Amazon shutting its domestic e-commerce business in China

Amazon announced that it plans on shutting its domestic e-commerce business in China. It will focus more on “cross-border” selling to Chinese consumers.

“We are notifying sellers we will no longer operate a marketplace on, and we will no longer be providing seller services on effective July 18,” the company said in a statement.

“Over the past few years, we have been evolving our China online retail business to increasingly emphasize cross-border sales, and in return we’ve seen very strong response from Chinese customers. Their demand for high-quality, authentic goods from around the world continues to grow rapidly, and given our global presence, Amazon is well-positioned to serve them,” the company added.

Amazon didn’t provide information on what is going to happen to its warehouses in China or the workers that staff them.

Chinese consumers will still be able to buy foreign products through Amazon’s global site and the company will reportedly continue to operate its cloud business in the country.

Amazon first entered the Chinese market in 2004 after acquiring Chinese web retailer for $75 million. In 2011, Joyo was rebranded to Amazon China.

According to CNBC, the company had a market share of over 15 percent in 2011 to 2012, however, its market share has since plunged to less than 1 percent.

According to research firm eMarketer, Alibaba Group Holding Ltd. – which includes, along with the Taobao and Tmall online marketplaces and other holdings – currently dominates the Chinese online retail market, with a market share of around 53%. Alibaba is followed by Inc, which enjoys a market share of 16.0% and Pinduoduo Inc., which has a 7.0% share.

Ben Cavender, an analyst at China Market Research Group, was quoted by CNN as saying:

“There is too much domestic competition and Amazon lacks the kind of brand awareness that Tmall or have.”

“That leaves Amazon in a position where it has to spend a lot of money to acquire customers while also competing aggressively with multiple strong players on price.”

Online retail sales in China totaled about $1.33 trillion (just over 9.00 trillion yuan) in 2018, a 23.90% increase compared with 2017, according to the National Bureau of Statistics of China.

eMarketer projects that China will account for 55.8% of global online retail by the end of 2019.