The Truth About Amazon China
Amazon's business strategy tweaks should cause a stir
Editorial  ·  2019-04-27  ·   Source: NO. 18 MAY 2, 2019

Amazon.com recently announced that it would no longer operate a third-party marketplace or provide seller services on its Chinese website, Amazon.cn, starting on July 18.

Some people are calling this a debacle for the U.S. e-commerce giant in the Chinese e-commerce market.

But is Amazon really retreating from the Chinese market? Of course not. It will never give up the Chinese market. Amazon's business in China mainly covers cloud computing, Kindle, cross-border

e-commerce and third-party seller services. While it is closing its third-party seller services, it is forging ahead in other sectors in China. Actually, Amazon's move is a change of business strategy.

Since the day it entered the Chinese market, Amazon has never spent much energy on its third-party seller services. The focus has been on Kindle, Amazon's most successful business in China, and cloud computing. Say Amazon and Chinese consumers think of Kindle and e-books. In 2018, the number of Kindle users in China increased by 91 times over the volume five years ago.

Cloud computing is Amazon's most profitable business, which saw an operating profit of $218 million in 2018, accounting for 57.5 percent of the e-commerce giant's total operating profits.

Its negligence of its third-party seller services in China led to a shortage of new ways to adapt to the Chinese e-commerce market. Meanwhile, China's domestic e-commerce businesses boomed and Amazon found itself engulfed in cut-throat competition, where it floundered trying to impose its U.S. business operating model on the Chinese market.

According to Amazon's annual report in 2018, its e-commerce business earned over $2 billion that year, a three-fold increase over the previous year. In contrast, its Chinese market share dropped from 15.4 percent in 2008 to the current 0.6 percent.

China's e-commerce market is fully open to Amazon and other foreign companies in terms of cloud computing and cross-border business. Chinese policies treat domestic and foreign businesses equally. Enterprises with all forms of capital are welcome in China and the Chinese authorities do not interfere in their lawful business strategies or methods. Amazon is now beginning to focus on the businesses in China where it has an advantage for growth, a normal adjustment to its business strategy.

So far, there is no sign that Amazon is losing its Chinese market. It still has a bright future ahead. So there shouldn't be a fuss about a foreign company's normal business strategy upgrading in China.

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