Is it possible that the almighty Amazon, global dominator of all things retail and pulveriser of hapless competitors, has finally conceded defeat in China? It certainly seems that way, as the US-based global e-commerce Goliath announced it would bring the curtain down on its Chinese marketplace business in July and will revert to offering only overseas products to domestic Chinese customers.
“We are notifying sellers we will no longer operate a marketplace on Amazon.cn, and we will no longer be providing seller services on Amazon.cn effective July 18,” the company said in an email sent to CBS MoneyWatch. “Sellers interested in continuing to sell on Amazon outside of China are able to do so through Amazon Global Selling.”
However, the company said that it would continue to keep the lights on for its other offerings such as Amazon Web Services (AWS), Kindle e-books, and cross-border shipping services that help send products from Chinese merchants to customers abroad.
How did a company that has dominated the online retail trade globally get turfed out so unceremoniously in the largest retail market in the world? And what does it mean for Amazon’s success in the next biggest retail opportunity in a country that it is so desperate to win in?
In China, a country that it entered in 2004, Amazon had transplanted its US model whole-hog without bothering to see if there were any cultural and consumer differences that would necessitate a different approach to the retail game. Amazon ignored the fact that Chinese consumers were already spoiled silly with very low and frequently free shipping on orders, and it required consumers to reach minimum spends to get shipping subsidies. This didn’t impress Chinese consumers as they flocked to Alibaba’s TMall and JD.com instead.
There were also failures, or perhaps a lack of will, to localise. While its Chinese competitors networked with smaller vendors to boost their businesses and utilise smaller delivery firms, Amazon decided to go the more familiar route, building 15 fulfilment centres as well as a domestic supply chain infrastructure that increased costs enormously. Meanwhile, fierce competition between domestic Chinese sellers, who were supplying its rivals, saw them forced to innovate in product and delivery.
The failure in China means that Amazon, as rumour has it, is now firmly focused on India where it has spent $5 billion and wants to do more. Its immediate competitor is Walmart’s Flipkart. Yet, the more menacing retail threat to it, one that is gaining more momentum day by day, is Mukesh Ambani’s Reliance.