Attracted by its allure, devoured by its scale.China’s extraordinary potential has attracted many global companies to move into the world’s second largest economy, only for many to try and fail. Last year Amazon found itself in distinguished company when it joined the ranks of eBay, Google, and ASOS, all proven powerhouses in the West, that now all have another commonality – their failures in China.

After a decade and a half, in April 2019, Amazon announced its withdrawal from the Chinese market and effectively shut down operations as a marketplace on, solely maintaining Amazon Web Services, Kindle e-books and cross-border operations. What exactly were the reasons for figures to be in such low digits that the company opted not to disclose them in its financial reports?

Amazon entered the Chinese market in 2004 by acquiring, a popular online seller of books for $75m – during the next decade it became Amazon China and peaked at a B2C market share of 15.4% in 2008. Meanwhile local e-commerce saw an enormous growth rate and was further populated with companies that went on to transform the entire landscape. In 2004’s retail platform went online and Alibaba started Single’s Day in 2008, which ten years later reached $30.8bn in sales and shipped to 230 countries and regions across the globe. When Amazon exited the market it was left with a market share of 0.6%; whereas Alibaba’s Tmall occupied 61.5% and 24.2% in 2018’s final quarter. So how has Amazon’s global success and competitiveness been crushed by local behemoths in China?


Despite its early entry into the market, Amazon increasingly encountered difficulties competing with the domestic giants gaining more and more traction and failed to effectively engage consumers on its platform.

With the obvious challenges that accompany the Chinese market aside, including dominant competitors and a strict regulatory environment, one of Amazon’s fundamental strategic flaws was its lack of trust in local management.’s CEO, Richard Liu, emphasises that the absence of a trusted decision-making body on-site in a rapidly changing environment was always going to be the downfall of Amazon. He also points out that their general managers were always non-Chinese and had never lived in China before, putting them at a massive disadvantage over aggressive, local players who are well-capitalised and have a well-rounded comprehension of their consumer’s demands.

The missing in-depth understanding of their customer base was noticeable in the platform’s product range and its user interface, for which it had received widespread criticism. Amazon, in its effort to maintain its brand image regardless of regional taste differences, had stuck to its comparatively simple and minimalist design. Whereas “if you look at the user interfaces of the Alibaba or JD websites […] they are very colourful, with lots of ads”, said Shenzhen based e-commerce marketing specialist Ker Zheng. A more seamless interface, with easier payment options, such as Alipay; its failure to capitalise on promotional days like Single’s Day; and a more competitive product range offered by its rivals with speedier delivery all contributed to losing a highly online-literate customer base and eventually put Amazon China out of business. Issues with counterfeit products was a general issue for the market, in which Amazon initially enjoyed widespread trust, however, as competitors became increasingly able to weed out fakes, Amazon’s advantage disappeared.

Another fatal miscalculation was the billions of dollars Amazon spent to open 15 fulfilment centres, controlling much of its own inventory, and building its own infrastructure, as it had begun to do in other markets it was succeeding in. While Amazon expanded it logistics footprint without increasing revenues, Alibaba, its fiercest competitor, captured most of the market by choosing to host “an array of smaller vendors and made use of local delivery companies to help it offer lower prices”, which eventually pushed Amazon into obscurity. operated closer to the Amazon model by more heavily investing in infrastructure but ended up simply outcompeting it, as Amazon was unable to offer the same product range with speedy deliveries. The Chinese consumer has grown accustomed to fast same-day deliveries, while Amazon was still lagging behind with long 2-day-deliveries.

Missing the importance of localization for ostensibly the entirety of its operations, ranging from its products to delivery speed and customer interaction left Amazon no other choice than to abandon its Chinese e-commerce ambitions. The only remaining, viable sections are its cloud services, its Kindle, and somewhat surprisingly, its cross-border e-commerce. Though subject to a different set of operations and challenges, the advantages Amazon enjoys in cross-border, such as quality products from smaller product ranges that are appealing to a more affluent demographic willing to accept longer delivery times, will also be contingent on its ability to apply lessons from its domestic failure. Experts have already expressed some scepticism as Amazon’s rivals are picking up speed on their international representation as well, with growing competition from Pinduoduo and Xiaohongshu. Amazon’s bid to acquire Kaola from NetEase with a 22.6% market share was crushed when Alibaba bought it for $2bn in late 2019. Despite stable progress, without the crucial adaptation to the local market Amazon might risk losing on this front as well.

Source: Transport Intelligence, February 18, 2020

Author: Dila Cebeci