Amazon success in China

1.        Did Amazon succeed in China? What did it learn?

Amazon’s China expansion

Amazon entered the China market by acquiring joyo.com in 2004 for $75 million. In the first year of China’s expansion,  Amazon operated under Joyo.com’s domain and focused on products like books and CD’s, making the transition very seamless into the Chinese market.

In 2007 Amazon finally changed the domain to amazon.cn and increased its offering to electronic and baby related products.

Amazon’s failure in China

Although Amazon tried to seriously replicate the customer experience and to fully enter the Chinese market, by growing from an online book store to an e-commerce force, Amazon failed to reach its expansion and struggle to gain traction in China.

Reasons why Amazon failed

        Amazon made many mistakes during its expansion, mostly because Amazon attempted to fit its working Western business model to the Chinese market.

The Chinese consumer market demanded something different, due to the cultural differences between China and the Western market, mainly in the way to shop e-commerce.

Also,  there was a conflict between Amazon and the Chinese government, leading to some censorship and the obligation to rule by the communist laws and regulations.

Besides that, Amazon also fails to use social networking sites to increase sales, lacking understanding of the Chinese market and failing to deepen relations with the Chinese government and local business partners.

Amazon also faced aggressive competition in China, with companies like EachNet, Alibaba and JD.com. EachNet was founded in Shanghai and ended up being renamed eBay EachNet after Ebay’s investment.  Its primary operations are founded on a service-based e-commerce model in which the company provides online platforms others can use to buy and sell goods. Alibaba Group is a Chinese e-commerce company. Alibaba's primary businesses in this area include a business-to-business e-commerce platform, Alibaba.com. JD.com is a direct-sales retailer, with a similar model to Amazon and  Alibaba's primary competitor in the e-commerce space in China.

Lastly, due to the geographical disparities and economic existent from region to region, Amazon failed to completely secure operations in China and create effective innovating strategies.

Amazon’s learning points

Amazon to succeed needed to recalibrate its competitive advantages, that worked well in the Western market, in order to adapt to the specifications of the Chinese market.

 Amazon recognized that at the beginning of the expansion it failed to customize its products, platforms, and services to the Chinese consumers. One example of this was the initial payment challenge, as many Chinese customers were reluctant to pay for their purchases in advance. Amazon to find a new approach and implement the cash on delivery option.

Besides the payment method, Amazon also had to adapt its logistics operations by handling deliveries in-house by hiring employees to transport the merchandise.

However, all those attempts might not be enough due to geographical disparities and economic.

Another key factor for success simply relies on Amazon accumulating incremental advantages, not only sudden innovations, to achieve long-term competitiveness in the digital scene.

In the end, despite Amazon’s early investment and efforts, as the digital market in China continues to expand rapidly, new ideas can become obsolete before they are fully implemented, therefore,  Amazon needs to keep being agile regarding the new challenges that might come up and continue to evolve rapidly with new innovating strategies.

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