Global economic recession can hardly turns the corner in the short run; stagnancy stretched into almost every sector; consumer confidence index nosedived; CPI in Q1'09 even dropped 0.6% year-on-year. The "Indoor economy", however, has thrived on the online consumption by people who like to stay indoors (hereinafter referred to as the indoor group) or those who are not employed. With its increasingly impressive performance, the sector has become a new target for VC investment institutions and stock market investors。

"Indoor" Era in 2009

Indoor economy is a fresh emergence along with the rise of the Internet, and has bloomed amid a worldwide economic depression. It mainly consists of SOHO and full-time and part-time business activities as well as consumption through TV, telephone and online shopping.

The financial crisis which broke out last year is one of the driving forces behind the boom of China's "indoor economy". 2009 saw the crisis hitting on every one, including their shopping and consumption habits. Brand-new consumption trends and time-killing ways are burgeoning and spreading among people of different ages. People who were used to brand clothes and high-end consumption tend to cut their socializing time, and the middle and bottom stratum even trimmed their consumption items, replacing dinner parties and shopping with computer games, shopping in malls with online shopping, and karaoke-singing (KTV) with web game playing. Industries related to indoor economy, such as online shopping, web games and entertainment, saw higher operation incomes and stock prices soared, outshining others on domestic market. Apparently, this robust consumption momentum amid an economic slump is also part of the indoor economy. Other sectors, such as online KTV, home delivery, parent-children economy, are also exploring indoor business opportunities".

"Indoor Economy" Prospers amid Adversity

1. Overseas "Indoor Economy" Derived from Japan

Indoor economy stemmed form Japan's "otaku group". According to the forecasts of Nomura Research Institute (NRI), by the end of Mar. 2009, Japan's online shopping market grew 22.0% in the fiscal year of 2008 to reached JPY6.22 trillion, which may expand 88.0% to JPY11.71trillion within a five-year period, namely in the fiscal year of 2013. On game market, according to the statistics from Enterbrain, Nintendo has sold over a million of its hand-held game machine DSi which was launched in Nov. 2008. The game market scale in Taiwan almost reached NT$10.40B in 2008, which is projected to rise to NT$11.30B in 2009, up by 8.0%-9.0%. Online shopping market also witnessed the propelling force of indoor economy. Taiwan's online shopping giant, www.24h.pchome.com, reaped a monthly operating income of NT$300.00B in Dec. 2008, tripling that over the same period in 2007. Besides, www.buy.yahoo.com.tw, another reputable online shopping magnate, also enjoyed a 30.0% increase in operating income year-on-year in 2008.

2. Status quo of Domestic "Indoor Economy"

China's indoor economy is mainly comprised of cyber-economy, represented by e-commerce, online entertainment and game, and business transactions in other fields along the industrial chain. Its eye-catching performance is also mirrored on the stock market in the second half of 2008. The stock prices of some NASDAQ-listed Chinese online-game enterprises, such as Shanda Interactive Entertainment Limited, Giant Interactive Group Inc., KongZhong Corporation and Perfect World, have kept climbing since Oct. 2008 when almost all big-cap stocks were sluggish. Among them, KongZhong Corporation has seen steadily rising profits since Q4'08, with its net profit up to US$2.52M in Q1'09 from US$0.52M in Q4'08, and is more likely to gain a gross operating income between US$30.50M and US$31.50M in Q2'09. In Apr. 2009, CYOU, a subsidiary of Sohu.com engaged in the R&D of online games, had an opening price at US$22.06, up 37.9% compared with its issue price. Besides online games, cell-phone polyphonic ring-tones also won wide popularity among indoor people. www.a8.com(0800.HK) listed in 2008 enjoyed a staggering year-on-year increase of 201.0% in the first half of 2008, or 193.0% after deducting nonrecurring gains and losses, and its stock price sharply rose accordingly in Q1'09.

The sharp upward curves of "indoor-related" enterprises on stock market partially reflect the current situation of China's indoor economy. When Chinese economy was battered by the global economic crisis, indoor economy, by contrast, staged a preeminent performance.

In terms of e-commerce, cyber-shops are free from storefront rentals, chopping the commodity prices by 30.0% or even 40.0%. Besides, consumers, due to their declining consuming capacity, are also attracted by the performance-to-price ratio offered by cyber-shops. The outbreak of economic crisis caused a decrease in the sales volume of high-end and middle-end commodities on cyber-shops, while sharply fueling the increase in middle- and low-end ones. As was reported, www.taobao.com saw a year-on-year trading-volume increase of 60.0% and an average daily trading volume of over RMB300.00M in Jan. 2009, hitting a record high of RMB460.00M per day; www.6tao.com enjoyed a 150.0% rise in its trading volume in Q1'09 compared with that in Q4'08; www.xkvip.com, dedicated to computer fittings, suffered little form the crisis, with its gross sales volume in Q1'09 sharply up by 20.0%-30.0% year-on-year; online vegetable basket projects have been unfolding like a raging fire too, with the websites such as www.gv123.com in Shanghai, www.txp168.com in Hangzhou and www.7jianshi.com in Wuhan seeing brisk business for the time being. All these show the merits of online shopping can save consumers' shopping time and costs against the backdrop of financial crisis. In the meanwhile, consumers are endued by a variety of payment choices, such as e-payment, web bank, cash on delivery (COD), prepaid expense member card, etc. According to the latest statistics from www.alipay.com, an e-payment website, 4.00M e-commerce deals are being conducted via it every day for the time being, and the daily trading volume even exceeded RMB700.00M.

Thanks to its lower income elasticity of demand (Refers to demand's response to the fluctuation of income) for a smaller proportion of consumption to income, online game is also one of the most prosperous fields in 2008. Besides, online game is still likely to cast a spell on consumers who are suffering from a leaner income due to economic depression or unemployment. According to the statistics from the Internet Data Center (IDC), the sales income from online game reached RMB10.57B in 2007. At the same time, analysts with Merrill Lynch predicted that online game market may enjoy a further 22.0% growth between 2009 and 2012 on the basis of a 49.0% increase in 2008. SNDA, the most competitive online game operators in Chinese mainland, has enjoyed steady growth for ten consecutive quarters as of the beginning of 2009. Moreover, Perfect World signed an agreement with HI-WIN, a counterpart in Korea, licensing the operation of the "Pocket Swims on the West" in Korea in Feb. 2009. The "Pocket Swims on the West" constitutes the fifth online game operated in Korea under the authorization of...