Adatom.com Launches a High-Tech B2B Site

By JONAH GREENBERG

(Virtual China News, May 11) Adatom.com (ticker: ADTM), an online retailer, announced it will form a joint venture with Shenzhen Bay Industrial, Education and Research Center (SBIERC). It is Adatom.com's third China deal announced in less than two months.

The Milpitas, Calif.-based company sells products to consumers over the Internet directly from manufacturers. It has identified China as an important region not only because of its market potential, but because of its large-scale production capacity.

"China essentially is, and will become more so, the production center for the world," said Rich Barton, Adatom.com's chief executive officer, speaking from his office Wednesday. "The place where most of those products are made is China," said Barton, adding that his company hopes to to "tap into that largely through electronic media."

Barton cited the low-cost labor and the country's traditional focus on manufacturing as key factors in China's manufacturing edge.

Human Capital

Adatom.com and SBIERC will become equal partners in a Web site or number of Web sites offering products, services, and information having to do with the development of high-tech industry in China, according to the agreement.

Adatom.com's share price soared 23 percent when the company announced its agreement with another Chinese partner, China Product Trade Net Center (CPTNC), on March 23.

The joint venture's business will also include a platform for online education, Barton said. Human capital, or skilled and educated personnel, is sought with increasing urgency by the growing number of Internet, software, and other high-tech companies around the world.

"Maybe all the human capital is in the U.S., but they can still train people overseas," Barton said.

In fact, the U.S. is currently experiencing a severe shortage of skilled labor in the information technology sector, and the demand for online training could flow in both directions. Adatom.com's education Web sites will be produced in both Chinese and English.

Physical Efficiency

Barton says his partners in China are eager to cooperate because they see the benefit in transferring traditional distribution methods to an electronic format.

"The Chinese recognize the opportunity to set up channels of distribution that are inherently more prolific through the use of the Internet and information technology," Barton said.

The execution of the e-commerce partnerships will enjoy diminished overhead cost because of the physical efficiency of electronic distribution, Barton said.

"It's the whole purpose of an electronic marketplace that you don't have to build offices and buildings and everything," said Barton, adding that he did not expect to set up offices in Shenzhen for the new joint venture. "You can do most of the transactions without taking possession of these products."

Many multinationals prefer not to partner with Chinese companies in order to retain more control over their profitability, and because they hope to avoid legal entanglements down the road. Barton, however, says that pursuing relationships with Chinese partners is an important strategic move for his company.

B2B Services

"Everything in China is relationships first, and then business," he said. Only Chinese companies "understand how to reach the Chinese marketplace and its consumers."

CPTNC is a semi-private government supported organization in China dedicated to promoting the global distribution of goods produced in China. By partnering with CPTNC, Adatom.com expects to capitalize on the company's database of all the manufacturers in China, which it will need as part of its business-to-business services in China.

"It's important to go to an enterprise that can touch the whole region," Barton said. "You have the ability to cover large bases at one time."

Adatom.com also signed an exclusive agreement with Yangling Agricultural Hi-Tech Industrial Demonstration Zone (YAHIDZ) to develop an electronic marketplace for agricultural products. YAHIDZ was set up by China's central government, and has received US$130 million investment.

ADTM shares soared as high as 20 percent Tuesday on news of the joint venture, but fell slightly to close at $3, up from $2.75. To reach Jonah Greenberg email: jgreenberg@virtualchina.com