Increasing numbers of people will be trading via online auctions in the next few years, with the use of the service set to quadruple.

Winnie Xu, an analyst at the Shanghai iResearch, said:"The development of online auction is set to attract lots of eyeballs not only from online buyers and sellers, but also more websites."

The firm is the only private business monitoring the Internet industry's development in China.

The volume of online auction transactions will grow from last year's 1.92 billion yuan (US$232 million) to 8.06 billion yuan (US$973 million) in 2006. This year's figure is forecast to reach 3.37 billion yuan (US$407 million).

Intensified competition, coupled with an increasing number of Chinese netizens and growing acceptance of online auctions are the market's major driving forces.

Three companies - eBay-Eachnet, the Yahoo!-Sina joint venture and Alibaba-Taobao - will dominate the market, according to Xu.

But Shanghai-based Eachnet.com, which is run by the US giant eBay.com Inc, is miles ahead of its rivals, with an 80 per cent market share.

Eachnet's success has attracted other firms into the market.

The last few months have seen rapid development in the online auction sector, with US giant Yahoo! forming a joint venture with Sina Corp, China's biggest Internet portal, in January and Chinese business-to-business website operator Alibaba.com founded an online auction website Taobao.com in July with an investment of 100 million yuan (US$12 million).

But Alibaba.com Chairman and Chief Executive Officer Jack Ma said he did not expect the firm to "generate significant revenue" within the next three years.

What was important for the firm was to "gain as many customers as possible" over this period, Ma said in Beijing on Tuesday.

According to an iResearch survey in December, 52 per cent of respondents visit Eachnet and 17 per cent visit Taobao.com.

Young people, especially students, are the most likely to take part in online auctions, accounting for 84.8 per cent of total customers. The average monthly income of online traders is 1,665 yuan (US$201).

Digital products, computers and mobile phones are the top products sold online, the iResearch report revealed.

But Xu said the Internet's credibility may remain the biggest obstacle to the development of online auctions.

Some traders often sell poor quality products, while many people bid for products just for fun and fail to pay transaction fees or pay for the product itself.

Transaction fees are another barrier to the development of the sector, but this will gradually become a thing of the past as the fees are reduced, said the iResearch analyst.

Eachnet.com adjusted its pricing policy on February 2, setting a maximum transaction fee of 8 yuan (97 US cents), rather than charging users according to transactions, in a bid to attract more users in face of increased competition from Taobao.com and the Yahoo!-Sina joint venture.

(China Daily February 20, 2004)