Amazon was founded in July 1994 by Jeff Bezos and is the bigger Internet-based retailer in the world by considering revenue and market holding values. Amazon entered the China market by acquiring Joyo in 2004, one of the biggest online book sellers in China. Amazon came up with a successful online store in the U.S market and tried the whole sum efforts in China market as well.
However, despite its worldwide success, Amazon could not do well in China market and made a yearly estimated loss of $600M in China up until 2015, when it opted to joint hands with Alibaba to get a platform in the China market in Tmall.
Amazon has struggled a lot in China market due to a very tough competition from local online store operators, including Alibaba, JD.com. Amazon first decided to withdraw its local market e-commerce business in China, in July 2028, however, kept operating its other businesses, including Amazon Web Services and e-books.
But now in 2019 Amazon have decided to totally move on from China market. Amazon’s exit from e-commerce business will put a full stop on company’s 15 years of journey into the China market.
Alibaba is the major e-commerce company in China holds more than 58% business revenue following with JD.com with 16 %. Amazon tried many marketing strategies by offering discounts, range of material to Chinese customers, but could not get the fruitful result. Chinese goods are already there in worldwide, Chinese are giving strong competitions to the world’s firms, therefore it must have been tough for Amazon to beat Chinese local firms in China. Amazon did try to retain their hold even after making losses but after a certain period Amazon must have decided that China can not be beaten at home so it’s better to transfer the focus into some other profit-making country.
It’s become a true theory for any US based firm, if they want to establish their business in China market, then they must have to apply the following practices: –
- Do partnership with a local Chinese famous retailer company have a string local goodwill.
- Bring a local strong leader to lead the business.
- Start a local retailer chain exclusively dealing Chinese products and range.
- Make business design as per Chinese markets and implement the same, involve local thinkers who can work as a business strategy maker.
What caused failure: –
- Business model- Amazon applied the U.S based model in China market, which somewhere went in to the wring decision because China’s population, demand, style, choices are far differ from U.S.
- No Local business leader- A local leader can better understand the likes and dislikes of local public, hiring the U.S based leader will always struggle to make business into the right track.
- No target-oriented approach- Amazon had entered in China market, just for the expansion and there was set of targets kept in mind in terms of revenue generation and minimizing loss.
The aforesaid wrong steps had actually brought Amazon in a miserable situation, as per company’s financial for China’s business, the trend of graph was always at the down fall side, whether its revenue or profit. Both were declining constantly, when at the other the joint venture Alibaba had been profitable in same period. Alibaba is a Chinese company; all its promotors are from China, so they have a similar business model which gains local attraction hence business comes automatically.
If in future, Amazon wants to re-enter into Chinese market, then somewhere they will have to first do a strong R&D in Chinese local market. Further, must listed down the main trend which is being followed by Alibaba for online business products. Secondly, Amazon will have to collaborate with local big name to set a platform and of course the string local leader to promote the business sin regional way.
No doubt, Amazon is a big fish in e-commerce world, but sometimes lack of market knowledge can struggle a fish to swim freely in the lake.