Home based e-business opportunities, Home-based e-business

Setting up a home-based e-business is an attractive option to many unemployed individuals, since the start-up costs are low and therefore the risks are lower than most conventional businesses. Home-based e-businesses are now very common and highly developed in N. America and Europe. However, it is less common in other countries, especially developing countries where options and support are far more limited. This study aims to find out whether setting up a home-based e-business is a viable option for self-employed individuals in Hong Kong .

In this paper, comparison studies are made between different home-based e-business opportunities available namely (1) promoting affiliate programs, (2) selling physical products, (3) selling soft/downloadable products, (4) selling services. In addition, comparison studies are made on the existing e-commerce supporting services between Hong Kong and overseas. The aim was to determine which type of e-business is most suitable for Hong Kong residents, and to see whether there are any major hurdles for Hong Kong in terms of supporting services. This paper also uses a participant observer methodology as much of the research was carried out in the course setting up a real profitable home-based e-business by the author.

The study finds that it is more difficult to set up a home-based e-business in Hong Kong than in the United States because there are fewer start-up options available for Hong Kong residents. There is also a gap in e-commerce supporting services between Hong Kong and the United States , although it has closed significantly in the past year. The study finds that the most suitable type of e-business for individuals in Hong Kong is selling physical products. Initially this can be carried out through auction sites such as eBay, but eventually it may be carried out through an online shop that can accept credit card payments in real time. Selling physical products is particularly attractive because it is easy to source products at low cost in Hong Kong , and efficient postal and courier services are available. Selling soft products and services are less attractive because of the higher demand in terms of technical knowledge and competency. Although almost completely risk-free, it is most difficult to earn a full-time income through affiliate programs alone because one would have to create web sites that attract a very high volume of traffic in order to generate a decent profit.

Setting up a home-based e-business is now a viable proposition for self-employed individuals in Hong Kong , as the author can attest to this. It is quite clear though, that a home-based e-business is not for everybody as a fair degree of knowledge and competence with the use of e-commerce resources is required , especially in the area of promotion. However, the ever-increasing amount of unemployment, and with the waiver of the business registration fees for 2002 and other incentives should encourage more people to set up home based e-businesses.

Chapter 1 – Introduction

The Asian financial crisis in 1997 and the consequent effect on the global economy after the terrorist attack on US on September 11, 2001 has given Hong Kong one of the longest period of economic instability. The rapidly deteriorating external economy and domestic structural problems have made the Hong Kong economy suffer significantly despite the fact that there have been interest rate cuts since 2001. With slackened domestic demand and asset depreciation, deflation continued, further restraining consumption and investment. The unemployment rate in Hong Kong has reached to a high level at 7.7% in June 2002 [6] and was expected to climb to more than 8% by the end of 2002.

The situation is extremely worrying as the redundancies are not only limited to the low skilled workers under the typical economic restructuring that appeared in the early 90's. Many professionals, experienced workers and managerial grade people were involved in the recent layoffs. According to the figures released by the Census and Statistics Department [19] & [20] (June 21, 2002), vacancies fell considerably in March 2002 from a year earlier. For all the selected major sectors taken together, the total number of vacancies in the private sector dropped by 31%. Decreases were observed mainly in the manufacturing sector and the wholesale, retail and import/export trades, restaurants and hotels sector, as well as at construction sites. Analysis of major occupation categories revealed that private sector vacancies were mainly observed for associate professionals, clerks as well as service workers and shop sales workers. Vacancies for these three major occupation categories taken together accounted for 74% of the total. Job vacancy figures by major occupation category and by selected major sector are shown in ( Appendix 1) .

The Government of the HKSAR has tried to boost the economy by increasing jobs or encouraging people to set up their own business. Many unemployed people have no choice but to work outside the territory (mainly in China ), or to consider setting up their own business. However, as the internal economy is still weak and there are limited resources for most individuals. Building up a home-based e-business is an attractive proposition for many individuals since the initial investment cost is low and also the risks involved. Home-based e-business has been developed for quite a long time and is very popular in the US and European. However, the rate of adoption of home-based e-business is not that high in Hong Kong which is surprising considering that Hong Kong is a well-known international city, with a well established IT infrastructure.

``The government should trigger more jobs by formulating policies to enhance employment. It could improve the business environment by simplifying procedures and thus encourage more people to start up their own business ,'' Henry Tang [18], the new Secretary for Commerce, Industry and Technology said on June 25, 2002. The “Self-Employment Enterprise Scheme” [33] sponsored by the Hong Kong Jockey Club Charities Trust aimed to provide re-training program for the self-employed individuals. At present, it concentrates on the training of some labor-intensive work such as house cleaning, baby-sitting, beauty care or hair dressing. The encouragement of these occupations can only help the low-skilled workers but it cannot create initiatives for the unemployed professionals, experienced workers and managerial grade people. As there is a significant decrease of vacancies at the administrative level since 2000, it would be difficult for a laid-off professional to resume his profession.

There are few options for these individuals except to be employed overseas or self-employed. For those who do not want to take high risks and prefer to spend more time with their families, setting up a home-based e-business may be a more viable and attractive option.

The advantages of e-commerce seems to be obvious but there are still a lot of reservations when individuals or companies try to set it up, either as an adjunct to their current business, or as a pure online operation. This is especially true in Hong Kong where it can be reflected by the low adoption level and low capability of e-business in the SAR region. Unless the key inhibitors behind can be fully addressed, the situation can not be improved.

The purpose of this study is to examine the difficulties e-business start-ups face, identify the criteria for setting up a home based e-business. It also investigates strategies for running a successful e-business in Hong Kong and assesses the options available for a self-employed person to set-up a viable home-based e-business in Hong Kong .

In this paper, comparison studies are made on the different home e-business opportunities available, and the existing e-commerce supporting services between Hong Kong and overseas, in order to explore the opportunities and hurdles of e-commerce in Hong Kong environment. For the purpose of this study, a home-based e-business is defined as business that is performed at home and is conducted through the Internet. Much of the research in this study was carried out in the course setting up a true home-based e-business by the author. In fact, since the end of the study, the business has now grown to four full-time and two part-time staff, it is no longer a home business.

There will be a literature review on e-business in chapter two. In chapter three, different opportunities available for home-based e-businesses will then be explored. In chapter four, the essential components which goes into a successful e-business will then be examined and discussed with regard to the different types of e-business opportunities. In the final chapter, the different types of e-business opportunities are compared with particular regards to the situation in Hong Kong and conclusions are reached on whether and what type of home-based e-businesses are suitable for Hong Kong residents.

Chapter 2 – Literature Review

There is a lack of objective literature on home-based e-businesses. However, there is a lot of promotional literature available online purporting to show how to set up an incredibly successful home based business with little investment in time and money. Needless to say, the majority of these schemes are either scams, or do not work anywhere near as well as the authors claim they do. This chapter will review the literature concerning previously mentioned issues and the attitudes and characteristics of the people in Hong Kong in relation to the adoption of e-business.

“ Hong Kong has been an entrepreneurial society .” (Yu, 1997) [39]. Hong Kong people are well known to be flexible, adaptable and willing to take risk. They have always been keen to start their own businesses, they would like to be their own boss instead of being an employee. The Hong Kong government also encourages this phenomenon; its policies encompassed an easy access to business, a relatively small public sector and free mobility of capital and human resources. Therefore, it is no surprise that no matter in a booming or weak economy, the number of new firms established each year has always out-numbered the failed one. It was revealed by (Yu, 1997) that both the numbers of enterprises and the company formation rates, after controlling for population size, were higher in Hong Kong than in the USA. A similar survey (Yeung, 2002) [38] also indicated that the number of establishments in all sectors and establishment-population ratios in Hong Kong has doubled every 7-10 years.

However, most of today's home-based businesses were not started by traditional entrepreneurs, they were started by a new breed of entrepreneurs called micropreneurs (Leboreuf, 1996) [26]. According to Leboreuf, micropreneurs usually have a different type of personality from traditional entrepreneurs. They come from different backgrounds, have different values and go into business for totally different reasons. There are basically three major characteristics that distinguish the micropreneur from the traditional entrepreneur. Micropreneurs tend to be well educated and highly employable, many hold advanced and professional degrees. The decision to go out on their own is not thrust upon them but is rather a choice they make. The greatest incentive behind micropreneurs is not money, is the promise of personal freedom, so as to achieve a better lifestyle for them and their family. Micropreneurs don't take stressful risks because they don't have to. They will take calculated risk to start a home-based business with little or no capital. This means that they can choose opportunities with high potential payoffs and little to lose. In that sense, home-based e-business can be regarded as the most suitable choice for micropreneurs.

In the United States, almost all industries in the economy are beginning to use the Internet as a means of cost savings on purchasing, managing supplier relationships, streamlining logistics and inventories, planning production, and reaching new and existing customers more effectively. (U.S. Department of Commerce, 1998 According to the U.S. Small Business Administration report on e-commerce 1999 [32], the number of U.S. households that have a home-based business currently exceeds 12%. Home-based businesses represent about 18 percent of all homes with personal computers (PCs) and 22 percent of home businesses that have made an online purchase. The number of home-based businesses in the United States surpassed 20 million in 2001, and is expected to eclipse 25 million by 2003 (see table), according to the research firm International Data Corp. (IDC) [24].

The average household income of those with home businesses topped US$57,000 in 1998, says the (IDC). Nearly 8,500 new home businesses start every day, and there are no signs of a slowdown. By 2003, home-based business technology spending is projected to be $30 billion, and 71 percent of those businesses will be conducted online. ( Forrester Research, 1998 ). Home-based e-businesses has grown substantially in the United States , but this type of set-up is not very popular in Hong Kong despite its relatively high company formation rate each year. By comparison, most of the home-based businesses in Hong Kong nowadays are still confined to some early home businesses (Hot Home-Biz Directory) [17] such as private tuition, freelancer or direct sales which have a low adoption level of e-business.

As most of the home-based e-business is small-scale enterprises that are usually run by 1-2 persons, these can be categorized as SMEs. Therefore, to study the activities of home-based e-business, it is worthwhile to obtain more detailed information on the behavior of SMEs in e-commerce by surveys and analyses that had been carried out by different sources. To be more comprehensive, surveys of SMEs practices and their attitude towards E-Commerce in US and European countries, Asian Pacific countries, People Republic of China and Hong Kong should be included. The analyses included the classification on the SMEs adoption levels and their capability levels of E-Commerce, the perception by SMEs of the Opportunities/ Benefits and the Inhibitors on E-Commerce and concluding remarks on the critical success factors that encourage the adoption of E-Commerce by SMEs.

Under the "Survey on E-business Adoption in Hong Kong" by HKPC and IMB (2000) [21], the deployment of E-business was classified into six levels ranging from level 0 to 5, representing "No Intention""Show Intention", "Basic Adoption", "Prospecting", "Business Integration" and "Business Transformation" respectively.

Besides the relatively low adoption level of E-business, the transaction rate in the Asia-Pacific regions are also ranked low as indicated in the Gartner's Predictions [13] for "B2B" Transactions (2000-2004), 39% out of 7.29 trillion world transaction belongs to US market, and 32% from Europe. The Asia Pacific regions only account for less than 14% of the total volume. The following charts indicate the distribution of the total world e-commerce revenues (B2B & B2C) predicted from 1999 to 2000

In the survey of "KITE" (1999) [25], the opportunities offered by E-Commerce are simply split into cost savings, timesaving and quality benefits. In Cost Savings Factor, the respondents from both the survey of "KITE" (1999) and the PricewaterhouseCoopers' report (1999) [31] indicate that "Cost" is not a key driver for SMEs to engage into E-Commerce. Rather, the respondents seem to be interested in time and quality benefits which include the quicker response to market conditions, higher flexibility, gain of access to new markets, improvement in customer service and competitive position.

Regarding the factors inhibiting the adoption of E-Commerce, the major concern perceived by SMEs varies between different surveys. In the PriceWaterhouseCoopers' report (1999) [31], the most significant barriers to E-Commerce adoption for participating SMEs in APEC member economies are the relatively low use of E-Commerce by both customers and suppliers.

In the survey "KITE" (1999) [25] that focused on the US and European firms, most respondents cited costs as the primary obstacle, slightly outweighing security and technology concerns combined. SMEs' investment costs constitute typically a greater proportion of revenue than large firms. For example a web server, database and leased lines plus case management tools, or a third party "virtual office" service run by an Internet service provider can be very expensive for a small company.

In Hong Kong, although the "Survey on E-business Adoption in Hong Kong" by HKPC and IBM (2000) [22] shows that the major problems among local SMEs in adopting E-business are lack of financial resources, lack of skills required and lack of human resources. It is worthwhile to be aware of the Chinese Cultural factors as raised by Deng Shoupeng [9] if the E-business involve domestic market or intend to explore and access the market in China after it enters the WTO.

Although Hong Kong is regarded as an entrepreneurial society, e-business has not taken off in Hong Kong . Most companies are still focusing on traditional business as reflected by the low adoption level of e-business for the SMEs in Hong Kong . In the next chapter, the business opportunities that are available for home-based e-businesses will be explored and discussed.

Chapter 3 - Opportunities available for home-based e-business

There is a perception that a home-based business involves low skilled and undemanding work that is most suitable for housewives or retired people. This may be true for the early home-businesses such as sub-contracting work of factory, house cleaning, baby-sitting, beauty care or hairdressing. With the advent of high technology and the easy access to the Internet, an individual is able to integrate all necessary processes and compete with large companies strategically in the global market. There are lots of opportunities in e-commerce where one can develop a professional business with one's knowledge and creativity.

There are lots of opportunities that can be made via the Internet, those which are available for home-based e-business, by the author's interpretation, can basically be defined into four categories: (1). Web publisher (2) Sells physical products, (3) Sells soft products, (4) Provide Services. These categories are not mutually exclusive in that many online businesses derive income from more than one category. For example, an online shop whose primary business is to sell MP3 music files may also sell MP3 players, and sign up as affiliates to sites that sell other electronic items. For the purpose of simplicity, this study will examine the 4 categories as stand alone businesses. Each category has different requirements of back-end services and technical expertise. In this study, each category is examined closely with two examples selected, in order to assess which are the best options for individuals based in Hong Kong .

Many large Internet companies such as Yahoo, MSN and Netscape derive some or most of their income from publishing. A published may earn income through the following means:

• CPM – the advertiser is charged a rate for each 1,000 banner impressions. The typical going rates are from $0.1 to $10.00.

• CPC – the advertiser only pays when a click to his advert occurs. The most well-known CPC program is Google Adsense. The actual amount paid per click is highly variable and may vary from $0.01 to $50.00

• CPA – the advertiser only pays if a click to his advert results in a sale or lead. Typically, the payment rate is in terms of % of the sale which varies from 3 to 70%.

• Selling text links – the advertiser is charged a fixed rate to put a text link on the publisher's website for certain period of time. The monthly rate for text links generally varies from $5 to $100.

Taking CPM, CPC or CPA adverts provide a means for small web site owners to earn money by taking advertisements on their web sites. It is almost completely risk free in the monetary sense and is thus particularly attractive to persons who may wish to work at home. Two options will be examined below. In the first option, the individual acts as a publisher where he provides a web site that takes in advertisements. In the second example, he signs up as an affiliate for a shop-front program that provides a ready-made web site for him to promote.

A publisher is a web site owner who publishes content on the Internet. He may offer advertising space to prospective advertisers. In general, web sites that are not well known and do not have a high volume of traffic start taking advertisements through joining affiliate programs, whereas larger and well-known web sites take in advertisers directly and generally demand a higher rate. Advertisers who want to buy advertising space on web sites may pay for impressions, click-through, leads or sales [30]. An impression is the display of an advertisement, text or graphics. A click-through is when someone clicks on the advertisement and goes to the sponsor's web site. A lead occurs when the person who clicks through gives contact information, such as name and email address. Companies may also offer to pay commission on sales, either a set amount per transaction or a percentage of sales for each sale generated by a click-through or over the course of a customer's lifetime with the company. Each affiliate program states how much it is willing to pay for which service. For example, one may pay $.01 per click-through while another may pay $1 per lead, or both [1].

To establish an affiliate program, a text or banner link is placed onto the publisher's web page that leads to the advertiser's site. Traffic referred to the partner site is tracked either by the partner site itself or through a third party such as Commission Junction [7]. Depending on the agreement with the advertiser, the publisher will be rewarded for hits, leads or sales with a certain amount or percentage-wise per sale. It could be a very time-consuming process to identify, contact, and set-up an affiliate program with various advertisers. It would be easier to do this through a third party such as Commission Junction, Link Share, bCentral. Merchants and affiliates are brought together in a 3 rd party structure that organizes the agreements, monitors the operation, and disburses the funds.

When an individual has decided to attempt to earn a living by being a publisher, he should first to create a web site that can attract high volume of first time and returning visitors. Generally, forums, interest groups, chat rooms or hobbies sites are comparatively easy to set up and be able to attract high traffic of target groups and have a higher potential to generate actual sales. Accepting of advertisements on a web site inevitably affects its image to its visitors, people may find it very disturbing especially with pop up ads, flash banners or some ads that stop you returning to the original window. Therefore, a publisher should carefully select the ads for his web page. Basically, it is better to choose some ads that are related to the theme of your web site and are also more effective in generating click and sales. There are a lot of affiliate programs on offer with some offering a very attractive rate of remuneration. However, many do not provide a means to the publisher of tracking his performance and entitled remuneration. Therefore, one should always select well-known advertisers such as Amazon.com. Another way to promote affiliate programs would be through an opt-in mailing list that the affiliate has built up. The affiliate would typically e-mail members on his mailing list making recommendations on merchants he is affiliated to. Provided that the mailing list is large and targeted, the affiliate can often generate a lot of conversions if this copy convincing enough. Another method would be to buy advertisements from search engines such as Google and Overture and direct the traffic onto the merchant's site. This may sound an ideal way to earn money as it does not even involve making a website or constructing a mailing list. Certainly, some affiliates have reported huge earning using this method. However, the financial risks are quite high since advertising is quite expensive.

The other option would be a third party agent service like Commission Junction [7], which it brings many affiliate programs together in one place. Both publishers and advertisers have the advantage of tracking many affiliates or affiliate programs together. The publisher simply selects the programs he wishes to join and the agent will make the necessary arrangements. Commission Junction is widely regarded as the best agent on the market at present and therefore it is examined in more detail. Publishers from all countries, including Hong Kong may sign up with Commission Junction. Payments are made once a month that consists of all the earnings from the different affiliate programs that the publisher has joined. The advertisers pay all the agent fees.

A prospective publisher should estimate the amount of traffic required for his site to generate enough hits or sales in order to make a desired income. The below is an estimate of the potential earnings that can be derived from CPM, CPC, and CPA programs for a website with 10,000 page views per month. In the case of a CPA program, an average order size of $50 is assumed.

From the above figures, it seems apparent that the payout from CPM, CPC, and CPA are similar but in practice, the actual CPC and CPA earnings depends very much on the site. In the case of Adsense, the payout rate for clicks differs dramatically depending on the actual keyword. The variation is even greater in the case of CPA programs. In general, the higher the commission rate, the harder it is to generate a sale. The publisher may wish to drive sales by advertising their site but this would increase the overheads of the business. Morover, since the margins for CPA programs are often thin, it is quite possible that the publisher may lose money especially if they are not experienced. However, affiliates can also promote merchants by means through their own opt-in mailing list. However, this is not easy to attain a large mailing list of committed invidividuals.

Selling text-links actually does not depend on the traffic that a site receives. Rather, it depends mainly on the “Google PageRank” which is a method used by Google to rank sites. Buyers of text links hope that it will help their sites to obtain a high PageRank in return and possibly more traffic from Google and other search engines. However, it is apparent with the recent changes in Google's algorithm that “PageRank” has become much less important. To maximize income, it is possible to put more than one program on the site e.g. join a CPM program, join adsense, promote affiliate programs and sell text links at the same time. Therefore it is quite possible to earn up to $500 with a website with only 10,000 page views per month.

Generally, it is not difficult to generate 10,000 page views per month for a normal web site with a moderate level of promotion. However, if one wants to go beyond 10,000 hits, it will require more effort and creativity to attract recurrent visitors. To earn a full-time income, one would have to operate one or more web sites with more than 100,000 page views per month which is extremely difficult to set up and daunting for the beginner. The alternative would be to set-up multiple sites with 10,000 or more per month. Besides being proficient in web design, the webmaster must also be proficient in promotion. Affiliate programs are now well established as an integral part of e-business in N. America and Europe but not so in Hong Kong . Therefore, prospective publishers must sign up with advertisers that are based overseas. One approach is to build up hobbyist web site targeting Chinese cusotmers, e.g. on watches, stamps and models, and have links to the appropriate retailers overseas. This approach would however be only successful if the items are more expensive or not available locally. Another approach that is taken by many is to set up a free adult website with a soft content with links to paying adult sites with a much harder porn content or retailers in sexual accessories.

Setting up a high-volume web site is not an easy matter for the beginner. A high degree of knowledge competency with the Internet, and also with the content of the web site is required in order to become a successful publisher. To earn a full-time income, several web sites may have to be set-up. However, once a web site becomes well established, advertisers may come to the webmaster directly offering much higher remuneration rates than would have been otherwise obtainable through the usual affiliate programs. Advertisers are often willing to pay rates of up to US$35 per 1,000 impressions in comparison to the figure of US$ 0.2 – 10 [1]The degree of monetary risk involved in setting up as a publisher is much lower compared to other types of e-business. The only risks involved are amount of time and money spent in setting up the website and promoting it.

Important developments have occurred that made affiliate program and publisher a much more viable preposition. The appearance of Google Adsense has revolutionized the market for publishers. Google Adsense is a CPC program and of the highest paying programs available, with effective CPM ranges from $0.5 to $4.00. Morover, since Google is the largest advertising agency on the Internet, there is usually a lot of advertising inventory available, unlike other networks. The advent of Adsense has enabled many webmasters to go full-time. However, the income is highly variable. Again, it is possible to supplement the Adsense income by putting CPM and CPA ads on the same website as well. The downside is the number of clicks and the income generated is highly variable. Other programs are becoming available such as the Yahoo network and BrightAds by Kanoodle.

Another twist to the usual affiliate programs is the emergence of shop-front affiliate programs such as V-store.com [36] that allows people to break into e-commerce quickly and simply at minimal risks. Anyone can set up a professional looking retail site as if it were his own at no cost. Up to unique stores can be created per unique e-mail address and options are available for persons to select the background and colour schemes. V-store provide millions of products in seven categories which includes recognized brands, such as SONY, Pierre Cardin, Nintendo, Sega, and Philips. Once the store is created, you are responsible for marketing and promoting the store that will attract visitors to your page and get them to purchase goods. In return, you get a 2-15% commission from each transaction depending on the individual product purchase. V-store will take care of the actual sales, shipping and customer service. Therefore the only risks are the time and money spent in promoting the site.

In theory, the concept of Vstore appears to be attractive but in practice, there are a lot of problems that have led to a lot of complaints from people who signed up as members. The prices of products carried by Vstore are slightly higher but is still broadly competitive with other well-known Internet retailers such as Amazon, cdnow or Etoys etc. However, it was commented by other members that some of the “hot items” are frequently out of stock. No telephone number is given and all communication to Vstore has to be done by e-mail. If a member fails to generate any sales in six months, his web site will be automatically shut down despite the effort and money that the member may have spent on promoting that shop. It appears that much of the business that Vstore generates is from the members themselves or their friends and family. There are very few reports of members making a decent income from Vstore.

Another alternative is to make your own website from a datafeed provided by a merchant. The datafeed would contain a catalog of the products carried by the merchant. It is possible to use a software program to generate a new complete website from the datafeed and this can be done in minutes. This tool would make affiliate marketing easier for many people.

In this scenario, physical products are sold through the Internet, either through auction sites such as eBay [11] or through a fully-fledged e-shopping web site. Amazon.com is an archetypal e-shopping site. It started selling books initially but is now a fully-fledged online department store. Selling physical products will come as second to many in Hong Kong . Hong Kong has been a major trading port with imports, exports, and re-exports accounting for an important part of its GDP. Its close proximity to China means that it had access to one of the greatest sources of manufactured products in the world. Its proximity to other major manufacturing nations in Asia, such as Japan, Korea, Taiwan, Singapore and other Asian countries means that there is an abundance of imported products from these countries which are suitable for re-export. Besides having access to an abundant supply of manufactured goods, the postal and courier services from Hong Kong are highly efficient which make it highly suitable as a base for mail order companies that ship internationally. In this section, selling physical products through online auctions and selling them through a fully-fledged online shop are examined.

The simplest way to sale physical products online is to list them in an auction site such as eBay [11]. It is not difficult to make a profit from buying and selling in auction sites but one will need to do some research. It is better to either select some rare item that people are willing to bid at a higher price, or some hot items that offer a lower than market price. The main advantage of selling through auction sites is that very little technical knowledge is required. One does not even need a web site or carry out other forms of promotion. The only requirement to sell through an auction site is a valid e-mail address. However, the way that the item is presented i.e. pictures and description, may affect the final price realized by the auction. Many traders sell their products through auctions exclusively, whereas others use auctions as means of generating traffic to their site. Traders can also use auction sites to test the market response to individual products.

eBay [11] is by far the most popular auction site and is an online marketplace that creates a powerful platform for the sale of goods and services by individuals and businesses. There are millions of items across thousands of categories for sale on eBay and it is an easy to use auction site. eBay enables trade on a local, national and international basis with customized sites in markets around the world. Sellers have to pay fees for listing their products and selling their products through eBay. Fraud protection is provided by eBay up to a value of US$250. There are a lot of options and strategies available for selling on eBay and other auction sites in terms of setting the open bid price, whether or not to set a reserve price, multiple item auction, and to pay more to eBay for extra exposure. Which is the best approach depends on the individual product and experience has to be gained through trial and error.

The charges levied by eBay on the seller are quite high, especially for low value items. If the seller chooses to accept payment via credit card through PayPal or other payment processors, then the final fees could be as high as 10% for items below US$25. Moreover, prices realized through eBay are usually at a marked discount to comparable products sold in online shops. Therefore the selection of the products is paramount to success in eBay. In general pre-owned items tend to do better than new items as pre-owned items have hard to compare prices. Collectible items such as pottery, porcelain, old toys or watches also do quite well on eBay.

A winning bidder or seller in an eBay transaction can leave feedback for other users. This is the only means by which a prospective buyer can judge the reliability of the seller. These comments can be positive, neutral, or negative, depending on your experience. Every eBay member has a feedback profile, this is an important detail when it comes to avoid being cheated upon. Therefore, it does take time for an individual to build up his reputation on eBay.

Individuals who wish to sell a quantity of product will use Multiple Item Auctions (Dutch Auctions). However, one has to be resident in the U.S. or have a feedback Rating of 50 or above. This makes it difficult for newcomers to eBay in Hong Kong who wish to sell a large quantity of a particular item in one go. The US$250 guarantee provided by eBay against fraud is vital as a confidence building measure for both sellers and bidders. Recently, eBay acquired PayPal, which is the most commonly used means of payment at auctions. This should lead to an enhancement of the service provided by eBay.

The most important decision is in selecting the product for sale. Products that sell well on the Internet are usually either rare, or at a marked discount to street prices. They should be easily recognizable to the customer so that he will know what he is buying without seeing and handling the items, unlike jewelry and clothes. The items should preferably be small and light in weight so that they can be posted easily. The price of the product should preferably be between US$20 to US$250, because if the price is too low, then it would not be worth the effort as substantial time is required in processing the order. Conversely, if the price is too high, the risk to the retailer is increased. Moreover, many prospective customers are unwilling to spend large amounts of money online because of fears over credit card fraud.

The advantages of running an online shop is that it markedly diminishes the need to keep a large inventory of products. Provided that reliable suppliers can be found, it is possible to operate the business on a just-in-time inventory basis so that goods are only ordered from the supplier when there are actual orders from customers. However, more often than not, suppliers do require their customers to keep substantial stock and thus a fair amount of risk. There is also a certain amount of risk from orders lost through the post. In the author's experience, the rate is well less than 0.5% for orders sent by registered mail but substantially more for those that are not. Orders sent by courier reach their destinations much faster and are less likely to be lost, but are much more expensive in terms of shipping costs. There is substantial risk arising from credit card fraud. In general, web sites that sell items with a broad appeal that can be easily resold e.g. cellular phone and flash memory are much more susceptible to credit card fraud. Whereas those that sell products to professionals are much less susceptible. However with practice, it is quite easy to detect the majority of fraudulent transactions.

Another possibility is to use drop-shippers i.e. order from wholesale companies who will drop-ship to your customers. The advantage of this approach would be that there is no stock to carry and thus no financial risk of unsold inventory. However, the suppliers normally charge a high price for drop-shipping and thus the profit margins would be lower. Moreover, unless the drop-shipper agrees to use the merchant's own company logo, there is a chance that they may steal the customer. Many users have also complained of a high entry fee charged by drop-shippers and have even been scammed in the process.

Soft products are those that can be transmitted directly through the Internet to the buyer after payment is made. It can be in form of graphic images, documents (eg. ebooks), software programs, music (MP3 songs or even mobile phone ring tones), games, movies or pornographic photos and videos etc. Selling soft products through the Internet appears to many as the perfect business. The business can be based anywhere in the world and there is very little maintenance i.e. there are no articles to post, no services to provide, and unlike affiliate programs, little maintenance of the web site is needed. Indeed adult web sites are probably the most profitable segment.

The main disadvantage of selling soft products is that the merchant is much more liable to credit card fraud. It had been reported that as much as one-third of credit card transactions through site selling soft products are fraudulent. Although unlike physical products, there is no monetary risk in losing the product, the merchant is still liable for a chargeback fee of up to US$30 per transaction. Moreover, sites where a lot of chargebacks occur are liable to have their accounts terminated by the payment gateway provider. In this section, two opportunities will be reviewed: selling ebooks and setting up an adult site.

An eBook is a book published in electronic form. It can be downloaded readily from a retailer web site after payment by credit card. One can either create an eBook, commission one, or buy reseller rights from others. There are many ebooks re-seller programs available in the market. Most of the ebooks for resell tend to concentrate on business opportunities although there are others that deal with popular topics such as relationships, keep fit, and self-improvement. After surfing extensively through the web, the author found a particular e-book re-seller package that is going from US$10 to US$99 [12]. One of the web sites is shown as follows: There are a total of 61 books, the majority of which deal with e-business opportunities. It is quite clear that it is the same scheme being offered again and again by people who have signed to it. Therefore it appears to function like a pyramid or multi-level marketing scheme where only the first few individuals are expected to make any decent money.

Although it may not be ethical to run a pornographic site, it is no doubt that it is by far the most profitable e-business. According to an unofficial investigation, Hong Kong people spent most of their time on adult site when they use Internet than anywhere in the world. In April 11, 2002 edition of Next Magazine, it had reviewed how a young man made make a fortune by running an online adult chat room in Hong Kong. The registered member of this chat room has grown to over 70,000 members in two year's time. The site offers online chat and real-time streaming videos of young ladies in a state of undress. Obviously, setting up a site of this sort requires a great deal of expertise. The bandwidth demand on the server would be enormous and one may have to buy a dedicated server. Setting up this sort of business in one's home may quickly lead to complaints by neighbors and potential trouble from the underworld. Another possibility is to construct a more passive site that consists of streaming videos that are not in real-time and also still images. Most frequently, instead of making or buying one's images and videos, they are usually stolen from other pornographic sites. It is also possible to act as resellers for established pornographic sites. As in the case of Vshop, the reseller is given a web site that he has to promote. More often than not, this is done through unsolicited e-mails or other unsavory means.

Although potentially carrying the highest rewards, running adult web sites carry a certain amount of risk. First and foremost, web-hosting company charge many times more for adult sites so that it may be more worthwhile to buy a server. Secondly, promotion of adult sites is much more difficult because the competition is so cutthroat. The use of unsolicited e-mails is the rule rather than the exception as are a number of other unethical techniques, like copying the contents of well-known non-adult web sites and have it redirected to the adult web site. Not to mention the possible legal ramifications since piracy and illicit activities may be involved. Therefore although the potential rewards are very high, this is clearly not a good proposition for most people.

Hong Kong is services based economy to many, offering services through the Internet is an attractive preposition. A broad range of services are available through the Internet nowadays e.g. financial, medical and legal advice, stock brokering, real estate, travel, web design and secretarial services. Needless to say, not all of these opportunities are suitable for everyone who wants to start a home business. Some require a large amount of investment whereas others require highly specialized skills. However, even if one does not have any professional knowledge or capital or connections to a particular service industry, it is still possible to enter the business through re-seller schemes. In this section, two different home business opportunities will be examined.

When choosing a service business, it would somehow limit your income potential. First of all, you have to spend most of your time comple