27 October 2016
E-commerce has certain advantages over brick-and-mortar businesses in terms of rental costs and manpower. Photo: Bloomberg
E-commerce has certain advantages over brick-and-mortar businesses in terms of rental costs and manpower. Photo: Bloomberg

Riding the tide of e-commerce

E-commerce is one of China’s most vibrant industries. In the last 11/11 Singles’ Day, one online shopping platform reported 57.1 billion yuan (US$9.2 billion) in sales.

In a country of 1.3 billion people, about half of the 650 million internet users shop online, according to official statistics. As both internet penetration and the people’s purchasing power are still growing, the meteoric rise of e-commerce is far from ending.

E-commerce has certain advantages over brick-and-mortar businesses. First, it saves operating costs such as rent and manpower. Second, e-commerce operates 24/7 and reaches customers even in faraway markets. In 2012, Hong Kong’s offline enterprises exported products to seven markets on average, while e-commerce retailers had sales in as many as 57 regions, according to a survey.

The implications of the growth of e-commerce for policymakers are twofold. The first one is that the government needs to keep the consumer projection regime up to date. The other one is that the government should explore what role it could play in turning e-commerce into a new engine of economic growth.

In Hong Kong, as the enthusiasm of mainland tourists subsides, the outlook for the retail sector is clouded with uncertainties. Still, our quality products, creative and Hong Kong-flavored, can be competitive in the mainland market. Most importantly, with a low entry threshold, e-commerce is a cost-effective means for small and medium-scale enterprises and startups to expand and flourish.

To foster e-commerce, there are several issues the government should consider.

1) Legal protection of consumers

Last year complaints about online shopping reached 5,442, up 70 percent from 2013, according to Consumer Council statistics.

Mainland China, Taiwan, the European Union and some other regions have already passed laws stipulating that online shoppers can withdraw their orders within a period of time (e.g., seven days) for whatever reason. This arrangement is dubbed “the right to regret” in China and “cooling-off period” in Europe. Yet, there is no law in Hong Kong dedicated to safeguarding the interests of e-commerce consumers.

Authorities should also explore online dispute resolution (ODR), which means employing non-litigation mechanisms such as arbitration and mediation to resolve disputes on the internet with lower costs and higher flexibility.

2) Financial support

In order to encourage SMEs to engage in e-commerce, the Singaporean government launched a number financial support schemes, including [email protected], under which more than 1,500 SMEs received HK$10,000 for making their first website.

To be fair to brick-and-mortar retailers, the Hong Kong government should definitely tax online stores according to the law, but providing tax credits and other incentives to online stores of SMEs for one to two years could also be a viable option.

3) Taxation and customs support

The government should maintain close communication with mainland and overseas authorities, provide relevant information about other economies in support of local SMEs and strive to hammer out more bilateral agreements to facilitate customs clearance.

4) Resources of the Hongkong Post

E-commerce opens new development opportunities for the Hongkong Post, which has seen deficits in recent years. The Royal Mail Group of the UK, for instance, has actively participated in e-commerce by establishing an online store on the Alibaba platform, aiming to deliver British products straight to the doorsteps of consumers in China.

In a similar vein, the Hongkong Post has launched iMail for citizens to sell products overseas and EC-Post for SMEs to transport products to mainland consumers. These measures deserve recognition, but should be further streamlined and promoted so that Hongkong Post can play a greater role in carrying Hong Kong’s brand abroad.

5) Marketing in China

The administration should further encourage local enterprises to tap into the China market. Last year, Beijing established seven cross-border e-commerce pilot cities, including Shanghai and Guangzhou.

In the Guangzhou Bonded Area, for example, foreign goods are imported by batches, stored temporarily and then delivered to individual consumers upon online orders. Such customs arrangements incur lower taxes, save time and slash shipping costs.

As the Guangdong Free Trade Zone has been formally launched, many companies are optimistic about the prospects of e-commerce and have set foot on such designated areas as Qianhai and Nansha. The business opportunities are just too precious to be missed by Hong Kong enterprises.

In this O2O (online-to-offline) era, while Hong Kong enterprises go from strength to strength in product development and design, the SAR government should also endeavor to build a favorable policy environment and help the industry to take full advantage of e-commerce and promote Hong Kong brands all over the world.

Ben Lee is the author of this article.

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