Business

Auction site e-tailers make hay amid economic gloom

Young entrepreneur Tseng Guo-lung is taking the Generation Y segment by storm with his hip clothing range. (Courtesy of Taiji Fusion)

• Publication Date：09/11/2009
• Source： Taiwan Today
• By  Tien-ying Hsu

The financial downturn may be savaging profit margins of retailers around the world, but in Taiwan, someone forgot to tell the island’s online auction site merchants, many of whom are enjoying record sales and fat bottom-lines.

An annual survey released by the Market Intelligence and Consulting Institute in July revealed that the value of Taiwan’s online shopping sector is expected to hit NT$311.6 billion (US$9.54 billion) in 2009, up 30.4 percent from last year.

The report also indicated that for the first half of 2009, the clothing and accessories segment ranked second overall with a market share of 13 percent, surpassing high-tech goods for the first time in years.

For the local auction site of Yahoo Inc., this trend saw its average number of unique monthly visits hit 7.69 million in June—an increase of close to 3 percent from the previous month. In addition, the quantity of items listed for sale skyrocketed by around 92 percent to more than 7 million from the year before, according to Taipei-based Web metrics firm InsightXplorer Ltd.

With consumers and sellers increasingly coming together to do business online, sales of fixed-price menswear on Yahoo are looking healthier than ever. Even amid the economic gloom, annual growth for 2009 based on monthly gross merchandise volume outstrips last year’s figures by 15 percent.

For Tseng Guo-lung, one of Yahoo’s top fixed-price sellers, the financial crisis has represented a lucrative chance to develop his “Taiji Fusion” online bazaar, which specializes in menswear and generates monthly revenues of NT$4 million.

Readily admitting that his foray into the world of e-commerce was more by accident than design, Tseng said that while preparing to return home after graduating from university, he came up with the idea of earning a little cash on the side by auctioning off some old clothes. “It ended pretty well. I made around NT$40,000 that summer, more than the monthly salary of most college graduates.”

Encouraged by the result, the then fledgling e-tailer decided to register in early 2005 as a commercial fixed-price seller with Yahoo. Tseng, 27, explained that at the time, he decided to target the so-called Generation Y segment—a market whose members have not yet hit 30—because of his own age. “Finding a focus you are familiar with is very important.”

Waylon Yang, a marketing lecturer at National Taipei University of Technology and CEO of 94iPlay Creativity Co. Ltd.—a Taipei-based e-business consultancy—noted that many successful online sellers share similar stories to Tseng’s.

“Taking on the competition in a market you are familiar with greatly increases your chances of coming out on top,” he said. “Tseng’s decision to sell menswear in the ever-changing youth market was a smart move.”

According to MIC data, online female buyers in Taiwan outnumber males at a ratio of 4-to-1, but their average annual purchases total only NT$8,631—far less than the NT$13,510 spent by men. This suggests that despite fewer males shopping online, they have a greater spending upside.

To better cater to the male demographic, Tseng stocks an eclectic range of clothing. His bazaar features reasonably priced U.S. sportswear, Japanese and Korean fashion clothing, and a smattering of baggy hip-hop threads. At an average of 60,000 visits per day, his bazaar stands out from the crowd on Yahoo.

As the online rag business is a cutthroat one at the best of times, discounts or special offers are needed to boost a store’s popularity. Tseng offers special prices and tailors packages according to shopping behaviors based on his own experiences. “Men like to shop for what they need, not what they want. They also like to finish their shopping in one go so as to keep the hassle to a minimum.”

Tseng explained that a T-shirt and pants set could be bought on his site at a special price with just one click. “This is far more convenient than most e-shops where items have to be checked separately.”

When it comes to sales strategy, Yang suggests that big-name retailers could learn a trick or two from online sellers like Tseng. “They have a real feel for formulating creative strategies that appeal to the Generation Y segment.”

But Tseng cautions that it takes more than just creativity to develop a profitable e-business. “One must think carefully before jumping in. A successful seller has to understand their market, otherwise, their capital will soon evaporate.”

Tseng recounted a story of a friend who turned his back on inheriting the family fish farming business to open an online shop. “He lost almost NT$1 million in a year simply by not investigating the market before jumping in. Besides, the online shopping business is not as lucrative as it seems.”

With gross profit on menswear running at around 30 percent, Tseng said he ends up with a net take of NT$20,000 for every million the bazaar brings in. “It is a very tough business to run.”

MIC data supports this position, revealing that clothing and accessories have the highest seller turnover rate of all online segments. New entrepreneurs continue to flood in, but waves of sellers leave defeated, too.

Like many entrepreneurs around the world, Tseng views mainland China as a glittering Eldorado. “Taiji Fusion” has already registered its trademark on the other side of the strait, and is waiting for the right time to launch. “With 10 times more shoppers visiting online stores such as mine, the opportunity for growth is unlimited.”

Although the size of the mainland market and challenges associated with cracking it are daunting, Tseng believes his business model is more than up to the task. “The world of e-commerce is a big one,” he said, “but if I keep my feet on the ground, there is no reason why I cannot build an empire of my own.” (JSM)

Write to Tien-ying Hsu at tyhsu@mail.gio.gov.tw