Why Amazon Lost China Market

It’s said, in the future, that Amazon China will only retain Amazon’s overseas purchases (imports), Amazon’s global stores (exports), Kindle and Amazon cloud computing services. China’s e-commerce business has all been cut down, which indicates that this e-commerce giant in the global market is invincible in the Chinese market.

If we say it’s Taobao’s victory in small business and business model when eBay withdrew from China in 2006, then by 2019, the official withdrawal of Amazon’s e-commerce business in China is the result of the fierce competition of China’s e-commerce market.

In 2008, Amazon’s peak period once occupied 15.8% of the market share, and then fell year by year. From 2012 to 2018, they were: 2.30%, 2.70%, 1.50%, 1.20%, 1.30%, 0.80%, and 0.60%, respectively.

In comparison, Tmall and JD gradually grabbed nearly 50% and more than 20% of the market. Since 2008, China’s e-commerce market has experienced Tmall’s incubation from Taobao, comprehensive wireless transformation, O2O and other group purchase business segment, content e-commerce rise, etc., but Amazon China did not keep up with this at all.

Amazon came to China with a huge attraction. In the same period of 2004, Amazon’s market value was 16 billion US dollars, and 75 million US dollars accounted for 0.46% of its market value. At that time, the war between Alibaba and eBay was not over yet. Taobao was only established less than two years ago, and Amazon had big opportunities to occupy the market. But it wasn’t until three years later that Amazon and the excellent back-end integration were completed and officially changed its name to “Amazon.”

Since then, Amazon China employees have been squatting between “two Amazons”: one is in the United States and the other is in China. The biggest challenge facing Amazon China for a long time is still localization, including decision-making, operations, and team.

But is the Amazon China team really having the opportunity to take control of its own destiny? It’s hard to say. Those values and goals at headquarters cannot be modified in China.

Helping users to “walk around” and keeping their retention, thus conducting more consumption, has become the main method of the Chinese e-commerce market. All of China’s e-commerce apps provide as much detailed and rich product information as possible. Another typical example is that Amazon’s core value ​​of “always keeping prices lower” is hard to take its advance in China.

Under the guidance of Amazon’s above value, the page layout with the algorithm is very different from the actual situation in China. Amazon also shows the headquarters’ control over China.

The style to be highly consistent with the headquarters not only makes its general users gradually leave, but Amazon China team can’t find a suitable action when facing its most important partners.

Due to the difference between the US headquarters and the Chinese market, Amazon has put its special sales and marketing system and warehouse management experience in China, which has caused great trouble to the merchants. Once there is a dispute or loss between the merchant and Amazon, Amazon China’s permissions and processing flow will make communication extremely inefficient.

Merchants can only passively and step by step with Amazon to saw until all the patience is worn away. At the same time, Amazon China’s main competitors Tmall and JD are gradually turning the business communication conference into a quarterly daily, making the communication as flat as possible, and the market share is sung all the way.

The billing period is another trouble.

Where is Amazon China going? How to balance the expectations and control of US headquarters with the reality of fierce competition in China?

Amazon believes that it must be patient with the Chinese market, with a focus on improving customer satisfaction with its products and services.

Compared with its Chinese counterparts, Amazon China has paid more attention to infrastructure, such as the layout of IT systems and warehousing logistics. Its warehousing logistics can not only cover first- and second-tier cities, but also radiate to nearly 1,200 county-level cities. However, local competitors such as Alibaba and JD.com have quickly realized the importance of the logistics distribution system and quickly put it into action, which has made Amazon China’s advantage in distribution gradually swallowed up.

So far, Amazon’s warehousing logistics has almost no sense of existence. As of the end of 2018, Amazon’s 13 operating centers in mainland China only have three cities: Beijing, Kunshan and Guangzhou. The Guangzhou Operations Center was also closed in early 2019.

Because China’s local e-commerce companies are strong, Amazon China is not satisfied with China’s cross-border import market, Amazon China should adopt a retreat or capital indirect control to continue China’s cross-border import market.

In comparison with Amazon’s imported e-commerce business, Amazon’s export e-commerce business – “Amazon global store” in the domestic development is booming.