Jenny Chan 陳詠欣
Apr 18, 2019

Amazon to withdraw from China's local e-commerce marketplace

Competition from Alibaba and JD proved too costly for Amazon China's domestic retail business, say industry experts.

Amazon to withdraw from China's local e-commerce marketplace

Amazon China is to shutter its local e-commerce site that targets mainland buyers, in a strategic shift to focus on cross-border sales of imported goods such as milk formula and cosmetics, etc.

The company has notified sellers on Amazon.cn that the date of closure will be effective 18 July, and will wind down support for domestic traders based in China in the next 90 days.

Instead, Amazon said it will "make operational adjustments" in its efforts to push cross-border sales in China and to "keep improving the experience for both Chinese customers and our global selling partners". 

Amazon is not calling it quits entirely though, as its Global Store, Global Selling, AWS cloud computing unit, and Kindle businesses will still be running. Amazon entered the Chinese market by acquiring Joyo, a local online book seller, in 2004. The US$75 million acquisition marked Amazon's second entry into the Asia-Pacific region at that time.

Merchants interested in continuing to sell on Amazon outside of China are able to do so through the Amazon Global Selling program. 

In an official statement to Campaign China, Amazon posited it has already been "evolving its China online retail business to increasingly emphasise cross-border sales" over the past few years.

"In return, we’ve seen very strong response from Chinese customers. Their demand for high-quality, authentic goods from around the world continues to grow rapidly, and given our global presence, Amazon is well-positioned to serve them," stated a spokesperson.

Within China, Amazon neither had the scale nor any distinctive offering to establish themselves, said Ashok Sethi, general manager at Illuminera Institute, who was not surprised at Amazon getting muscled out. 

"They should have shut down the domestic business a long time ago since it's difficult to compete with Alibaba and JD unless they are willing to invest a lot of money and not profit for a long time," commented Ker Zheng, marketing specialist at Azoya Group. "We just work with the Chinese platforms. It is not really worth it since Amazon has such a small market share in China."

The powerful US online retailer held a diminutive 0.6% of the entire e-commerce market in China last year, according to local research firm Analysys.
 
It makes "more sense" to pivot to cross-border imports since Amazon is a trusted foreign retailer and can source quality items from overseas, said Zheng. "I think they have an opportunity now to clearly position themsleves as the authoritative cross-border e-commerce platform, assuring authenticity and continuous discovery of new products," added Sethi.

To Navin Williams, CEO at MobileMeasure, the way forward for foreign brands to succeed in China is "partnership, partnership and partnership" in order to adapt to the jungle of a market that is China, or else it is going to be an "uphill task" forcing eventual retreats as we have seen so often.

Source:
Campaign China
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