[OECDIT] B2B Deals Dominate E-Commerce

Reference: http://www.koreatimes.co.kr/www/news/nation/2008/06/123_25957.html

By Michael HaStaff ReporterSouth Korea, one of the most wired countries in the world, saw its e-commerce volume jump almost 20 percent during the first three months of 2008. Leading the way was business-to-business (B2B) transactions, which now make up a whopping 92 percent of the overall e-commerce business in Korea.``The Korean B2B market keeps getting bigger, helped by Korea's advanced Internet infrastructure,'' according to a representative from the Korea National Statistical Office, which issues the nationwide e-commerce figures every quarter.``B2B e-commerce refers to online corporate purchases and sales between companies. We started publishing data on B2B e-commerce beginning in 2001. Korean companies first began using B2B systems in the late1990s. In 2001, the overall B2B activities were worth 109 trillion won, which is less than what we had just in the first three months of this year." B2B activities have also been leading e-commerce transactions in some other major economies.In the United States, for example, more than 94 percent of all e-commerce can be classified as B2B, according to an estimate by the U.S. Census Bureau. And in Canada, B2B deals make up more than three-quarters of its overall e-commerce transactions. According to Canada's National Statistical Agency, the ``vast majority of gains'' in e-commerce during the past few years have been the result of B2B deals ― increased sales from one business to another.The Korean statistical office said e-commerce transactions for the 2008 first quarter amounted to 138.39 trillion won. B2B deals posted a 20.3 percent increase to 127.1 trillion won.One advantage of B2B commerce is that it allows real-time transactions and cuts down on paper documents and filing time, helping to boost productivity. ``Companies can input data into their online system just once and cut down on transaction processing time in the future. It can make corporate procurement very efficient.''Other types of e-commerce activities also rose. Business-to-consumer deals, called B2C, were up 11 percent to 2.85 trillion won, while transactions between consumers, called C2C, jumped 27 percent to 1.43 trillion won. Business-to-government online deals were up 6 percent to 6.99 trillion won.``Major Korean companies, especially manufacturing firms, have set up e-commerce systems to sell or purchase materials with other businesses. The figure also includes B2B e-transactions between Korea and overseas businesses,'' the Korea National Statistical Office representative explained.For example, a shipbuilding company may have online purchasing options, as part of its computerized enterprise resource planning (ERP) system, to buy steel from various steel-making companies. The shipbuilding firm and steel-making companies would have digital identifications to access each other's e-commerce sites.The Korea National Statistical Office representative said manufacturing companies represent the biggest user group of B2B commerce in Korea, making up 60 percent of the entire B2B activities. Wholesalers and retail companies make up the second largest group. Construction firms also use a lot of B2B commerce. ``Many companies also purchase electricity and gas through e-commerce.''Not every company is satisfied, however. For small business owners, the initial cost of setting up a B2B system may be too high. ``There have been some companies that perhaps expected too much from B2B. Many Korean companies had set up e-commerce systems but some of them, especially some of the smaller ones, have been pulling back from B2B commerce,'' the representative said.``And there is a cost barrier to participating in B2B e-commerce. It takes about 1 billion won to set up a B2B e-commerce system in Korea, which may be too costly for many small businesses owners.''Kwon Ki-duk, senior research fellow at Samsung Economic Research Institute, said B2B is leading the e-commerce in Korea and that other types of online commerce are also very active.``The B2B market is much larger compared to other sectors. But the B2C sector is also becoming very active. Online shopping is widespread among Koreans,'' Kwon said.``And we are not just talking about buying merchandize online. A lot of Koreans are also using online services including online banking and financial transactions, which incur processing fees. There are also online games and Internet news, and even watching television on the Web. All these everyday activities have become commonplace in Korea." The online market in Korea can be divided into several different sectors. ``For Korean Internet users, there are online portals offering Internet search and information services. The company with the biggest online presence in this space is NHN, a Korean equivalent of Google in the United States,'' Kwon said.``NHN reported 1 trillion won in sales last year. That's much larger than revenues from traditional media companies.''Another major portal aside from NHN is Daum. In Korea, the top two, three portals dominate the market. Indigenous companies continue to dominate the Korean Internet search market while U.S. companies like Google have a small market share, Kwon noted.``Much of the revenues for Korean Internet portals come from online advertising and games. There is also a lot of user-created contents that attract Internet traffic on the Web. Korea is really ahead of the curve compared to most other countries. Nowadays in Korea, new social trends can be created and found on the Internet and online portals.''In the consumer e-commerce sector, ``companies like `Auction' and `Gmarket' offer online shopping and open markets. Major Korean portals also operate popular online shopping malls where they can charge buyers and sellers processing fees.Then there are Internet game providers, like NCSoft, and also Internet companies offering online communities.One concern for online game sites is the danger of virtual gambling. Critics have charged that illegal gambling can be found alongside online game sites. Kwon noted: ``In the real world, there are also dangers of gambling and illegal betting in games. The online world is a reflection of the offline world, so there are some adverse side effects.''Kwon also said that in the past few years, online education has also been gaining popularity, with a company called ``Megastudy'' leading that sector.

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