Amazon has decided to pull the plug on its marketplace business in China. Also shutting down its seller service, the two Amazon services will cease to exist on its Chinese website, Amazon.cn, from July 18.
The move comes in the backdrop of stiff competition from Chinese ecommerce rivals Alibaba Group Holding’s Tmall marketplace and JD.com (Jingdong), which have several supply chain advantages and a more fleshed-out ecommerce network than Amazon in the country.
“We are working closely with our sellers to ensure a smooth transition and to continue to deliver the best customer experience possible,” a spokeswoman told Reuters in a statement. Further adding that, “Sellers interested in continuing to sell on Amazon outside of China are able to do so through Amazon Global Selling.”
Cross-Border Selling Through Amazon.com
From July 18, Amazon shoppers in China will not be able to buy goods from third-party Chinese merchants on Amazon.cn, but will still be able to order goods from Amazon’s global website. The Amazon spokesperson told Reuters that the company will continue to invest in other units in China such as Amazon Global Store, Global Selling, Kindle e-readers and online content, Amazon Web Services.
The move means Amazon could make more aggressive plays in other growth markets such as India where it competes with Walmart-owned Flipkart. Further, Reliance Jio is expected to launch its mega ecommerce service this year, which means Amazon needs to double its efforts in the country to outpace competition. The company has already invested $ 4.7 Bn in India, out of the $5 Bn Jeff Bezos committed for the India operations.
Tough Competition in China
Michael Pachter, an analyst Wedbush Securities told Reuters that Amazon is pulling out of China because they are not profitable and now growing. For example, Alibaba’s Singles Day sale in November 2018 generated $30.8 Bn in revenue, whereas Amazon’s Prime Day sale in July 2018 is estimated to have generated just $4 Bn in sales.
iResearch Global, a consumer research firm told Reuters that Tmall and JD.com controlled 82% of the Chinese ecommerce market in 2018. Both provide same or next-day delivery thanks to large nationwide fulfillment networks covering more than 1 Bn people in China.
Alibaba and JD.com collectively owned 74.5% shares of all ecommerce sales in China in mid-2018, whereas Amazon had a mere 0.7% share in all ecommerce sales, according to Statista, which highlights just how intense the competition is for Amazon in the country.