SOIT Looking to Cash in on Rising Viewer Traffic
South China Morning Post
2004-08-03

China's biggest online retailer of electronic and IT products wants to reshape the way consumers buy gadgets

Beijing SOIT Digital Technology, the mainland's largest online retailer of consumer electronics and information technology products, draws an estimated 600,000 unique visitors to its website daily.

Many of them leave something valuable behind: feedback on the products they buy.

'This information is very useful to product manufacturers. We can sell this information,' chief executive Guo Hongchi said.

This is just one of the ways SOIT plans to capitalise on its soaring traffic, now about 1.96 million page views per day, up from just 160,000 last year.

SOIT is considering a service whereby it sends product information to mobile phones through short text messages, collecting a fee.

The company also wants to expand beyond its mainstay business of digital cameras, camcorders, MP3 players and computer equipment.

'SOIT plans to sell household appliances such as white goods,' Mr Guo said.

It is all a part of a vision to reshape the way electronics and other gadgets are sold in China.

Of the 350 billion yuan in IT products sold in China last year, just one billion yuan, or 0.3 per cent, of the transactions were conducted online. This compared with 20 per cent for the United States.

According to some estimates, 10 per cent of all mainland IT product sales will occur online within five years.

Manufacturers and brands such as Lenovo, Sony and Canon sold 500 million yuan worth of goods through SOIT's e-commerce platform last year, up 250 per cent from 2002.

The company hopes 30 billion yuan to 50 billion yuan in transactions will be conducted through its site within five years.

Achieving this type of growth should be helped by SOIT's listing model, which avoids inventory headaches and accounts receivable risk. By carrying no stock of its own, the company can scale up quickly.

Last year, SOIT derived 67 per cent of its revenue from listing fees and 19 per cent from advertising. While 14 per cent came from direct sales to consumers, the company plans to exit this business by next March.

About 200 domestic and international vendors sell their wares through SOIT's website. Manufacturers include global brands such as IBM, Dell and Samsung.

The company, however, is not without competition. Other e-commerce firms include Dangdang, Joyo and Igo5.com.

In addition, the major portals could be drawn to the business as they look to diversify away from value-added mobile phone services. SOIT, however, has partnerships with Sina.com and Sohu.com.

Mr Guo said the company had had four years since its founding to refine its approach to e-commerce. The company's platform allows consumers to easily compare product prices and features, and the ordering process is simple to use.

'Visually, it's a very co-ordinated layout. We're at least two years ahead of any competition who wants to build these capabilities.'

In the meantime, SOIT is looking to raise funds from venture capitalists and has hired Latitude Capital Group to look for investors. The company would not rule out selling a stake to foreign investors, who have been eager to buy established internet operations on the mainland rather than building businesses from scratch.

By Michael Logan