By JONAH GREENBERG
(Virtual China News -- Apr. 12) One of China's lesser known e-commerce portals ambitiously pledged a one-hour delivery window to its users in Beijing last week, following in the footsteps of rapid fulfillment e-tailers in the U.S. such as Kozmo and Urban Fetch in New York City. The move came as the NASDAQ nose-dived in the largest ever single-day drop, largely a result of waning faith in business-to-consumer e-commerce models.
The eGuo.com Web site already hawks groceries, software, and personal convenience products among the selection it claims it can deliver in one hour. The company will soon expand the one hour service to include CDs, VCDs, electronics, and books. Other products sold at eGuo's site are available within 8 hours, according to Christopher Spuches, the company's director of marketing.
The crowded ranks of e-commerce sites in China are likely to thin out over the course of the year as business-to-consumer, or b2c, models fail to turn profits and continue to lose investor confidence. eGuo's move might be a ploy to stand out among its competitors.
"Royal Treatment"
By offering one hour delivery service, eGuo hopes to attract more attention among China's growing population of Web users, which currently numbers around 9 million, according to the most recent government survey.
"Word spreads so fast," said Y.Q. Zhang, eGuo's chief executive officer, who is currently in New York talking to investors.
While the number of Internet users in China doubles every six months, many consumers there are not as exposed as their Western counterparts to luxury conveniences delivered by advancing technology, and Zhang agrees that in the past Chinese businesses rarely emphasized the importance of customer service.
Zhang said that eGuo's delivery people "get royal treatment" when they show up at customers' doors within the one-hour time limit.
"They want to know how it can be done," Zhang said.
Deliveries will be made by the three-wheeled cycles that are common in Beijing, as well as by bicycle. At night the deliveries will also be made by automobiles that belong to eGuo's fleet of "delivery tools," according to Zhang.
Long-term View
While some e-commerce sites based in Beijing such as MyWeb.com have claimed to have partnerships with taxi companies to oversee automobile deliveries, eGuo has chosen to purchase its delivery resources in order to keep a tighter reign on quality control.
"We have everything under the company's direct control," Zhang said.
At a time when doubt surges within investor communities about the promise of the b2c e-commerce model, Zhang remains unshaken about the future of his business. Although he recognizes the difficulty of turning a profit on the Internet, Zhang sees it as a short term phenomenon.
"The fact that companies are losing money is not because there isn't money to be made on the Internet, it's because the sector is too crowded," Zhang said. "In the long term the winner is going to make money."
And when Zhang says "long term" he seems to have no illusions about the time that it will take to become a profitable company.
"It will most likely be three years before we can hit the level of one of the largest shopping malls in Beijing," Zhang said. Still, Zhang said eGuo's online transactions have doubled every week this year.
When other e-commerce contenders in China like 8848.net are gearing up for NASDAQ listings, it is important to become one of the "winners" before being branded one of the "losers." eGuo expects to make an IPO on the NASDAQ exchange in the firt quarter of 2001, according to Spuches.
Overhead Question
Zhang points out that b2c outfits have one key advantage over traditional retailers: they have less bills to pay.
"We probably pay higher salaries than traditional retailers, but overall we have lower overhead," he said. However, since the company is responsible for its inventory and delivery, it is unclear how their overhead is substantially less than traditional retailers.
One of eGuo's managerial initiatives is a weekly mandatory two-hour training session called eGuo University, which echoes certain Western employee training programs. Many Internet companies in China run by high-level managers and executives who have studied or worked in the U.S. are importing managerial techniques back to China. But Zhang does not agree that this is the reason for eGuo's employee training system.
"eGuo University is really there to provide a mechanism to educate and train our own employees," he said.
Launched in 1998 as a consumer product information portal, eGuo relaunched as a predominantly e-commerce-oriented site in October 1999. So far, the company has secured about US$1.5 million in venture capital from predominantly U.S. sources, according to Spuches. The company is currently tying up its third round of financing which they expect to bring in between 5 and 6 million dollars.
To reach Jonah Greenberg: jgreenberg@virtualchina.net
