August 10, 2005

Auctions in China and America

China’s online auction market is both booming and just beginning. In 2004, about 12 million people, or almost 12% of China’s 104 million internet users, had tried online auctions. This number was twice as high as one year earlier and is projected to grow to 18 million (or 14% of the projected 133 million users) by the end of 2005, and to 26 million (or 16% of the projected 166 million users) by the end of 2006.

For comparison with U.S. rates: The Pew Internet & American Life Project’s February-March, 2005 tracking poll showed that 24% of the 135 million US internet users, or about 32 million users, have participated in online auctions. That number was 15% in July, 2000; 20% in the spring of 2002; 22% in December, 2002; and 23% in February, 2004.

Two of China’s major problems with its online auction environment are how to disburse online orders, in a country whose transportation system simply needs roads, and how to enable online transactions, when credit cards in the country are a rarity.

Here the Chinese might do well to watch and learn from the U.S. model. In a report to the Senate Special Committee on Aging at the end of July, the Federal Trade Commission said that online auction fraud followed identity theft as the number two complaint from all consumers. The FTC also reported that online auction fraud comprised 41% of all consumer fraud complaints received in 2004 by consumers over age 50, and that these complaints from older consumers were representative of problems for the population as a whole.