The most quoted reason is the poor credit and payment systems. Credit cards are still new to most Chinese people. There are about 650 million bank cards in circulation, but the majority of them are debit cards.
My friend in Beijing asked me about the benefit of using credit cards. “why do you need to use a credit card to make the payment?” she said, “it’s not convenient.” It’s actually a bank card/debt card for her. She has to transfer the money to that “card” account before she can use it. People are used to use cash for payments.
However, this may change in the next a few years. Two mobile payment companies: SmartPay and 99Bill Corp, received venture fundings led by RRE Ventures of New York and DOC-Doll in August. The firms enable people to make payments from their bank accounts through mobile phones. My friends – the founders of YeePay told me that they are rolling out three new payment methods including SMS payment, fixed line phone payment and mobile prepayment.
Another reason is the insufficient logistics and distribution channel. The under-developed distribution channels make long distant shipping very difficult and unreliable. Again, this can be changed too as a result of China’s modernization. In addition, DHL and UPS are all going to China.
I see there are two major social-economic reasons that inhibit e-commerce from taking-off, and these are not likely to change anytime soon:
- Culture of Negotiating and Bargaining Chinese love to haggle; everyone wants a deal. This century-long practice of negotiating and bargaining deals is part of business culture. e-Commerce does not allow people to do that.
- Low Levels of Trust I think trust is the biggest issue in e-commerce in China. My friends told me that they would never buy anything without seeing and touching it. There are no established brands. High levels of fraud and cheating make on-line shopping risky.