These are some of the biggest and most recognizable brands
in the U.S.
What do they all have in common?
None survived in China.
And you might be surprised to see this e-commerce giant on
that list, despite China's enormous $2 trillion
e-commerce market.
Amazon arrived in the country through a $75 million
acquisition of Joyo.com, an online book and media seller,
back in 2004.
The company bet big on its e-reader and tablet product
offerings, but it took years thanks to China's infamously
tricky regulatory approval process.
"Some companies thought their competitive advantages can be
transferred to China.
Unfortunately, they couldn't."
China is home to the largest and fastest growing e-commerce
market in the world.
Competition includes the likes of billionaire and
multi-hyphenate Jack Ma's Alibaba, TaoBao and JD.
It also has a massive middle class, having grown from a
measly 4% of urban households in 2000 to 76% in
2022, making for an attractive market.
"China's a very tech savvy and mobile first market, and the
Chinese consumer's always in to the latest technology and
into the latest trends.
On top of that, Chinese consumers still love and are
attracted to a lot of foreign brands.
So that presents an interesting opportunity."
So why did Amazon, a global e-commerce force, lose its
footing in a country that so readily embraces
e-commerce?
Like many U.S. company failures in China, Amazon's
was a lesson in overconfidence.
It thought its domestic success story could translate
. In North America, net sales more than doubled from 2004 to
2008. Amazon Prime launched in 2005.
In China, the company began its expansion by acquiring
Joyo, a domestic online shopping market, in 2004.
Joyo rebranded to Amazon China in 2011.
"At that time, the e-commerce market in China was just
taking shape. There were only a few players out there,
including eBay, Alibaba, JD, Dongdong and
Joyo. For the first few years, Amazon was kind of
market leader, so it was taking 12% of the market
share, only after Dong Dong."
"When Amazon entered the market in 2004 through the
acquisition of Joyo, it was very much seen as a platform
for... that Chinese consumers could trust for authentic
products, not only domestic products, but also products
from abroad."
In later years, the company bet on its full suite of
e-reader and tablet products, but regulatory approval for
wireless products were required from three different
government agencies, which caused years-long delays and a
lot of valuable time lost.
Between 2011 and 2012, Amazon's market share held at
a little over 15%.
But by the end of 2019, that number plunged to less than
1%.
"Alibaba, through Tmall and Taobao and JD.com, another
rival, began to expand aggressively.
And that edge, that unique proposition that Amazon had,
started to erode because JD.com, as well as Alibaba's
e-commerce platforms, began to partner with brands, they
brought foreign brands onto their platform, luxury goods
and foreign clothing, brands, electronics, etc., etc.
And so they become- they became also trusted platforms
for Chinese consumers to get a lot of these products."
Amazon's failure was, for the most part, a gradual ordeal.
After all, the company managed a 15-year tenure in
China. Given the wealth of China's e-commerce segment,
the assumption is that a global conglomerate of
Amazon's pedigree would fit right in, somewhere in that $2
trillion. But the reality is that the market is saturated
and exceptionally competitive.
Amazon was up against billion-dollar behemoths.
Alibaba's China commerce revenue was $15.6 billion in
2012. Tmall, another Alibaba-owned B2C site,
controlled 53.7% of the B2C China market, and JD
held 17.1% in 2012 as well.
Amazon trailed behind by a measly 2.7%.
Alibaba was founded by Jack Ma in 1999 and operates some
of the largest third-party platforms and marketplaces in
China, including Taobao, Tmall and Juhuasuan.
In 2013, it was the world's largest online and mobile
commerce company. Alibaba and JD are two of the largest
e-commerce players in China.
Aside from their positive reputations among Chinese
consumers, their long-standing presence
advantageously informs their business decisions and acumen.
Put more simply, they understand the Chinese
consumer better.
"It's important to talk a little bit here about Singles
Day. This happens every year on November the 11th, and it's
a huge day where e-commerce companies offer massive
discounts and big promotions.
Alibaba, JD and some of the domestic e-commerce players
are very aggressive in their marketing around this, but
over the years, you haven't really seen Amazon take a huge
role in marketing around this.
And this is the big marketing event of the year.
So I think that really highlights the way that Amazon
hasn't been as forthcoming when it comes to advertising
for its business in China."
In other words, price wars broke out.
Amazon did have Prime Day, a day-long event featuring
special discounts and deals, as it does in the U.S.
But the other platforms' connection with consumers was
just stronger.
Both JD and Alibaba break their sales records nearly
every year.
In America, Amazon's competitive pricing is what
attracts many consumers.
But in China, the playing ground was leveled.
The consumer experience between shopping, ordering and
delivery was also lackluster by comparison.
Amazon's selection, previously seen as expansive,
proved to be narrower than competitors in later years.
Alibaba's exclusive payment system, Alipay, was not only
convenient and favored by consumers, but has existed in
China since 2004, and on top of charging for delivery,
Amazon's delivery times lagged behind competitors in
China.
"Consumers value speed more than anything else.
Amazon still relied on third-party couriers for the
last mile delivery.
But JD already built its own in-house delivery team, so
those drivers would ride on three-wheeled electric bikes
and get the goods very fast to consumers."
Amazon's leadership was also ill-equipped to compete with
Chinese entrepreneurs.
The local team in China was actually aware of the
company's missteps, but unable to get on the same page
with Amazon's domestic leadership.
"We know Amazon is a global company.
It generates more than half of its revenue from
international markets.
But JD or Alibaba, they are local companies.
The majority of their revenue comes from the Chinese market,
so they couldn't afford to lose China.
So the Chinese entrepreneurs are much more aggressive than
their counterparts in the West.
For them, it's a life or death battle."
Despite a strong logistics network and familiar name,
according to some China-based analysts, Amazon's insistence
on implementing Western business practices ultimately
led to an unsustainable operation.
With no sign of growth or profitability, it decided to
withdraw most of its marketplace efforts in 2019
and refocused its China business on cross-border
operations.
"It allowed Chinese consumers to buy products from some of
its foreign sites.
Now that business is tiny, and by this point, it really
lost the battle. JD.com and Alibaba's e-commerce sites
still dominate, particularly as well, in that cross-border
part of the business."
It's worth noting that Amazon itself recognized all of these
challenges in its 2012 report and yet were unable to
overcome them anyway.
Today, Amazon's presence in China is led by its cloud and
selling services.
Amazon Web Services operates in the Beijing and Ningxia
regions.
To be clear, Amazon's presence in China has not dissolved to
a full absence.
The company continues to operate cross-border services
and announced plans to open a front-end bonded warehouse in
the Ningbo, Zhejiang province in 2023.
Other services include Amazon Global Selling, Amazon
Advertising, Amazon Global Logistics, among others.
On the other hand, Amazon struggles in China persist.
In summer 2022, it announced the closure of its Kindle
e-book store.
In Q3 2022, Amazon's international segment sales
decreased 5% year-over-year to $27.7 billion from
$29.1 billion.
The international segment operating loss was $2.5
billion. Despite its China marketplace closure, Amazon's
international scope otherwise hasn't ceased to expand.
Germany and Britain are Amazon's biggest markets after
the U.S. This year, Amazon announced a plan to launch new
Amazon Web Services local zones in 32 new metropolitan
areas in 26 countries globally.
AWS is a multi-service cloud platform that provides
compute, storage and data functionalities, among others.
Amazon provided CNBC the following statement: "We have
become much more than an online store in China and will
continue to expand the services we offer to our
Chinese customers." For now, Amazon has shown no
intentions of reinstating its China market, but given that
it still has operations in the largest e-commerce market
in the world, it remains to be seen whether or not Amazon
will attempt a revival in the future.