E-commerce about to go ape

In the wilderness that is e-commerce in New Zealand, TradeMe is the 900lb gorilla suddenly facing challenges from all sides.

Several smaller players have recently launched, including Zillion and Sellmefree, and now Telecom is unleashing its own gorilla - online shopping mall Ferrit - by Christmas.

Meanwhile, looming in the background is eBay. The company launched here in 2001 and has yet to really take off, but the global auction equivalent of King Kong could at any time decide it wants more of the local action and boost its efforts here.

It's a new scene - after years of inactivity, suddenly the jungle finds itself with several players. But why has e-commerce been so slow to take off here?

At least one analyst says it's because the phenomenon has yet to etch itself into businesses' fundamental psychology.

"For e-commerce to be successful, it has to be fully integrated into the national economy," says Sydney-based telecommunications analyst Paul Budde.

That hasn't happened here, Budde says. E-commerce has been acknowledged as vital, but little has been done to facilitate it.

"It's like saying it's important to have transportation, and then not building roads and railways."

Poor broadband uptake has been part of the problem. New Zealand ranks 22nd out of 30 in the OECD, and the slow connections that businesses are dealing with has led to a dearth of websites being designed. New Zealand therefore lags the OECD average in its per capita number of websites, ranking 12th in 2003 with 15.3 sites per 1000 people. That's less than half the OECD average of 31.4 and well below most Western countries, including the leader Germany, which had almost 85 websites per 1000 people.

TradeMe has been the lone success story, and has become New Zealand's most popular website by virtue of its local flavour.

Business manager Mike O'Donnell says one of the secrets to TradeMe's success has been designing the site so that it loads quickly.

That means any user - whether on broadband or dialup - can access it, "so my dear old mum ... can find it just as easily as a graphic artist from AUT", he said.

The other key to TradeMe's success, he says, has been in leaving the international auction market to global players such as eBay, while keeping its focus local.

In January, TradeMe turned off its site to international sellers. A few months later, international buyers, with the exception of Australians who had verifiable New Zealand bank accounts, got the same treatment.

O'Donnell says the changes were driven by the realisation that TradeMe wasn't going to be a global empire.

"There are some pretty big global operators out there. We decided to focus on New Zealand."

The Kiwi focus meant adapting to local conditions to not only ensure buyers and sellers were matched up, but also that they had as hassle-free an experience as possible.

Telecom says Ferrit will not compete with TradeMe directly in that it will be more of a retail portal rather than an auction site. But it will doubtlessly compete indirectly, providing a new focal point for online shoppers.

Observers are sceptical of its future, however.

Budde says Ferrit isn't likely to succeed because telecommunications companies are "the worst possible providers of that sort of service".

O'Donnell is slightly more charitable.

"We understand the concept of community. We're doubtful Telecom does."

Meanwhile, eBay has continued to aggressively expand into the Asian market.

In addition to New Zealand, the company has in the past four years launched services in Malaysia, the Philippines, Hong Kong and Singapore, as well as acquiring major e-commerce sites in Taiwan, China and India.

That push appears to have stalled in New Zealand, however. The New Zealand site is run out of Australia, and items listed in local currency are few and far between.

Simon Smith, the company's managing director for Australia, says eBay has no current plans to establish an office in New Zealand.

He did say that eBay's global reach allows Kiwis to trade with one another along with the company's community of 168 million members around the world.

Smith also alluded to New Zealand's broadband problems, suggesting that buyers and sellers are ultimately going to go to the site "with the most selection that provides the most stability, speed and safety."

O'Donnell still sees a great deal of growth opportunities for TradeMe.

The site has expanded its reach into the real estate, automotive and rental markets, and is looking to expand its user base.

The site has 1.2 million members, O'Donnell says, compared with 2 million internet users in the country. That number is sure to climb as broadband uptake improves.

"Clearly, there is still opportunity there for us," he says.