Economics Ministry Builds Environment For E-Commerce Development

At the beginning of November the Department of Commerce (DOC), a unit of the Ministry of Economic Affairs (MOEA), announced the achievements made under its "Electronic-commerce Environment Readiness and B2C (business to consumer) e-commerce Promotion Program," the first of its kind undertaken under the guidance of Taiwan's government sector.

DOC Director General Tu Tzu-chun noted that a country's "e-readiness" is often used as an index of its overall competitiveness, especially in the Internet age. According to analysis carried out by the International Institute for Management Development (IMD), one of the world's most respected sources of competitiveness data, Taiwan enjoys powerful competitive advantages in terms of business potential, enterprise spirit, and high-tech industrial development.

A recent DOC survey shows that over 90% of all companies in Taiwan have corporate networks and networking infrastructures, and that about 80% of them have established websites.

The survey indicated that the total value of trading on Taiwan's B2B (business to business) e-commerce market grew to NT$4,944 billion (US$154 billion at NT$32.1:US$1) in 2003, increasing by NT$4,227 billion (US$131.7 billion) from the NT$716.8 billion (US$22.3 billion) worth of transactions recorded in 1999. This represented an annual average growth of 63.1%. From now to 2008 the island's B2B market is expected to grow at an annual average of 17.6%, bringing the market value to NT$10,656 billion (US$332 billion) that year.

Online shopping on the B2C e-commerce market is expected to reach NT$34.72 billion (US$1.08 billion) this year, up 57.2% from 2003. The travel industry will account for 68% of the total value, and travel plus 3C (computers, communications, and consumer electronics) products will account for a whopping 85% of the overall amount. Online shopping will account for just 1.2% of Taiwan's total retail sales this year.

Unstoppable Online Shopping

The DOC predicts that the online shopping market will grow by another 40% in 2005 to reach NT$49.31 billion (US$1.53 billion), and that the amount will continue growing at a compound average growth rate of 28.7% annually to reach NT$95.22 billion (US$2.96 billion) in 2008.

The C2C (consumer to consumer) market in Taiwan is dominated by three major online auction sites: Yahoo!Kimo, eBay, and Roodo.com. Yahoo!Kimo has managed to continue growing robustly even after launching a user fee system for online auctioneers in April this year.

According to a report from the DOC's E-commerce Infrastructure Preparation and B2C Promotion Project, women online consumers outnumber their male counterparts 54% to 46% (and unsurprisingly cosmetics products make up the biggest sales category with 11.17% of the market), so online retailers will continue boosting the number of their products targeted at female consumers. The variety of online retailers will continue to expand as online purchasing continues to grow in the next few years.

DOC statistics indicate that 31.9% of Taiwan's online retailers are now profitable, and that most of them went into the black within two years after their inception. Another 15.1% are reporting breakeven business so far in 2004, and most of them expect to become profitable within a year or two.

Online education (e-learning) is a new segment which had only a handful of Taiwanese suppliers two years ago, but the recent entry of software houses and publishers into the business is giving the field a strong boost. An "E-Learning National Technology Program" was launched in 2003; since then hundreds of new firms have entered the online market, and the industry is reaching toward maturity.

The open, transparent, and public nature of the Internet has had a considerable impact on traditional employment service companies. According to the "Taiwan Employment Website Use Behavior Research Report," compiled by InsightXplorer, a market research consulting company in October 2003, during the peak employment season the island's employment websites recorded an average of over three million visitors per month. In August that year, for example, 3.47 million visitors, or 36% of all Internet users, hit employment sites.

Online Stock Trading

The same report indicated that the emergence of online trading has changed the way that people invest in the stock market. Online stock trading has grown rapidly since it was introduced in Taiwan in 1996; the number of new accounts peaked in 2000, at 955,000, and in 2003 online trading accounted for 11.74% of total trading in terms of numbers of transactions and 12.71% in terms of volume. Some online trading firms are also providing peripheral services such as options trading and integration with online banking.

Insurance companies are also taking advantage of the Internet, and expect their use of online operations to increase so long as they are able to provide customer-friendly interfaces and the highest level of security.

In March this year the DOC conducted a survey of Taiwan's B2C e-commerce technology development, with representatives from eight domestic e-commerce websites and 16 industry analysts being invited to predict future trends.

The eight e-commerce site representatives expressed the expectation that new payment tools and electronic signatures and applications would begin growing gradually in 2006. They predicted that digital consumer products and Internet infrastructure technology and applications would offer the greatest B2C market opportunities, and that IC cards and digital copyright management would also have a strong impact on the market as they are adopted by up to 20% of all Internet users. However, the most important technologies for e-commerce websites, according to the respondents, will be public key infrastructure, home Internet access, and instant messaging.

The e-commerce representatives and industry analysts believed, in general, that USB MP3 players, home Internet access, and instant messaging will be the first of the technologies affecting Taiwan's B2C e-commerce to achieve large-scale application next year.

Finally, according to the industry analysts, the first B2C e-commerce technology to reach maturity and be put into widespread use will be Internet infrastructure and applications, followed by new payment tools, electronic signatures and applications, copyright-protection technologies, digital consumer products, and digital lifestyle technologies. Slowest to reach maturity and widespread use will be digital consumer products and digital lifestyle technologies.