Fast-Expanding “Online” Markets in South Korea and China: Are They Worth Pursuing?

Abstract

The online shopping craze in South Korea has been ongoing for more than a decade, but in China, online shopping is experiencing tremendous growth, with 64 million additional shoppers per year. Consumers in Asia are among the world's most prolific online shoppers. This study compares the evolution, cycle, and stages of the online shopping markets in South Korea and China. Using the fast-expanding market model as an initial analytical framework and multiple case approach, we find that Chinese online shopping corresponds to the take-off stage of a successful cluster, in which significant opportunities are still present in Chinese Tier 3 and Tier 4 cities. Conversely, the South Korean online market is nearing saturation, though major foreign players are still entering this perceived lucrative marketplace.

Full text

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FEATURE ARTICLE
Correspondence to: Associate Professor Adrian Kuah, James Cook University, Australia, Singapore Campus, 149 Sims Drive, Singapore 387380,
+65 6709 3718 (phone), +65 6709 3889 (fax), Adrian.Kuah@jcu.edu.au
Published online in Wiley Online Library (wileyonlinelibrary.com)
© 2016 Wiley Periodicals, Inc. • DOI: 10.1002/tie.21779
By
Adrian T. H. Kuah
Pengji Wang
The online shopping craze in South Korea has been ongoing for more than a decade, but in China,
online shopping is experiencing tremendous growth, with 64 million additional shoppers per year.
Consumers in Asia are among the world’s most proli c online shoppers. This study compares the
evolution, cycle, and stages of the online shopping markets in South Korea and China. Using the fast-
expanding market model as an initial analytical framework and multiple case approach, we  nd that
Chinese online shopping corresponds to the take-off stage of a successful cluster, in which signi cant
opportunities are still present in Chinese Tier 3 and Tier 4 cities. Conversely, the South Korean online
market is nearing saturation, though major foreign players are still entering this perceived lucrative
marketplace. © 2016 Wiley Periodicals, Inc.
Fast-Expanding “Online”
Marketsin South Korea
andChina: Are They
Worth Pursuing?
Introduction
The Internet is an important vehicle for commercial
transactions and, from a marketing perspective,
is generally used in two ways (Burrow & Kleindl,
2012; Doligalski, 2014; Haubl & Trifts, 2000). On the one
hand, companies use the Internet to communicate with
their current and potential customers (Burrow & Kleindl,
2012). On the other hand, consumers use the Internet for
various purposes, including to gain product information
before making a purchase decision (Darban & Li, 2012;
Kuah & Weerakkody, 2015). In this sense, e-commerce—
the buying and selling of products and services online,
the sharing of business information, and the maintenance
of business relationships—has created a paradigm shift in
the way modern companies conduct business.

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FEATURE ARTICLE
Thunderbird International Business Review DOI: 10.1002/tie
The booming online sales globally provide evidence
of this paradigm shift. Online shopping is not only bur-
geoning in developed economies, including the United
States, the United Kingdom, Japan, Germany, France,
and South Korea, where high Internet penetration exists
and consumers tend to be more sophisticated due to
higher incomes, but also in emerging economies, such as
China, Russia, Chile, and Brazil, where the Internet infra-
structure is still being developed (Ben-Shabat, Moriarty,
Nilforoushan, & Yuen, 2015; Jones Lang LaSalle, 2013).
Stimulated by the rapid growth of online shop-
ping, researchers have become increasingly interested in
understanding which factors affect consumers’ decisions
to purchase online. For example, Agarwal and Wu (2015)
attribute the growth of e-commerce in emerging econo-
mies to conducive factors at the global, national, and
transactional levels. Thus, online shopping has become a
fast-expanding market (FEM) in some countries.
This article focuses on the online FEMs in South
Korea and the People’s Republic of China (China) to
understand the evolution, cycle, and stages of their
growth. Lessons drawn can help investors, entrepre-
neurs, and government organizations understand the
Asian online markets at a more realistic level. This article
proceeds as follows: We begin by reviewing the cyclical
growth of FEMs and the cluster life-cycle theory. Then,
we discuss our methodological approach and present our
findings in the light of our theoretical framework. The
last section concludes the article.
Asia’s Online Shopping FEMs
Led by the “Asian Tigers” of Taiwan and South Korea,
many companies in Asia were decimated when the dot-
com bubble burst in 1997. The fastest performers and
largest e-commerce markets in Asian countries, such as
China and India, became known as the “Asian Elephants”
(Chakrabarti & Kardile, 2002; Jones Lang LaSalle, 2013).
Today, China still regulates political content on the web to
retain propaganda control; the country has approximately
331 million online shoppers, a number that is expected to
grow by 64 million additional online shoppers, or 19.6%
per year (China Internet Network Information Center
[CNNIC], 2014). In contrast, the South Korean govern-
ment has not restricted or controlled Internet usage and
thus has achieved a high penetration of Internet users.
In 2013, 71.1% of Internet users in South Korea had pur-
chased products online (Statista, 2015). Revenue from
online shopping in South Korea increased by 20.1% from
2012 to 2013 (Statistics Korea, 2015). With more than a
15% growth rate, the e- commerce markets in China and
South Korea constitute two key fast-expanding online
markets in Asia.
Theoretical Framework
FEM Model
In an FEM, rapid growth and opportunities are pres-
ent, such that the market becomes the focal point (Tse,
Esposito, & Soufani, 2013). Tse et al. (2013) note that
the cyclical process of an FEM begins with (1) the rising
impact of a technology or product on a society, which
then (2) prompts the society or government to expedi-
ently embrace the trend, after which (3) the speed of
uptake is so fast that it attracts more players, and finally
culminates in (4) consistent growth of the FEM, poten-
tially leading to further spillovers. According to Tse etal.
(2013), this cycle sustains its speed for three to five years
before the formation of a cluster.
The FEM framework is useful in gaining insights
from a bottom-up approach into how FEMs develop and
how they can be predicted to affect the economic land-
scape. However, the framework seems to stop analyzing
an FEM at its peak performance point (i.e., clustering
stage). What happens during or after the clustering
stage is not covered in the FEM model. As a result, we
incorporate cluster life cycle into the main FEM model
to extend understanding of the clustering stage and the
stages afterward.
Cluster Life-Cycle Model
A cluster refers to a physical proximate group of inter-
linked companies connected through their common-
alities and complementarities in their products, services,
inputs, technologies, or output activities (Kuah, 2002).
Clustering enhances value-creating benefits, such as
innovation, competition, and productivity, when firms co-
locate in physical proximity and have closely associated
activities, either vertically or horizontally (Kuah, Ward,
Doyle, & Shapira, 2010). Externalities arise from cluster-
ing, and these include localization externality, urbaniza-
tion externality, pecuniary externality, and knowledge
spillovers (Kuah, Tse, & Esposito, 2013).
Swann, Prevezer, and Stout (1998) suggest that clus-
ters have a life cycle. They note that growth and entry of
new firms into a cluster depend not only on the life cycle
of technologies but also on the life cycle of the cluster.
Indeed, Kuah and Ward (2011) do find that older firms
rely less on positive spillovers and that younger firms ben-
efit more from clustering. Swann et al. (1998) describe
three stages of a cluster life cycle: (1) the take-off stage,
when the number of new entries starts increasing and the

Fast-Expanding “Online” Marketsin South Korea andChina: Are They Worth Pursuing
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DOI: 10.1002/tie Thunderbird International Business Review
cluster grows in size; (2) the growth plateau at the peak
entry stage; and (3) the saturation stage, when the cluster
stops growing. In this last stage, as Pouder and St. John
(1996) suggest, externalities and spillovers that initially
draw firms together can eventually erode. Intense compe-
tition also drives firms in the cluster to focus on market
niches in response, and market fragmentation surfaces.
Congestion on either the demand or the supply side may
cause a cluster to mature or even decline (Kuah, 2002).
Integrated FEM Model
In this research, we incorporate the cluster life cycle into
the FEM theory to explain what happens after an FEM
experiences consistent growth and industry spillover and
how these factors may create a larger cluster. Figure 1
depicts the integrated FEM model.
In the legitimation process of a new organizational
form, pioneers that have established new market stan-
dards and gained consumers’ acceptance move into
F-Stage 1. This is also when the new form’s impact on
the society or government becomes clearer in terms of
acceptance. The government and/or commercial sectors
take a lead in its development, and the society begins to
embrace the new trend (F-Stage 2). After this, the speed
of uptake becomes so rapid that this market potentially
attracts even more business players and success (F-Stage
3). As incumbents grow due to market demands, new
firms are created in proximity to support those incum-
bents. Other external firms may enter (through joint
ventures, acquisition, or direct entry) to compete for a
share of this attractive market, leading to clustering or the
take-off stage of a cluster (C-Stage 1).
The growth of any FEM will certainly generate exter-
nalities, knowledge, and industry spillovers (F-Stage 4).
The more firms that enter, the higher are the exter-
nalities, thus creating positive feedback that benefits all.
Indeed, externalities are known to improve the growth
and performance of firms (Kuah & Ward, 2011; Kuah
etal., 2013).
This positive feedback loop is characteristics of clus-
tering (Kuah, 2002). However, congestion on either the
demand or supply side may cause a cluster to saturate and
plateau (C-Stage 3). Market saturation pushes the players
to extend their focus, causing fragmentation in the indus-
try. That is, firms in the cluster must explore new market
opportunities domestically or internationally, bringing
the FEM into other geographic or business areas. If not,
the FEM may eventually decline (C-Stage 4).
FIGURE 1 Integrated FEM Model

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FEATURE ARTICLE
Thunderbird International Business Review DOI: 10.1002/tie
Case Approach
Methodologically, the case study is an examination of a
unit of analysis (Yin, 2003) using multiple sources of data
to present consistent evidence of the unit or to preserve
anomalous views in some instances. We selected the cases
in South Korea and China because of (1) the growth rate
of more than 15% per year for three years as Tse and
colleagues’ (2013) criterion, (2) the increasing interest
in the FEM phenomenon, and (3) the rapid uptake of
online shopping in Asia. A major strength of the case
approach is that there is no upper and lower limit to the
number of observations or the number of cases before
a complex issue is adequately highlighted (Yin, 2003).
Another advantage of the case study design is the affirma-
tion of construct validity from many sources (Ghauri &
Gronhaug, 2002, p. 172).
A single case study is therefore adequate if the chosen
case is “revelatory” (Yin, 1994, p. 41). The case of online
shopping in China, a developing economy, becoming an
FEM is revelatory, is less studied, and forms the main unit
of our investigation. South Korea, a developed economy
in Asia, provides a good comparison because its online
craze has been growing for some time. Collectively, the
two cases contribute to a better understanding of the
conditions influencing FEMs.
The collective cases draw on multiple sources of
information, such as published research, industry reports,
and participant observations. We use published sources
of evidence, such as journal articles, press reviews, and
industry reports, because they are both easily obtainable
and reliable. A fundamental feature of secondary data is
that they were produced for some purpose other than to
directly answer the current research question. Therefore,
we must assess their evidentiary status before using them
in this research (Hakim, 2000; Scott, 1990). To assess the
published evidence, we used Scott’s (1990) criteria of (1)
authenticity, or attributable authorship and soundness
of the document; (2) creditability, or the accuracy of
information and potential biasness from the document;
(3) representativeness, or the design of survey and sam-
pling of the secondary evidence; and (4) meaning, or the
underlying meaning and definitions that may be biased
from the way the document was prepared. We also used
participant observations to supplement the published
sources, including users’ experiences on and feedback of
different websites and portals in China and South Korea.
These observations mostly came from website reviews and
traffic statistics, talking personally to users in those coun-
tries, and our own personal experiences. Multiple data
sources tend to be less prone to “quirks derived from a
single source” (Yin, 2003) and lead to data triangulation
(Stake, 2000; Yin, 2003), which makes the case method
more attractive.
The main technique for summarizing and analyz-
ing substantial amounts of data is to adopt an analytical
framework (Stake, 2000; Yin, 1994). The analytical strat-
egy that Yin (1994) proposes uses a framework for orga-
nizing the case study. Our case design makes use of the
FEM model as an initial organizing framework in the next
section, before we present the viability of our integrated
FEM model in the following section. Adopting a common
framework across collective cases facilitates comparison
of the two key cases of online FEMs in Asia.
Analysis: FEM Cycle
Rising Impact on the Society: Readiness of Society to
Engage in E-Commerce
As mentioned previously, Tse etal. (2013) indicate that
the cyclical process of an FEM starts with the rising impact
of a technology or product on the society. In both China
and South Korea, the online FEM starts with the adop-
tion and diffusion of Internet technology, which leads the
society (i.e., consumers and firms) to become aware of,
accept, and engage in e-commerce.
China
The Internet was first introduced in China through a
worldwide connection between China’s Institute of High
Energy Physics and Stanford University’s research labs in
1991. This led to the development of CERNET (China
Educational and Research Network). However, rapid
expansion and diffusion of the Internet did not occur
until 1996, when multiple information technology (IT)
infrastructure programs and applications across diverse
sectors were introduced through the Golden Projects
promoted by the Chinese government (Clark, 1999). The
Golden Projects created an infrastructure backbone for
data networks, information exchange, and financial trans-
actions through the application of Internet technology.
With the development of the network infrastructure,
consumers began adopting Internet technology into their
daily lives. Table 1 shows that the growth of Internet users
from 600,000 in 1997 to 33 million in 2001. The number
of names under the .cn domain also jumped from 5,000
in 1997 to 127,000 in 2001.
From a business perspective, e-commerce quickly
established itself in China. The first batch of domestic
e-commerce websites emerged from 1997 to 1999. The
most notable of which included Alibaba.com, which is
an e-commerce generalist player pursuing economies of

Fast-Expanding “Online” Marketsin South Korea andChina: Are They Worth Pursuing
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DOI: 10.1002/tie Thunderbird International Business Review
scale with a focus on the mass market (Carroll, 1985),
and Dangdang, which is a specialist player putting more
of its resources into one category of products (Carroll,
1985). Launched by Jack Ma in 1999 (Backaler, 2010;
Jung, Ugboma, & Liow, 2015), Alibaba set up nine
related businesses to quickly exploit change and transient
opportunities: Taobao, Tmall, Juhuasuan, AliExpress,
1688.com, Alimama.com, Aliyun.com, Ant Financial,
and Caniyao. In mid-2003, Alibaba revolutionized the
business-to- business (B2B) market, creating Taobao for
Chinese exporters to gain access to US buyers online
(Jung et al., 2015); it also introduced Alipay, Alibaba’s
version of PayPal that adds security to online payments
(Backaler, 2010). During this time, foreign generalists
and specialists entered into China, the first of which was
eBay in 2003, followed by Amazon.com. Correspond-
ingly, the business-to-consumer (B2C) market increased.
According to CNNIC’s survey, 9% of Internet users had
purchased products online by January 2000; this number
increased to 31% in January 2002.
South Korea
The South Korean plan for Five National Information
Network Projects, which included National Administra-
tive Information Network and Education and Research
Network Infrastructure, was launched in July 1983. For
the next eight years, this national network was used by
the university and education sector. The Internet became
available to business and individuals in 1994, when the
Korean National Information Society Agency established
the Korean Information Infrastructure initiative to con-
struct a nationwide optical fiber network. This was fol-
lowed by a series of five-year programs that combined
government loans with private sector contributions,
including Cyber Korea 21 in 1999, e-Korea Vision 2006 in
2002, IT Korea Vision 2007 in 2003, and the Broadband
Convergence Network and IT 839 initiatives in 2004
(Chung, 2008).
This government strategy made South Korea one of
the most technically advanced countries in the world in
terms of Internet usage and broadband penetration. In
1993, only 612 websites had the .kr domain; this number
peaked at the end of 2000 at 517,354. As of December 2001,
24.38 million Koreans (56.6% of the total population) over
the age of seven had accessed the Internet at least once a
month. More than 60% of Internet users report that they
surf the Internet almost every day (Ministry of Commerce,
Industry and Energy Republic of Korea, n.d.).
At the same time, the fast adoption and diffusion of
Internet technology urged businesses in South Korea to
engage in e-commerce. The number of companies that
adopted e-commerce rose from 14 companies in 1999 to
24 companies in 2000 (Ministry of Commerce, Industry
and Energy Republic of Korea, n.d.). One early mover
in South Korea was Gmarket, founded by Young-Bae Ku
in November 2000, with its predecessors AuctionWe and
ShoppingMall. The South Korean government’s consis-
tent strategies for developing IT attracted some foreign
e-commerce players. For example, eBay entered South
Korea in 2004 by acquiring the Korean company, Auc-
tion, which had a similar business model.
Accordingly, while searching for information was
the primary purpose for Internet usage, many Koreans
regarded the Internet more as a place to conduct online
banking transactions. Approximately 20% of all Internet
users in Korea are identified as B2C e-commerce users as
of 2001.
The increased awareness of the e-commerce market
among business and consumers has boosted sales. The
total volume of e-commerce in Korea increased from
$47.93 billion in 2000 to $99.15 billion in 2001, up more
than 250% in just one year (Statistics Korea, 2013).
Embracing the E-Commerce Trend
The awareness and readiness of a society can prompt it
and/or the government to expediently embrace the FEM
(Tse etal., 2013). The government, consumers, and busi-
nesses (as a community) all work together to embrace the
trend of shopping online in both China and South Korea.
China
The Chinese government welcomed the potential eco-
nomic gains that e-commerce and the Internet poten-
tially brought to the Chinese economy and tried to
expedite the development of e-commerce by establishing
the infrastructure, cultivating demanded talents, and
issuing regulations related to e-commerce (Haley, 2002).
China has funded a series of Golden Projects since
1993, including Golden Bridge, Golden Gate, Golden
TABLE 1 Internet Infrastructure in China
1997 1998 1999 2000 2001
Internet users (million) 0.62 2.10 8.90 22.50 33.70
Computers with Internet
connections (million)
0.34 0.75 3.50 8.92 12.54
International gateway
bandwidth (Mbps)
30 143 351 2,799 7,597
Domain names (.cn)
(thousand)
5 18.4 48.7 122.1 127.3
Source: Adapted from CNNIC (http://www.cnnic.net.cn)

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FEATURE ARTICLE
Thunderbird International Business Review DOI: 10.1002/tie
Card, and Golden Tax (Chen, Gillenson, & Sherrell,
2002) to build up the e-commerce infrastructure. The
Chinese government also tried to improve its Internet
access speed while cutting down on expense for Internet
users. The average cost for Internet users per month was
approximately $10 in 2007, which was less than in 2006
(Li & Suomi, 2009). To nurture more talents, in 2001,
the Ministry of Education in China allowed 13 Chinese
universities to recruit students for an e-commerce major
(Zhang, Li, & Lin, 2005). At the same time, the Chinese
government made initiatives to embrace the e-commerce
trend through research and development (R&D). For
example, the Chinese government sponsored R&D on
e-commerce activities by providing research grants to
public research institutions and private sectors (Tan
& Wu, 2002). Recognizing consumers’ concerns about
online transactions in terms of system security, suppliers’
credibility, and inconvenient payment systems (Tan &
Wu, 2002), the Chinese government drafted regulations
and policies on Internet usage and e-commerce in 1996.
These regulations and policies focus on web access,
domain name regulation, Internet content regulation,
encryption regulation, and so on (Kennedy, 2000; Lo
& Everett, 2001). The Chinese government also issued
regulations or laws on e-contract, e-signature, taxation,
authentication, and so on, to help push e-commerce
development (Li & Suomi, 2009).
The trend of online shopping became popular in
China among consumers for three reasons. First, the
rapid uptake of Internet usage from 2000 to 2014 was
substantive in China (see Figure 2). With China’s exter-
nal media control, Chinese social media platforms, such
as Sina Weibo and WeChat, thrive domestically. Chinese
consumers are largely influenced by their friends, word
of mouth, and social media personalities rather than
celebrities or official sources when it comes to product
decisions (Shier, 2014); they tend to use these platforms
to obtain product advice and knowledge about retailers’
credibility, reliability, and service (Ching & Lam, 2014).
Social media platforms encourage consumers to chat
about their online experiences and blog about products.
More than 80% of Chinese consumers report that they
use social media to learn about products before purchase,
and 66% write product reviews after making a purchase
(Nilforoushan, Ben-Shabat, & Moriarty, 2013).
Second, with China’s rapid economic growth, the
number of middle-class consumers has increased, owing
to higher disposable incomes and rising wealth in China
(Nilforoushan etal., 2013). Accordingly, there is a grow-
ing predisposition to spend among Chinese consumers,
though they tend to be pragmatic shoppers, motivated
strongly by price (McKinsey & Company, 2010). Online
retailers cater to this behavior by offering lower prices
than traditional brick-and-mortar stores (Shier, 2014).
Online platforms also enable easy price comparison,
allowing Chinese consumers to compare prices from
multiple places before settling on a purchase (Hoffmann
& Lannes, 2013).
FIGURE 2 Internet Users in China (Millions)
23 34 60 81 96 112
140
213
303
391
466
524
564
618 642
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20 14
Internet Users in China (Million)
Source: Data obtained from http://www.internetlivestats.com/internet-users/china/

Fast-Expanding “Online” Marketsin South Korea andChina: Are They Worth Pursuing
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Third, online shopping meets Chinese consumers’
desires for convenience and variety. This is particularly
true for those in lower-tiered cities, where many of the
physical retailers do not reside, and thus product variety
is limited. As such, lower Tier 3 and Tier 4 cities1 have
become a major segment of the e-commerce market.
Despite lower disposable incomes, people in these cities
are spending the same amount online as their counter-
parts in higher-tiered cities (Ritacca & Stanley, 2014),
adding up to around 27% of their individual disposable
incomes (Koehler, 2014).
In China, businesses engage in e-commerce mainly
through B2B, B2C, and consumer-to-consumer (C2C)
markets. As of 2014, B2B makes up the largest share of
the e-commerce market (more than 75%), followed by
C2C and B2C (Gordon, 2014). Three models can be
used to classify China’s e-commerce platforms: the mar-
ketplace model, the online retail model, and the tradi-
tional retail model (Backaler, 2010). In the marketplace
model, marketplace companies provide a website for
merchants/individuals to list their offerings and generate
revenues through transaction fees and online advertise-
ment. The marketplace model includes both B2B and
C2C. The major companies are Taobao, Alibaba, and
Paipai. Most merchants/individuals choose to work with
marketplaces to avoid heavy up-front investment and to
gain exposure to the marketplaces’ enormous existing
customer base. The marketplace model thus dominates
the Chinese e-commerce market, with 90% of the market
share in terms of sales volume (McKinsey & Company,
2013). The online retail model provides both products
and a channel to sell directly to customers, and the major
companies are 360buy, Joyo, and Dangdang. For the tra-
ditional retail model, companies not only sell products
or services through the Internet but also have traditional
retail outlets. The major companies are Gome, COFCO,
and Lining (Backaler, 2010). The online retail model and
traditional retail model constitute B2C e-commerce.
In addition to merchants and marketplace com-
panies, many businesses actively became part of the
e-commerce value chain, taking on the government sup-
port and consumer trend of engaging in e-commerce.
According to McKinsey & Company (2013), these busi-
nesses include (1) marketing services that help consum-
ers find and compare offering, such as online advertising
on marketplaces, search engines, portals, and product
comparison websites; (2) third-party payment providers,
such as Alipay and Tenpay; (3) logistics providers that
provide warehousing (e.g., Yilong warehousing) and
express delivery service (e.g., SF express, STO express);
(4) IT companies that provide software to help merchants
scale up their businesses (e.g., Shanghai Baiban software
offers an application for merchants to set up mobile
commerce store fronts); and (5) integrated services that
build or operate online businesses for small merchants,
traditional offline retailers, and foreign brands entering
China. For example, various sportswear manufacturers
(e.g., ANTA, Li Ning, Kappa) use GalaXeed to market
their products online. The associated value chain activi-
ties generated US$13 billion (RMB 83 billion) in revenue
in 2011, among which express delivery and online adver-
tisement were the two largest categories, followed by pay-
ment and others (McKinsey & Company, 2013).
As a result of all these factors, China has witnessed
the rapid expansion of its e-commerce market. The
gross merchandise value of China’s online shopping
has increased more than 15% in the past few years
(IResearch, 2014). Approximately 331.5 million users
in China, of 632 million Internet users in 2014, conduct
online shopping. This figure is expected to grow by
19.6% per year (CNNIC, 2014). China’s US$64 billion
online retail market (second only to the United States) is
predicted to increase over the next five years to US$271
billion (Nilforoushan etal., 2013).
South Korea
The Korean government has promulgated an e-business
National Vision that applies to various governmental
organizations and business sectors and also implemented
e-commerce law and human resources development
(Mutula, 2009). Well aware of the need to establish a reg-
ulatory framework to handle major issues in e- commerce,
the Korean government endeavored to eliminate the
stumbling blocks of consumer protection, privacy,
e- payment, protection of intellectual property rights, and
security, to achieve robust growth of e-commerce (Minis-
try of Commerce, Industry and Energy Republic of Korea,
n.d.). For example, it set up the E-Commerce Mediation
Committee, a simple arbitration system, to offer consum-
ers and e-commerce trading partners more accessible
and affordable ways to deal with disputes. This committee
issued eTrust and isafe certificates2 to promote awareness
of privacy protection and security (Ministry of Com-
merce, Industry and Energy Republic of Korea, n.d.).
The Korean government also set policies central
to e-commerce, by establishing the Basic Act on Elec-
tronic Commerce in 1999, “Comprehensive Policies for
e- Commerce Development” in 2000, and “E-Business
Initiative in Korea” in 2001 (Ministry of Commerce,
Industry and Energy Republic of Korea, n.d.). Recog-
nizing the weakness of small and medium-sized enter-
prises (SMEs) in e-commerce, the Korean government

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FEATURE ARTICLE
Thunderbird International Business Review DOI: 10.1002/tie
supported programs for B2B and IT use in SMEs. The
Korean government has actively engaged three million
SME managers in e-business to strengthen and promote
IT in the sector (Kim, 2007).
The Korean government launched an Internet educa-
tion program called “Ten Million People Internet Educa-
tion Project (2000–2002)” that focused on demographics
not usually associated with web activity, including the
elderly, farmers, the disabled, prisoners, and housewives.
The program offered government-subsidized training
and reached four million people in 2000 (Pham, 2014).
Several lifestyle factors in South Korea help consum-
ers embrace e-commerce. First, the Internet in South
Korea has high penetration, and South Koreans are
tech-savvy. There are an estimated 45.3 million Internet
users, more than 75% of whom purchased through the
web in 2014 (Google Consumer Barometer Report,
2014). Second, South Koreans have five credit cards on
average, compared with two in the United States. South
Koreans also use credit more often, with 129.7 credit
card transactions per year, as compared with 77.9 credit
card transactions in the United States (Jones, 2014),
suggesting high purchasing intention and power. Such
high credit card usage accelerates e-commerce. Third, in
contrast with the Chinese, who have a bargain-hunting
mind-set, South Koreans cite convenience and time-
saving as the most important factors for online shopping
(Hwang, McInerney, & Shin, 2015). South Koreans have
among the longest working hours (2,193 hours) among
Organisation for Economic Co-operation and Develop-
ment countries, with young, upwardly mobile executives
often too busy to go shopping for groceries at traditional
stores (Petit de Meurville, Pham, & Trin, 2015). Online
stores are not constrained by opening and closing times,
physical locations, or, to a large extent, product avail-
ability (LaRose, 2001). As Table 2 shows, business quickly
became involved in e-commerce.
B2B has emerged as the major type of e-commerce in
South Korea, comprising 91% of e-commerce revenues,
as Table 2 shows. The use of B2B e-commerce is domi-
nated by the manufacturing sector, followed by wholesale
and retail trade, though manufacturing’s dominance is
decreasing. Nonetheless, all industries exhibited a growth
in e-commerce from 2001 to 2007. The growth of B2B
e-commerce is likely due to the growing utilization of
e-business systems among SMEs. As Table 3 illustrates,
companies are implementing e-business systems at a con-
sistently increasing annual rate.
Chaebols, which are large, family-controlled con-
glomerates, are the dominant players in the small Korea
B2C e-commerce market. These companies integrate an
offline and online product–market presence, leading to
the dominance of “bricks-and-clicks” stores in the B2C
market. In such stores, physical stores provide in-store
purchase or pick-up services, while online ordering and
customer service are also available (Pavel, 2010).
Therefore, online shopping in South Korea is very
popular, maintaining a steady high growth rate since
2005 (KISA, 2014). Revenue from online shopping
reached US$9.59 billion in 2013 and US$11.53 billion in
2014. This represents an increment of 20.1% and shows
the high demand for online shopping (Statistics Korea,
2015). Ben-Shabat etal. (2015) assert that South Korea
remains a leader in consumer online and mobile engage-
ment and boasts a solid financial and logistical infrastruc-
ture. South Korea was ranked the fifth most attractive
market for e-commerce globally and third within Asia in
2013, though it dropped to seventh place, according to
Ben-Shabat et al. (2015), because its e-commerce sales
growth slowed down relative to other countries.
Growth of Existing Players and In ux of New Entrants
China
To serve a geographically diversified market, e-commerce
in China necessitates that the online market and con-
comitant supporting industries, such as “Taobao villages”
TABLE 2 E-Commerce Sales in South Korea by Type,
2011–2012 (Trillions of South Korean Won, % of Total
and% Change)
2011 % of total 2012 % of total % change
B2B 912.88 91.3% 1050.99 91.8% 15.1%
B2G 58.38 5.8% 62.26 5.4% 6.6%
B2C 18.53 1.9% 19.64% 1.7% 6.0%
C2C 9.79 1.0% 11.8 1.0% 20.6%
Total 999.58 100% 1,144.69 100% 14.5%
Note: B2G = business-to-government.
Source: Statistics Korea.
TABLE 3 E-Business System Utilization
e-Business System Introduction Rates 2003 2004 2005 2006
Enterprise resource planning 14.7% 14.8% 23% 24.8%
E-bidding system 9.8% 10.1% 10% 11.4%
Supply chain management 4.5% 2.2% 2.9% 3.6%
Customer relationship management 1.4% 3.6% 4.4% 3.5%
Source: MOCIE, 2006.

Fast-Expanding “Online” Marketsin South Korea andChina: Are They Worth Pursuing
9
DOI: 10.1002/tie Thunderbird International Business Review
(Guo, Liang, & Luo, 2014), and the express logistic sec-
tor (Deloitte, 2014) be competitive. More players from
within and outside the industry in China have joined in
e-commerce.
On the one hand, there has been an influx of outside
players into the industry. Consider, for example, Taobao
and Tmall, the two major components of the leading
e-commerce player Alibaba Group. Both have attracted
many players into e-commerce and related sectors. Tao-
bao focuses on the C2C market, and its popularity among
consumers boosts 20 Taobao villages across the country,
in which entrepreneurs from remote areas commit to
C2C business through the Taobao platform, focusing
on manufacturing, packaging, logistics, marketing, and
training (Guo et al., 2014). Most Taobao villages are
located in Zhejiang, Guangdong, Jiangsu, Shandong,
Jiangxi, Fujian, and Hebei provinces, in which many small
mom-and-pop operations in the same Taobao village sell
similar products, forming an online industry cluster (Lam
& Li, 2014). For example, Qingyanliu village in Yiwu city,
Zhejiang Province, is the top Taobao village in terms of
e-commerce sales, focusing mainly on small commodities
and general merchandise; Baigou, another major Taobao
village located in Hebei Province, specializes in selling
luggage.
The growth of Taobao villages has marked an
important step in the process of rural modernization.
They help lift the incomes of rural residents and nar-
row the urban–rural income gap. Some Taobao villages,
such as Junpu village in Guangdong, with the support
of the local government, have gone a step further by
opening a “Taobao university” to teach people how to
sell online. The local government in Junpu village has
provided support by offering free wireless Internet con-
nections to residents, as well as tax credits (The Econo-
mist, 2014).
Tmall represents the B2C market leader for indepen-
dent retailers and individuals to sell directly to the public.
Many brands are opening online stores on Tmall to take
advantage of its large customer base and third-party ser-
vices. For example, Uniqlo, the Japanese casual clothing
retailer, has formed a partnership with Tmall, to tap its
expertise in areas such as website design, payments, and
deliveries (Hoffmann, Lannes, & Dai, 2012).
On the other hand, the incumbents are also extend-
ing their businesses into related industries. Recognizing
that the logistical challenges outside of urban centers
have kept China from its full online retail potential, some
e-commerce players are integrating logistics functions
into their businesses. One entrant that succeeded with its
logistics in 2004 was JD.com. JingDong (JD), the leading
domestic online direct sales company in China, owns
86 warehouses in 34 cities. It has 1,629 delivery stations
and 214 pickup stations in 495 cities across China, thus
making same-day delivery available in 43 cities (Lam &
Li, 2014). Maintaining control of its in-house logistics
enables JD to process orders and make deliveries faster
than competitors. The online shopping industry func-
tions similar to an enlarged cluster in China, but it also
creates rapid urbanization externalities and industry spill-
overs even on a global scale (Guo etal., 2014).
South Korea
Similar patterns have emerged in South Korea. Noting
the opportunity of e-commerce, many companies have
expanded their concepts online. For example, one early
mover to the online space, Gmarket, revolutionized the
online market by bringing together buyers and sellers
internationally in an auction format. Large chaebols,
such as LG and Samsung, participated in this space
and sold their products and services using competitive
auctions and fixed-priced store fronts. Retailers such as
Daum Communications and GS Home Shopping have
all opened their own online marketplaces, making the
online competition even tougher. Another recent entrant
to South Korea’s online shopping was Tesco in 2009. Not-
ing that South Koreans spend a significant amount of
time on public transport, Tesco initiated the idea of a vir-
tual store, which allowed consumers to do their shopping
while waiting for public transportation. Tesco’s virtual
stores were set up in public spaces such as subways and
bus stops. The store signboard allowed customers to place
their order by scanning the QR code of the products and
to receive same-day delivery of goods.
Existing players also transform or integrate their busi-
nesses. For example, Coupang made large investments in
its mobile apps, which generate 70% of Coupang’s rev-
enue and 80% of its total traffic. Coupang’s logistics net-
work provides delivery within the same day (Shu, 2014).
Kakao Pay, co-developed by Daum Kakao and LG CNS, is
in partnership with the “big five” online shopping malls,
including GS Home Shopping, and online book stores
such as Kyobo Bookstore and Aladdin are in competition
with digital wallets Apple Pay and Alipay (Kim, 2015).
Continuing Growth or Decline?
China: An Online Global World
Backed by a huge population, a significant online com-
munity, and large geographic coverage, e-commerce
in China creates its own clusters. China binds together
a unique marketplace containing some 1.37 billion

10
FEATURE ARTICLE
Thunderbird International Business Review DOI: 10.1002/tie
Mandarin-speaking people, located in 657 cities (as of
2015) and more remote areas, with different levels of
economic development and retail saturation (Administra-
tive Divisions of China, 2014). Recent research suggests
that the e-commerce industry in China has not been fully
exploited. For example, McKinsey & Company (2015)
reports that online sales have the potential to reach $650
billion by 2020. Such a prediction can be well supported
by both macro- and micro-level data. From a macro-level
perspective, the 55% Internet penetration in China in
2015 is still well below the 70% or higher ratio in devel-
oped economies (McKinsey & Company, 2015). With the
further development of an Internet infrastructure, more
market potential can be exploited. The e-commerce mar-
ket still has a concentrated structure. For example, as of
2014, Alibaba had a 52.8% market share in the B2B mar-
ket, while Tmall had a 50.55% market share in the B2C
market (Guintoli, 2014).
From a micro-level perspective, we propose that such
growth may come from Tier 3 and Tier 4 cities, and rural
areas, more than Tier 1 and Tier 2 cities. The prolifera-
tion of e-commerce in Tier 3 and Tier 4 cities, and rural
areas can be predicted by the lower Internet penetration
and the passion for e-commerce of existing digital users.
Compared with the 76% Internet penetration rate in
Tier 1 and Tier 2 cities in China, the Internet penetra-
tion rate is only 47% for Tier 3 and Tier 4 cities, and
only 19% for rural areas (Incitez China, 2015). However,
although they have lower average incomes, digital con-
sumers in Chinese Tier-3 and Tier-4 cities and rural areas
are just as active in e-commerce as their urban counter-
parts, who are more prosperous. According to McKinsey
& Company (2015), online shopping penetration among
digital consumers in rural and Tier 3/4 cities is 64%
and 66%, respectively, not far from that in urban areas
(72%). Such data suggest a larger potential e-commerce
market in China associated with the Internet develop-
ment in these areas.
The market potential from a large number of Tier
3 and Tier 4 cities, and rural areas receives further sup-
port from the limited product variety and offering due
to a lack of physical retailers and brand presence (Ben-
Shabat et al., 2015). The growing economy and dispos-
able incomes have enabled consumers in Tier 3 and Tier
4 cities, and rural areas to turn to online purchases for a
greater assortment of goods and new products (KPMG,
2014).
Another growing pillar comes from the global market.
China’s online shopping market has created a network of
e-commerce players, manufacturers, wholesalers, and
foreign retailers around world, as it has been driven by
Chinese consumers’ obsession with foreign products due
to safety and authenticity concerns of domestic goods. In
2013, foreign product purchases online reached RMB 70
billion (US$11.49 billion), and the amount is doubling
every year (Hoffman & Lannes, 2013; E. Lee, 2014). In
2014, Alibaba’s Alipay system released Alipay ePass, which
allows consumers to order from a growing number of
international sites, such as the Gap, Gilt, and ASOS.com.
Alibaba has also invested in the e-commerce platform
ShopRunner, which helps the likes of Cole Haan and Nei-
man Marcus ship to China. Alibaba gained recognition
in the US market, mainly due to its successful US initial
public offering in September 2014. Through AliExpress
and Alibaba.com, Alibaba serves manufacturers, wholesal-
ers, and consumers in the United States and other parts
of Asia.
In essence, the significant and growing online Chi-
nese community and China’s expanding Internet infra-
structure suggest a stable and predictable growth pattern
in China’s e-commerce. China’s improving e-commerce
platforms are expected to allow more domestic and
foreign players to gradually tap into this huge FEM, and
continued growth in the next five years is inevitable.
South Korea: Battle Zone Asia
E-commerce has reached a saturation point in South
Korea for two reasons. First, South Korea is a small econ-
omy with a low population base. With the high penetra-
tion rate of the Internet usage for more than a decade,
most of the market potential has been explored. Second,
Korean consumers are well educated, tech savvy, and
generally willing to experiment with new things. Many
Korean consumers buy products from overseas directly
through online shopping malls. According to the Korean
Customs Service, e-commerce imports reached $1.54 bil-
lion in 2014, a 48% increase from the year before (C.Lee,
2015). More than 15.5 million purchases were made,
and of those direct online purchases, the US market
accounted for 73%.
The saturation is largely due to a fragmented market
structure, declining growth rate of the industry, and a
lower profit margin of existing players. Industry-wise, in
2009, the combined market share of two main players—
namely, Auction and Gmarket—reached almost 90%,
whereas their combined share declined to 60% in 2013,
due to the influx of competitors (Jung etal., 2015). Fur-
thermore, South Korea is losing its lead in Asia in terms
of its e-commerce sales growth, dropping from fourth to
seventh place globally in 2015 (Ben-Shabat etal., 2015).
The individual players T-Mon, Coupang, and WeMake-
Price are still experiencing losses. For example, T-Mon

Fast-Expanding “Online” Marketsin South Korea andChina: Are They Worth Pursuing
11
DOI: 10.1002/tie Thunderbird International Business Review
reported a net loss of 44 billion won ($41 million) in the
first three quarters of 2013. This loss was chiefly due to
the millions the firms spent on marketing—for example,
by hiring Korean celebrities and investing heavily in
television ads (Schumpeter Business and Management,
2014). These firms need to make such large investments
because no player currently dominates, they all sell simi-
lar products, and they have a similar operations model.
According to beSUCCESS (2014), what determines mar-
ket position is not service or price differentiation, but
rather the amount of money they spend in advertising,
free shipping, and discounts.
To deal with the saturating South Korean market,
some players have begun expanding internationally for
more opportunities. For example, Gmarket (currently
Qoo10) was a first mover in its internationalization
efforts. With its success in the domestic market, it became
a strong contender in Southeast Asia, where it introduced
its successful business model to countries such as Sin-
gapore, Japan, Malaysia, and Indonesia. This move has
provided Gmarket sources of revenue diversification and
enabled the company to successfully catch pockets of
growth in parts of Southeast Asia. Its presence also made
it attractive for eBay to acquire the company and to form
a joint-venture partnership through Qoo10. Currently,
Amazon.com is in the preparation stage of opening its
first branch office in South Korea.
Discussion
The analysis of e-commerce in China and South Korea
confirms our integrated FEM model. When comparing
China and South Korea, we find that e-commerce in both
countries went through the first three stages of the FEM
model at different times. In the first stage, Internet tech-
nology generally brought about awareness and adoption
of e-commerce, albeit a decade later in China (F-Stage 1).
The government, consumers, and businesses embraced
the use of e-commerce during the second stage, perhaps
even more rapidly in China, which led to the fast expan-
sion of online shopping in both countries (F-Stage 2).
During the third stage, the growth of online shopping
attracted more players from outside the industry, and
existing players also diversified into related industries
(F-Stage 3).
However, in F-Stage 4, e-commerce in South Korea
and China seemed to diverge as predicted by the inte-
grated model. With a smaller domestic market and highly
penetrated Internet usage, South Korea seemed to come
into a saturation stage, in which domestic e-commerce
players’ project margin dimmed and industry growth
slowed down. We contend that this FEM or cluster has
begun to saturate or reach a plateau, as rapid growth
has already occurred during the past several years. In
response, domestic Korean players have begun either
expanding internationally to tap into the Southeast Asian
markets or exploring new business models of offering
e-commerce in South Korea (e.g., virtue stores).
Conversely, owing to its huge domestic market,
physical clusters—in the form of Taobao villages—mush-
roomed in China, with associated spillover effects in the
form of urbanization externality (Guo etal., 2014). Tier
3 and Tier 4 cities and rural areas experienced economic
growth as a result of clustering, and the FEM constituted
new demands for more products and services. Although
Internet usage and e-commerce have achieved high pen-
etration rates in both Tier 1 and Tier 2 cities, market
opportunities in Tier 3 and Tier 4 cities and rural areas
have remained largely unexploited. Noting the large
domestic market, particularly the Tier 3 and Tier 4 cities
and rural areas, Chinese e-commerce players now make
every effort to improve their logistics arrangements to
bring more foreign products and services into the domes-
tic market. We therefore observed positive feedback of
industry clustering in Chinese e-commerce. This finding
provides support for our integrated FEM model that the
growth and success of an FEM create externalities, knowl-
edge, and industry spillovers. As incumbents increase in
size and new firms are created, even more spillover will
result. Table 4 summarizes the main findings in South
Korea and China using the integrated FEM model.
Conclusion and Implications
This article focuses on online FEMs in South Korea and
China to understand the evolution, cycle, and stages of
their growth. It aimed to answer whether these online
markets are indeed fast expanding and therefore worth
pursuing. We contend that the Chinese online shopping
market corresponds to the take-off stage of a potentially
huge cluster, in which new businesses and keen foreign
players continue to participate to sell their products. This
is indeed an attractive FEM. China is also becoming an
online global force, as the country itself is a unique mar-
ket bounded by a common language and one that is also
interested in trading with the world.
South Korean online retailers are strong contenders to
capture the Asian market, as the case of Gmarket/Qoo10
demonstrates. However, we find that clustering of online
retailers in South Korea’s market is nearing its saturation
point. This saturation is due to a fragmented market struc-
ture, declining industry growth rate, and a lower profit

12
FEATURE ARTICLE
Thunderbird International Business Review DOI: 10.1002/tie
margin of existing players. Thus, despite being an estab-
lished FEM in Asia, we contend that South Korea’s online
shopping is less attractive and is no longer worth pursuing.
This study provides implications for business practi-
tioners and policy makers on FEMs. First, we shed further
light on the nature of FEMs. Any industry has its life cycle,
but failure to identify the later stages of an exciting FEM
may lead to overinvestment, resulting in the poor perfor-
mance of existing and new businesses. To make the FEM
model complete, we incorporate the cluster life cycle
into an integrated FEM framework. We find that in both
South Korea and China, the FEMs have resulted in the
clustering of players, which can then be assessed further if
the FEM or cluster growth is indeed gaining momentum.
FEM growth has slowed down in South Korea as a result
of the limited market size, high Internet penetration, and
market saturation. We conclude that the FEM/cluster
may be plateauing in terms of growth. Through the two
cases, we also conclude that our integrated FEM model
serves to assist the analysis of any FEM.
Second, monitoring industry changes in an FEM is
always important. Some of the critical indicators, such
as firms’ acquisition, market fragmentation, or declining
industry growth, signal that an FEM is becoming satu-
rated. This is the case in South Korea, and thus we suggest
that industry players now try to consolidate to find niches
TABLE 4 FEM in South Korea and China
South Korea China
F-Stage 1: Rising
Impact & Readi-
ness to Engage
The government was an early adopter and started creating the
network infrastructure in 1983. A nationwide  ber-optic network
was constructed in 1994.
Since then, consumers and business have become aware of
the e-commerce.
The government created the infrastructure backbone in 1993,
and rapid commercial uptake commenced around 1999.
Led by the commercial sector, namely Alibaba in B2C and
C2C, which created online payment (Alipay) around 2003, Chi-
nese companies were allowed to trade with the world.
F-Stage 2:
Embrace
E- commerce
Trend by Govern-
ment, Consumers,
and Businesses
The government supported this stage with policies on
e- commerce and programs for SMEs, and it eliminated stum-
bling blocks on consumer protection, privacy, e-payment, pro-
tection of intellectual property rights, and online security.
Readiness of the society such as consumers’ tech-savviness,
high Internet penetration rate, high purchasing power, and
bargain-hunting mindset, sparking widespread proliferation of
online shopping in South Korea.
Early market mover was Gmarket in 2000. Domestic retailers
such as GS Home Shopping, and CJ O Shopping joined in,
making competition even tougher.
The government established the infrastructure, cultivated the
personnel, and issued some regulations and policies on web
access, domain name, content, and encryption. Also supported
with laws on e-contract, e-signature, and taxation.
Readiness of the society, such as consumers’ desires for con-
venience and variety in lower-tiered cities, price comparison,
higher disposable incomes in large cities, and thriving social
media platforms throughout the country, allows different seg-
ments of the economy to embrace online shopping.
Early market mover, Alibaba, engaged in much experimentation
(e.g., Taobao, Tmall, Juhuasuan, 1688.com) to exploit various
segments. Others such as JD, Dangdang, and YiHaoDian also
caught on to the wave.
F-Stage 3: Rapid
Uptake and
Growth
C-Stage 1:
Take Off of a
Cluster
In the take-off stage, new entrants actively sought the market,
triggering rapid growth in the past decade.
For example, large Chaebols such as LG and Samsung partici-
pated in B2C sales through Gmarket. Gmarket also extended
its successful model to Asia. In 2009, eBay acquired Gmarket’s
Korean operation and formed a joint venture with Gmarket’s
foreign subsidiaries, while Tesco UK set up its virtual stores.
In the take-off stage, the entry of many new players and indus-
try sparked rapid growth. Still an attractive market for foreign
players.
For example, entrepreneurs joined in online platforms to per-
form C2C sales, and suppliers burgeoned in concert (e.g., Tao-
bao villages, logistical sector in China). More foreign brands set
up stores online at Tmall to capture the B2C Chinese market
and are not limited by geographical constraints.
F-Stage 4: Growth
& Spillovers
Taobao villages formed by clusters of suppliers, producing
complementary products and creating urbanization externalities
in those villages.
Urbanization of rural areas creates new demand and further
spillover effect in future.
C-Stage 2:
Peak Growth
Leading to Plateau
The e-commerce in South Korea is currently at a plateau and
saturate stage, with South Korea losing its lead in Asia.
E-commerce business players responded by exploring new
business model in domestic market and expanding overseas.

Fast-Expanding “Online” Marketsin South Korea andChina: Are They Worth Pursuing
13
DOI: 10.1002/tie Thunderbird International Business Review
there. However, new entrants are continuing to consider
South Korea.
Third, our discussion on the establishment of
e- commerce infrastructure and lifestyle factors in a devel-
oped Asian country and a developing Asian country may
help practitioners identify other online FEMs around
the world. Although e-commerce currently accounts for
less than 1% of the total retail sales in Southeast Asia,
we expect rapid growth as the network infrastructure
continues to improve and consumers’ income increases
in parts of Asia.
Finally, we offer some important implications to poli-
cymakers. From the case of China, online shopping as an
FEM seems to be a good tool to advance the urbaniza-
tion and economic growth of rural areas. The growth of
Taobao villages creates job opportunities, helps lift the
incomes of rural residents, and narrows the urban–rural
income gap (Lam & Li, 2014). The continued develop-
ment of C2C e-commerce has indeed driven sources of
revenue diversification for entrepreneurs in the remote
cities and villages that can lead to more long-lasting
economic advantages. China’s express delivery industry
now has more than 8,000 companies, some offering
nationwide deliveries and many others offering one-day
delivery service to a city area. The boom in online shop-
ping has forced the logistics sector in China to be more
efficient, resulting in the mushrooming of express deliv-
ery services—a spillover effect from the online FEM.
We conclude that even when the commercial sector
takes the lead in the development of e-commerce (as in
China and, to a lesser extent, South Korea), it is impera-
tive that policymakers carefully plan and implement
the infrastructure, policies, and programs in support of
e-commerce. Various consumer lifestyle choices have
led to the embracement of online shopping, but online
shopping as an FEM could potentially advance the urban-
ization and economic growth of rural areas, thus enhanc-
ing connectivity. This may especially occur in a large or
developing country that has much to offer in terms of its
demand and supply conditions.
Notes
1. China’s cities are often classified into tiers according to their popu-
lation and economic level, though the classification is often vague.
Beijing, Shanghai, Shenzhen, and Guangzhou are considered Tier-1
cities, while Chengdu is an example of a Tier-2 city (U.S. Department
of Commerce, 2011).
2. The eTrust certificate is a mark awarded to website operators that sat-
isfy certain set criteria on evaluation of consumer protection and privacy
policies of the commercial website and purchasing process. A website
must offer a convenient, safe, and reliable e-purchasing experience to
customers. Isafe offers the ePRIVACY mark and I-safe mark to promote
awareness of privacy protection and security to create a foundation for
trust between individuals (users) and operators (suppliers) through
active self-regulation.
Adrian T. H. Kuah is Associate Professor of Business at James Cook University Australia, Singapore Campus. Previ-
ously, he was a faculty member and the MBA Director at Nottingham Business School and Director of UG Business
Studies at Bradford University. He received his PhD degree from the Manchester Business School, and his research
focuses on services and national competitiveness. His work has appeared in the European Journal of Marketing,
European Business Review, R&D Management, and Singapore Management Review.
Pengji Wang is senior lecturer at James Cook University Australia, Singapore Campus. She obtained her PhD
from the National University of Singapore, and her research interests include corporate governance, strategy, and
performance of  rms from emerging economies. She has published in journals such as Corporate Governance: An
International Review, Journal of Business Ethics, and Singapore Management Review.
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