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eCommerce and eReadiness rankings higher in Asia

June 9, 2005

Japan and the Pacific-Rim region is one of the biggest eCommerce market in the world, with annual sales of $38.4 billion in 2004, making it about 30 percent the overall size of the US market.

Second to all of this is South Korea at $6.3 billion, followed closely by China and Taiwan, each with about $1.1 billion in sales a year.

"China is not the biggest market not yet but it clearly has the most promise," said Jeffrey Grau, eMarketer Senior Analyst and author of the report. "Only 7.2% of China's population is online, and broadband penetration is low."

Even with its minimal penetration rate, China already ranks second in the world in total Internet users.

The e-readiness rankings, published annually by the Economist Intelligence Unit, assess the e-business environment of the world's 65 largest economies according to a broad set of social, economic and technological criteria.

An important component of a country's e-readiness score is its ability to support a retail e-commerce environment. This is measured by the extent of Internet connectivity and technology infrastructure in a country. The share of retail commerce conducted on the Internet, the logistics support and online payment systems are also part of the equation, as well as the legal and policy environment and the availability of e-commerce technical support and tools.

The Asia-Pacific region's overall ranking is bolstered by high Internet connectivity scores in Hong Kong (6th), Australia (10th) and Singapore (11th) and by innovativeness in products and services in South Korea (18th) and Japan (21st). However, the region is pulled down by poor performances from China (54th) and India (49th).

Connectivity and technology infrastructure measures are accorded the most weight among the six major categories used in the e-readiness rankings. One element of connectivity is the access individuals have to the Internet.

To compare, the US has the world's largest Internet subscriber base (170.1 million in 2004), but a host of Asia-Pacific countries, namely, China, Japan, South Korea and India, also have sizeable online populations. And China and India are clearly at the earliest stages of growth.

"During the 2004-2008 period, eMarketer estimates that the US Internet population will grow at a slight 2.6% annual rate," says Mr. Grau.

"This is because more than six out of ten Americans are already online. By now, those that are offline are unlikely to get connected. In contrast, China's Internet population, according to our estimates, will grow during the 2004-2008 period by over 14.3% on an annual basis. Droves of Chinese citizens are being introduced to the Internet daily."

A second significant connectivity measurement that builds upon a country's Internet usage is its broadband penetration rate.

Numerous research studies show that broadband users are more avid online shoppers than dial-up users.

The governments of Japan, South Korea, Malaysia and Singapore have been instrumental in setting policies that encourage private sector innovation in the area of information communication and technology.

This, as well as the popularity on online gaming, especially in South Korea, but also in Japan and China, has been a force behind consumer broadband adoption. eMarketer estimates that last year 73.0% of all households in South Korea had a broadband Internet connection. Hong Kong, Taiwan, Japan and Singapore are all ranked ahead of the US in this important driver of online shopping.

"A new middle class is emerging eager to consume the myriad products and services that are available online and not just those offered by Chinese e-tailers, either," says Mr. Grau. "iResearch, a Chinese market research firm, estimates that China's e-commerce market will be worth $6.5 billion by 2007, nearly a six-fold increase over 2004."

Source: eMarketer

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