“Online auctions will take off soon in China, with the redefining of the retail business," said Shao Yibo, founder and chief executive officer of Shanghai-based EachNet, China’s largest online trading house.

“After China’s accession into the World Trade Organization, the country’s distribution systems will undergo a major reshuffle, and e-business will gain a larger share of the retail business."

Several first-tier distributors have begun selling mobile phones on EachNet, Shao said.

The website is www.eachnet.com.

“More than 50 per cent of the handsets being auctioned or sold on our website are new phones."

Some handset makers are negotiating with EachNet to sell their phones online in a bid to curtail their costs, Shao told Business Weekly.

Shao predicts more first-tier distributors and manufacturers will join the online auction craze, which is expected to spark an online business boom.

EachNet’s business has surged more than 40 per cent in each quarter, in terms of revenues, in the past year.

That, Shao said, signals China’s online auction business is maturing.

“The volume of trade done online in China will continue to rise with the increasing penetration of the Internet," Shao said.

“I expect it will account for 10 per cent of the total business within 10 years."

Considering China’s large population and vast market, even a small share will translate into bulky revenues for online auction houses.

China’s e-commerce market, worth US$5.6 billion last year, is expected to be worth US$124 billion in 2005, predicts market research firm IDC.

China had 45.8 million Internet users at the end of June, 31.2 per cent of which had purchased goods online, according to CNNIC (China Internet Network Information Centre).

About 17.4 per cent of Chinese Internet users are frequent visitors to online shops, which suggests Chinese are intrigued by online auctions.

EachNet has registered about 4 million users, who have posted 2.9 million items.

The trade volume of successful deals via EachNet has hit 920 million yuan (US$111 million).

“Chinese people like bargaining, which promises huge business opportunities for auction houses," Shao said.

The expected boom of online auctions will also be fuelled by Chinese people’s increasing use of credit cards to make payments, he noted.

More than 70 per cent of the goods on EachNet were purchased via credit cards, with the remaining paid for by remittances.

“With interlinked credit cards and improved banking systems, I expect the usage of credit cards over the Web will surge," Shao said.

“One of our top priorities now is nurturing potential consumers, and helping them foster the practice of buying goods online."

But for all the buzz, Shao acknowledged a lack of trustworthiness is still one of the bottlenecks handicapping the rapid development of online auctions in China.

A survey by Horizon Research Co indicates more than half of China’s Internet users do not trust online trading, and Internet security is their biggest concern.

EachNet has established a real-name registration system to ease such worries, Shao said.

The system requires sellers to provide their real names and ID numbers.

EachNet also launched a credit evaluation system, in which buyers can check sellers online trading records.

EachNet is also spending more money on enhanced security.

Buyers who do not receive the products in the prescribed period after payment can ask EachNet for a refund.

“EachNet is just providing a platform to hook up buyers and sellers," Shao said.

“Though we are not obliged to refund buyers, we are using this system to build trust among buyers, sellers and EachNet, and to promote online auctions," Shao said.

Due to its reputation for being trustworthy, EachNet tops the list of China’s best online auction houses, indicates the latest survey conducted by Beijing-based market research company Huicong International Information.

While many venture capitalists are backing away from dotcom firms, EachNet has been long courted by investors.

EachNet has secured more than US$60 million in funds, most from overseas.

Silicon Valley-based online auction pioneer eBay in March paid US$30 million in cash for a 33-per-cent stake in EachNet.

“The tie-up with eBay has greatly benefited EachNet, as we are learning a lot from eBay’s experience in this field, and we are adapting that to the unique Chinese market," Shao said.

Although EachNet is still in the red, such momentum gives company leaders a good reason to believe it will soon be in the black, he said.

“I’m expecting our business will double or triple in the coming years, with the dazzling development of the Internet in China," Shao said.