Amazon China: A Global E-commerce Leader Tries to win Over China

Amazon.com, generally considered to be the top e-commerce retailer in the world, operates in the lucrative Chinese online retail market via its Amazon China (Amazon.cn) e-commerce website. Despite efforts to grow its online retail presence, Amazon China has experienced difficulties in gaining market share from Chinese competitors such as Alibaba and JD.com, and currently controls less than two percent of the Chinese online retail marketplace.

Chinese Amazon Store in English

The current Amazon China website has much the same look and functionality as Amazon.com’s flagship U.S. site, with categories for books, audio & video, software, digital devices, appliances, beauty & health, toys, sports & outdoors, clothing and jewelry. Also English language of the website is for the most part available. Please see these instructions on how to use Amazon China in English for good information on the topic. Unlike other Chinese online retail sites such as Taobao, though, Amazon.com focuses on selling goods directly rather than via the storefronts of third-party merchants.

Amazon.com first entered the online Chinese retail market in August 2004, when it acquired Joyo.com, then China’s largest online bookseller, for $75 million. The site, rebranded as Joyo Amazon, was later rebranded again as Amazon China (Amazon.cn) in October 2011. For more than a decade, then, Amazon.com has had a presence in China. In fact, Amazon China was the seventh regional website of Amazon.com, and only the second one in Asia (behind only Amazon Japan).

Despite Amazon.com’s commitment to the Chinese market, it has thus far failed to make a significant impact in China. According to Wall Street analysts, as of March 2015, Amazon China’s total share of the Chinese online retail space was only 1.5 percent. Moreover, Wall Street analysts estimate that Amazon China’s losses each year in China are close to $600 million.

As a way to boost its market share, in March 2015 Amazon.com opened a branded storefront on rival Alibaba’s Tmall platform, which is a website for verified brands such as Nike and Apple to sell their official products. In exchange for opening this storefront, Amazon.com must pay fees to Alibaba. As a result, many analysts see this move by Amazon as an admission of defeat in the hyper-competitive Chinese marketplace.

The problem, say analysts, is that Amazon China is unable to offer lower prices than the market leader Alibaba. Chinese consumers may realize that goods sold on Amazon China are higher quality and are unlikely to be counterfeits, but pricing is paramount for the Chinese consumer. It’s impossible to gain more than a tiny sliver of market share when your prices are always higher than those of your competitor.

Which is not to say that Amazon China has not made efforts to improve its competitive profile in China. In 2014, Amazon China unveiled plans to open eight new fulfillment centers, which would theoretically bring down the cost of getting its goods to Chinese consumers. Getting as close to the consumer as possible is a strategy that Amazon.com has employed effectively in other international markets since it is a way to get prices to become more competitive.

Going forward, Amazon China will look for other ways to narrow the pricing gap with its larger Chinese online retail peers and emphasize the authenticity of its goods. It will also look for ways to use complementary product offerings , both in Chinese & English – such as its cloud computing offerings and its digital content offerings – as ways to gain market share and win over the Chinese consumer.

Regards,
Dwayne Peng