China plans virtual world for commerce

updated 7:38 a.m. ET Oct. 15, 2007

SAN JOSE, Calif. - Your favorite pants are fraying?

You may soon be able to order replacements directly from the factory where they were made, according to the chief scientist of an ambitious Chinese Internet project.

China's government is building a vast virtual world dubbed Beijing Cyber Recreation District, which founders say will help the manufacturing superpower evolve into an e-commerce juggernaut.

Some supply-chain experts say the project is impossibly grandiose in its goal to provide direct links between tens of thousands of Chinese manufacturers and millions of individual customers around the world.

But every "Made in China" label eventually could include a Web site where customers could order more — and Chinese factories would produce custom-made goods and send them directly to consumers' homes, mused Chi Tau Robert Lai, chief scientist of the virtual world.

The 3D world is supposed to be the online counterpart to the China Recreation District, a theme park, mall and playground being built in a former steel plant in Beijing for the 2008 Olympics.

Some Chinese-language Web sites of the CRD are already up, but most of it — including the first direct links to manufacturers — won't come until the second half of next year at the earliest, Lai said.

In addition to connecting factories with people outside China, the project will allow businesses outside China to tap the nation's burgeoning middle class, he said.

"This makes you have to think of China in a different way," Lai said Thursday evening at the Virtual Worlds Conference & Expo in San Jose. "We are stepping back and trying to blend the human and the computer to touch everything associated with people's lives."

Getting rid of the middle man
The CRD's dream of eliminating middle men — brokers, shippers, purchasers, even retailers — is not new. Toyota Motor Corp. began experimenting with "just-in-time" manufacturing in the 1950s, though it took decades to refine the process.

But just-in-time manufacturing for less expensive items such as clothing, electronics and toys is still years away. The low cost of labor in China — and Sri Lanka, Vietnam and other developing countries — makes it cheaper to ship bulk items to retailers around the world and then sell overstock online or in discount stores.

China's plants  also grappling with quality concerns and U.S. recalls over excessive lead and other toxins — are unlikely to deliver consumer goods to doorsteps abroad anytime soon, said Robert L. Bartlett, a retail industry consultant in San Rafael, Calif.

"In the long run, the age of technology will allow us to do just-in-time responsive manufacturing based on consumer needs — but the superior customer experience in truth is still in a retail store," said Bartlett, consultant to Gap Inc., Wal-Mart Stores Inc. and other major retailers. "People shop online for convenience, and if your shirt isn't delivered for six weeks because it's being made in China, where's the value?"

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