A recent survey by the Market Intelligence Center (MIC), a unit of Taiwan’s Institute for Information Industry, showed that 39.1% of the online retailers (e-retailers) contacted were operated by companies engaged in internet sales only; while 33.3% were offshoots of traditional stores.

The survey also revealed that 20.5% of the retailers included in the study were traditional stores that had set up e-retail operations, while only 7% had started out as e-retailers and then established traditional shops. These statistics show that, the MIC said, increasing numbers of retailers have joined e-retailing due to its popularity, while the growing practice of shopping on the Internet has motivated more of Taiwan’s traditional retailers to move online.

The study analyzed annual withdrawals from online retailing in Taiwan and found that the withdrawal ratio was 33.5% in 2005, 13.9% in 2006, and 15.9% in 2007, indicating a stabilizing trend.

Focusing on the top-three types of online business that shut down in 2007, the MIC numbers revealed that 26.1% were fashion boutiques, 21.5% sold beauty and healthcare products and services, and 21.4% were online bazaars. The MIC stated that some of the online shops that fizzled due to cost considerations switched to Internet auctioning, while many small, independent online retailers of variety goods were rolled under by the snowball effect of bigger operators or have transformed into thematic e-retailers that differentiate themselves from online bazaars.

Top-3 Hardships

The MIC survey also discovered that the top-three challenges facing online retailers in Taiwan were comparison shopping, which led the field at 67.8%; difficulty in finding a retailers’ Internet address, at 59.1%; and the weakening of shopper confidence caused by online fraud, at 36.1%.

MIC analyst C.Y. Chan said that product information is becoming increasingly transparent online, that the convenience of search engines has substantially eased comparison shopping; and that online shopping has eroded the high profitability of traditional stores. The way for e-retailers to prevent shoppers from making price-based decisions is to offer product specialization and differentiation, according to MIC.

Going Global

The MIC study indicated that as much as 46% of Taiwan’s online shops had planned to go global in 2008, and that 18.2% had already begun developing overseas markets. By contrast, 19.9% expected to venture abroad in 2010. Most of the e-retailers eyeing the global market said that initially they would target mainland China as their first choice (60.4%), followed by Japan (13.2%), the United States (11.9%), and Europe (7.9%).

The MIC reported that 64% of the surveyed e-retailers that planned to go global expected to focus on direct online sales, and that the most daunting hurdles they would face were cross-border cash flow and logistics integration.

Consumer Preferences

Another section of the MIC survey found that among the Taiwanese consumers planning to buy 20-inch or bigger LCD TVs in 2009, clear differences existed between the preferences of different age groups: the 30-and-under group preferred models with "digitized audio/video-transmission, as well as home-theater stereo"; the 30-to-40 group opted for "language-translation and automatic picture-tuning based on ambient lighting”; and the over-41 group wanted "adjustable screen height and angle, with a built-in high-definition digital-TV receiver." In short, according to H.J. Jiang, a senior industry analyst at MIC, older buyers cared more about integrated TV functions, while younger ones paid more attention to multimedia applications.

Internet security is a top issue of concern to most users in Taiwan, according to the MIC. Issues of lesser concern include internet-connection quality, broadband access, and connection fee.

Looking for a relationship between occupation and Internet use preferences, the MIC survey discovered that middle and senior managers, professionals, and office workers cared more about Internet-connection quality, bandwidth, and internet security, while household subscribers and students were more sensitive to Internet security, quality, and service fee.

The MIC analyst said that office Internet users cared more about Internet quality and bandwidth, which influence work efficiency; while home users were more sensitive to connection fees. With most companies protecting their Internet connections with firewalls, the analyst noted, office Internet users were less worried about Internet security than were home users.

(by Philip Liu)