M-commerce Booming in China

A combination of factors underpins rapid growth in the Chinese mobile commerce sector.  

Trend Description

China is rapidly emerging as the global capital of m-commerce applications, driven by an increasingly high-tech digital environment, the world’s largest mobile phone subscriber base (nearly 600 million), and the recent launch of the country’s own 3G standard (TD-SCDMA).

Although China currently lacks the advanced mobile applications of Europe, North America, Japan and Korea, many cellular players are now launching sophisticated mobile applications, and analysts predict the country may leapfrog more traditional m-commerce markets in the near future.

UK-based Juniper Research predicts that the global m-commerce market will be worth U$40 billion by 2009, with revenue stream dominated by mobile entertainment products, including ring tones, wallpapers, gambling and games. According to statistics from US-based Analysts International, China’s mobile ecommerce application market will be worth of RMB 30 billion (US$4.2 billion) by 2009, with a forecasted year-on-year increase of over 30%.

Penetration of new markets, including retail, ticket purchases and person-to-person transactions, is predicted to result in increasingly high volumes of small payments to Chinese m-commerce service providers. Because this type of transaction costs businesses far less than retail or other forms of transaction, the demand for m-commerce solutions is expected to grow and result in tremendous opportunities for these SPs.

Cases

UFIDA’s hapigo

The “hapigo” platform developed by UFIDA Mobile is China’s first large-scale, multi-functional m-commerce platform. With a strong focus on mobile internet technology, hapigo provides retailers and consumers with an efficient and effective  one-stop m-commerce shop. Last year hapigo became “the first brand of mobile e-commerce in China”, serving 200,000 retailers over 1 million mobile consumers.

UFIDA Mobile is a recently created US$13.42 million joint venture between the Beijing-based Ufida Software Company and Japan-based wireless heavyweight NTT DoCoMo.

Taobao’s WAP Site

Alibaba’s Taobao, the Chinese version of eBay, has recently launched a WAP version of the site at wap.taobao.com., in an effort to expand its reach to China’s huge mobile phone subscriber base, many of whom do not have net access of their own.

More interesting still is the way in which the site is served by a mobile interface for Alipay. Payment for most m-commerce in China so far has been processed by mobile service providers as part of the consumers’ bill. Although China Mobile may not be too happy with Alibaba’s move to cut them out of the loop with its “m-Alipay” service, its hard to imagine they can stop it in the long term.

Trend Potential

While the future for m-commerce in China looks rosy, there are still many obstacles to overcome. China is still largely a cash-based economy, with m-payment support structures only recently being developed. The rate of mobile phone uptake is also very  biased toward urban areas, especially when it comes to smartphones / PDAs.

Since voice is still the dominant application, decades-old mobile technologies are still some of the most profitable, and many mobile operators will need to upgrade large parts of their networks to the 2.5G and 3G technologies needed for most m-commerce applications. Still, with m-commerce proving increasingly popular and profitable, the financial incentives will surely continue to drive investment in both infrastructure and applications.

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