers and handicraft packages also sell strongly, while young mothers are another group who enjoy a vast choice of baby products and intelligent toys. According to MasterCard, many Hong Kong people still like to touch and feel what they buy, so traditional “bricks and mortar” stores continue to be a key competitor to online purchasing. That’s a feeling Chua Chengxun, managing director of Singapore-based virtual fashion chain Zalora which operates in

Less than 5% Between 6% and 10% Between 11% and 25% Between 26% and 50% Between 51% and 75%

A tale of two entrepreneurs
At a small but tidy office in a Wan Chai high-rise, Donald Sun Kai-hon and Jonathan Leung Ho-pui sit face to face, overlooking the hustle and bustle of Hennessy Road. Both studied marketing and are partners of Their website is a “cyber community for Hong Kong people to share online shopping experiences”. It recommends 50 Taobao goods under one theme every day, such as lanterns for the Lantern Festival, and encourages experience sharing among users. “There are just too many choices on Taobao,” Leung said. “We want to edit a selection for local taste and create a platform for people to share experiences.” Years ago, Sun found that MP3s he bought on Taobao were hot items among local buyers. “I realized online shopping had a future in Hong Kong, and expected Taobao to become popular.” So when the mainland giant started drawing attention in the city in 2009, the two partners hammered out a way to ride the wave. Sun and Leung invested their savings, a “six-digit” sum, in the joint venture and kicked-off the website with a Facebook page in Feb 2012. The website has grown exponentially. “In the first two months, about 8,000 users flocked to us. That number has now reached 40,000”, they say. From day one, relied on the business of recharging Alipay, the designated payment processor for Taobao. For each purchase, apart from the currency exchange, Hong Kong buyers have to pay 1.5 percent to 4.95 percent of the transaction as a commission fee. Leung admits the margin is thin. But the website made ends meet the second month after launch. Competition is rising, and to sharpen its competitive edge, OnlineBuy introduced an App for both iPhone and Android mobile devices last October to enhance mobile transactions. Online Hong Kong’s message is clear — buy.

Source: Nielsen

Greater than 75%

more than six Southeast Asian countries and launched in Hong Kong last June, knows all too well. “For a lot of Hong Kong people, shopping is not the end, but part of their lifestyle. People meet their friends in a shopping mall, have a coffee, see a movie and take a walk around. That’s the pleasure. That culture is hard to break.” But he’s trying, by giving Zalora — which sells garments, shoes and accessories from more than 300 brands — added-value twist. “One very common thing in the US and Europe, but not in this part of Asia, is a ‘no-questions-asked’ return policy,” Chua said. “It’s challenging when you buy things online. You can’t try it. That is one of the biggest barriers to online shopping. We try to make it simple for people to return.” While delivery is free, return isn’t. The firm tried pick-up, which didn’t work, so now 50 percent of returns are dropped directly at their Tsim Sha Tsui office. “It’s the most convenient way for our customers. We try to be as flexible as we can.” Market growth potential According to Chua, while 58 percent of Hong Kong people are happy to shop online, the rate is much higher in other developed economies in the region. “About 90 percent of Koreans are planning to shop online in the next six months,” he said. “Though Hong Kong consumers don’t have that plan, they can always change their mind. I don’t see any reason why in coming years Hong Kong will not catch up.” In Hong Kong’s current online market, a smaller, added-value boutique offering can succeed by creating its own niche. When Joshua Lau, founder and CEO of YesAsia Holding Ltd, was discussing his idea of building an online wine cellar in the company’s Kwai Chung office, a winetasting session was going on next door. In less time than it takes to pop a cork, Lau

launched in January 2011, which features introductions to about 900 kinds of wine. The website works monthly with a luminous wine taster — Chris Chow of three Michelin-starred Joël Robuchon, Macao fame — introducing customers to new wines specially selected for Hong Kong. It also operates a temperature-controlled logistics system from warehouse to delivery vehicles. “The environment, especially the lighting, in supermarkets is not good for storing wine. We are the choice for those who want quality products.” Lau says average value per order is HK$1,000, and the website offers a 10 percent discount for orders of six bottles or more. With “several thousand” users to date, Lau anticipates faster growth this year as more locals get acquainted with e-tail. He also cites an added advantage of his virtual emporium. “In recent years rent soared for lots of retailers and so have prices of wine. We don’t suffer from that. This sharpens our competitive edge.” And smooth progress. “The number of wine drinkers in Hong Kong is rising every year,” Lau said. “Yet there aren’t a lot of online networks selling wine. We think if we have a good platform and work professionally, we will be popular.”

Netrepreneurs: Partners Donald Sun and Jonathan Leung launched, a cyber community for Hong Kong people to share online shopping experiences.