Exploring an Effective Deployment of e-Commerce to Promote Increasing Trade Opportunities

David Chow Tekhill Holding Limited May 19, 2011

What We Learned From Around the World

The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

e-Commerce in China Truly Fast Growing

e-Commerce Increased Retail Sales Share

China: Fragmented Market Grows Online Shopping

In Comparison: % Adults in EU Making Online Purchases

Amazon.coms Revenue Acceleration + Share Gains are Powerful

TaoBao An Impressive Run

190MM activeusersasofCQ1,up80%Y/Yvs. 114MMforAmazon.comand90MMforeBay $58BGrossMerchandiseVolumein2010,up 2xY/Y,accountingfor2.6%ofChinaretail sales 50% oftotalpackagedeliveriesforallbusiness procurementinChina

Newegg Overview

Newegg e-Commerce Platform

e-Commerce Properties Core

Brand

Customer Base

Efficient Platform

+
Rapidly growing

+
International

IT/CE + Shipping + Service Ranked Best Overall Place to Buy Online 7 years in a row by Computer Shopper

Loyal Majority of orders from repeat customers Trend-setters Influencers

E-commerce frontend Back-end Fulfillment infrastructure Highly efficient operations

Newegg Formula Maybe Utilized

Customers come, buy, stay and tell their friends

Acquire
Daily Deals Shell Shockers Social media Email Vendor relationships

Convert
Shopping experience Product selection UGC Advanced analytics for optimum product, price, placement Exclusive products

Fulfill
Fast shipping Inventory balancing Advanced technology to optimize inventory

Retain
Customer satisfaction culture Email / LiveChat Community / Eggxpert

Key Competency

Newegg in North America & China

XianChina GlobalSupportCenter OZZO LogisticsCenter

, Canada Newegg Canada Memphis, Tennessee Warehouse 6, 12

ShanghaiChina GlobalResearchCenter NeweggChina OZZO LogisticsCenter

New Jersey Warehouse 10 & 14: Cranbury Southern California Warehouse 1Support Center (Phone, Chat & Email), Whittier Warehouse 2,7&8: City of Industry US HQ: City of Industry

ChengduChina GlobalSupportCenter OZZO LogisticsCenter

TaipeiChina GlobalProduct Management Center

Guangzhou/Beijing/Nanjing/Jinang OZZO LogisticsCenter

Newegg: a Decade of Growth

2nd largest online e-commerce platform

Note: Net sales shown above include freight revenue and other revenue ($ in millions)

Vendor Relationship Critical

Vendor relations (select categories)
IT products Q410 SKUs
Hard drives 1,693 SKUs Mobile hardware 3,523 SKUs Memory 3,239 SKUs CPUs 171 SKUs

Vendor benefits
2010 net sales
$302mm

Product promotions partner Access early adopter customers benefit from

influencer effect

$293mm

Access customer data

$186mm

Newegg benefits
Vendor incentives Favorable product allocations Competitive pricing

$135mm

CE products
Home video 1,299 SKUs Digital cameras 1,649 SKUs Video game consoles 4,287 SKUs Home audio 1,358 SKUs $68mm

Selection and partnerships

Large SKU selection sourced directly from
vendors

$65mm

$36mm

Diversified partnerships

$39mm

Opportunities for continued vendor leverage

Unique Visitors Growth

Unique visitors (Indexed to November 2009)
150%

Nov-10 traffic (mm) YoY growth

5.2 14.7%

125%

28.8

16.7%

4.4
100%

10.2% 10.0% 7.9% 4.4%

49.0 5.3
75%

113.6

50% Sep09 Oct09 Nov09 Dec09 Jan10 Feb10 Mar10 Apr10 May10 Jun10 Jul10 Aug- Sep10 10

1.9 6.7

0.2% (2.4%)

Source: comScore

Unique visitor growth in line with / at top end of peer group Highest LTM unique visitor growth amongst peers

Best-in-Class IT Platform

Website order process performance benchmarks Nov Dec 2010

Response Time Rating Success Rate Rating

Newegg
Office Depot Overstock QVC Site CDW Sears LL Bean Walmart Williams Sonoma Office Max Amazon J.C. Penny Benchmark Average HP Target Dell HSN Victorias Secret Staples

8.87 9.81 10.37 Time (sec) 13.91 14.20 14.42 15.22 15.94 16.58 16.81 18.26 18.36 18.79 20.53 22.47 25.70 29.15 30.76 36.80

QVC CDW Newegg Site HSN Overstock Office Depot LL Bean Walmart Target Amazon Dell Williams Sonoma Benchmark Average HP Office Max Victorias Secret Sears Staples J.C. Penny

99.6 99.5 99.4 99.3 Rate (%) 99.3 99.1 99.0 99.0 99.9 99.8 99.4 98.3 98.3 97.9 97.7 97.1 96.9 96.6 94.0

Yunnan International e-Commerce Company

AjointventurecompanyofYunnanProvince andNeweggsistercompany OfficialOperationalCenterfor AsianChinaFreeTradeAreaBusiness Portal AsianChinaFreeTradeAreaB2BPlatform

Exploring e-Commerce Deployment

ADB: Why e-Commerce Important*

Internetisdramaticallychangingthewaygoods andservicesareproduced,delivered,soldand purchased Internettechnologieshavethepotentialto empowerSME Potentialbenefitsofecommercefordeveloping worldareimmense anycompanycanenter globalmarketswheresizeandlocationbecome ratherirrelevant
* Asavin Chintakananda, Senior Advisor, Asian Development Bank, Page 6 of Financing E-Commerce While Fighting Poverty Presentation

ADB: Fostering e-Commerce*

Rightconditionsmustexistfor ecommercetogrowandthrive
Strongpolicyframework Skilledworkforce Infrastructureandaccess Awarenessandtrust

* Asavin Chintakananda, Senior Advisor, Asian Development Bank, Page 9 of Financing E-Commerce While Fighting Poverty Presentation

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Phase 1: B2B Trial in GMS

GMSmayconsidertomakereferenceand utilizeASEANChinaFTAB2BPlatform
TargetinglowerentrycostsandbarriersforASEAN enterprises Accessexcitingyetfragmentedmarkets B2BforASEANMemberCountriesandChinato promoteinterregionaltrade MoresupportcomingtargetingCrossBorderonline settlementandePort

CurrentlyrunningatrialwithMalaysia lesson learned:governmentsupportisverycriticalto success

Rationale for Trial

Accelerateadoptionofecommercetrade Continuousbuildingofinfrastructure,legal frameworkandincreaseawarenessinetrade oncostsandbenefits TargetingtradeopportunitiesbetweenASEAN MemberCountriesandChinaasapriorityin theearlytrial worthconsideration DomesticB2CandC2Cmarketswhenready Effectiveutilizationoftransportation infrastructureupgradedinrecentyears

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Phase 2: B2B2C Through Established Partners

Utilizeandmakeuseofanestablishedelectronic shoppingmallatNeweggandotherestablished channelsintheU.S.
Leapfrogbypassinggroundzero Shortenlearningcurve Accessvastmiddleclassconsumersegment

AcceleratetradingwithChinathroughNewegg platforminChina CurrentlyrunningatrialwithMalaysia

Phase 3: Domestic B2C/C2C

ConsidertoutilizeNeweggandotheravailable PubliceCommercePlatforms
Considernottoreinventcertainbasics Reducelearningcurve Lowerstartupandentrycosts Tailormadetospecificneeds

Governmentsupportfromeachcountryverycritical
RelevantADBinvolvementandcoordinationvery important Comprehensiveplanningbutsmallwinsthroughtrials utilizinganestablishedchannelisrecommended

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Conclusion: Obstacles Seen but Huge Potential

Potentialkeytosuccess
Adequateecommerceinfrastructureinplace Policyandregulatoryframework Commonplatform:wheelsnotmadehere B2BbeforeB2Cincertaincountries Internationalandlocalcollaborators

ADBstrongleadershipinsustainableGMS ecommerceframeworkdevelopment

ThankYou
Forfurtherinfoandinquiry: David.C.Chow@Tekhill.com (86)13601603392

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