Daily Insights

Amazon’s Chexit

By: Liz Flora | Apr 18, 2019

Amazon has fizzled in the China market, joining a list of US tech giants that includes Google and Uber.

Reports today state that on July 18 the e-commerce behemoth plans to close the 3P marketplace and will no longer provide seller services on Amazon.cn.

Despite owning 49% of the e-commerce market in the US, Amazon hasn’t been able to make much of a dent in China, where Alibaba reigns supreme. As of Q3 last year, Alibaba’s Tmall and its competitor JD.com had 85.3% of the market cornered, while Amazon had less than 1%.

In addition to leading the Chinese e-commerce market, Tmall has also been able to succeed in China in ways that Amazon has not in the US, namely through its ability to attract premium consumer brands to officially distribute on the platform. Gartner L2’s Digital IQ Index: Beauty China 2019 found that 86% of premium beauty brands have official shops on Tmall, with 31% listed on Tmall’s high-end Luxury Pavilion. Tmall has attracted a growing number of luxury brands as well, including Alexander McQueen, Bottega Veneta, Valentino, Burberry, Tod’s, and Versace.

China is a tough market for foreign tech companies thanks to a combination of factors, including protectionism, censorship, and a lack of experience in the local market. Google pulled out of China back in 2010 after a hack of the company and disputes over censorship. In the year it left, it had an estimated 30% market share, while local rival Baidu had around 64%. It still reportedly holds out hope for China, however, according to reports of its secretive Project Dragonfly developments.

Uber, meanwhile, pulled out of China in 2016 when it sold to local rival Didi Chuxing. The ride-hailing giant had entered the market with big ambitions, but struggled with government challenges to its legality in the country and police raids of its offices. The company still intends to make money in China, however, through its stake in Didi.

Previous reports had said that Amazon might do something similar by selling its China business to a local rival, in this case NetEase’s cross-border e-tailer Kaola. Amazon stated that it would still be available in China though its global store and remain active in its web services business, which is also trying to chip away at Alibaba market dominance through Alibaba Cloud. It will also continue to sell its Kindle, which it has promoted heavily on Tmall.

On the flip side, Chinese sellers are having success on Amazon in the US, where their numbers have been increasing since 2015. One of the most highly publicized examples was the viral $129 “Amazon coat” by a Chinese brand called Orolay, which became a best-seller on the site and staple of Upper East Side moms.