Amazon will be closing its domestic e-commerce marketplace business in China by July 18, becoming another major U.S. e-commerce company to call it quits in the China market. According to The Wall Street Journal, Amazon will continue running other business sectors in China including Kindle ebooks, Amazon Web Services, and cross-border operations.
“We are notifying sellers we will no longer operate a marketplace on Amazon.cn (the Chinese-language site) and we will no longer be providing seller services on Amazon.cn effective July 18,” an Amazon representative said.
Amazon has slowly been developing in China over the last 15 years after acquiring the Chinese online shopping website Joyo.com in 2004.
“We are very pleased to be entering the Chinese market with Joyo.com,” said Amazon CEO Jeff Bezos in a 2004 statement. “In a relatively short time, Joyo.com has established itself as the leading online destination for books, music, and videos in China, and we’re happy to be part of one of the world’s most dynamic markets.”
The goal of the acquisition was the blend Joyo.com’s expertise in the Chinese market with Amazon’s online retail expertise. Fashion e-commerce accounted for 20.4% of the total fashion retail sales in the U.S. in 2018 and the average U.S. consumer spends $1,800 on e-commerce transactions every year.
But it took Amazon three years to transform Joyo.com into Joyo Amazon and an additional four years to transform Joyo Amazon into Amazon.cn. In those seven years, local rivals began catching up to Amazon. China may use over 45 billion pairs of chopsticks in a year, but they won’t be buying them from this domain.
As a result of Amazon’s slow-and-steady business strategy in the wake of China’s ever-changing market, the online retail giant has fallen behind like its predecessors such as MySpace, Yahoo, and eBay. Internal auditors can help to perform risk management and assurance services in these situations, and Amazon chose to pull out of China.
In the first quarter of 2018, Amazon China’s share in China’s B2C market dropped to less than 1.2%. Local rivals Tmall by Alibaba and JD.com took 83.8%.
“Their ability to localize and compete is not so good,” said Wang Jian, a professor from the University of International Business and Economics. One former employee for Amazon China says decisions are made slowly because the power falls to the American headquarters.
“The Chinese market changes quickly,” said JD.com CEO Richard Liu. “Without mass delegation of authority, it’s going to be a problem.”
While Amazon may be one of the fastest delivery options in the U.S., it’s not the fastest option in China. Compared to Amazon’s Prime membership, which gives users two-day shipping, JD.com offers one-day or half-day delivery.
“Customers expect to get their products within six hours,” said Liu. “Two days would be too long.”
Amazon has been pivoting away from general e-commerce services to its cross-border operations. In a statement, the company said Amazon has received a strong response from Chinese customers in its cross-border sales.
“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,” said Amazon.
The first 15 Amazon operations centers have already started closing in China. However, operations centers in Shanghai, Ningbo, and Hongkong have been left open for now.