Amazon's (NASDAQ:AMZN) aggressive push to court Chinese merchants could be flooding its U.S. marketplace with low-quality goods, according to the Wall Street Journal. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. "With the domestic market locked up by Alibaba and JD.com (combined they control 75% of the ecommerce market in China), it makes sense for Amazon to … However, Amazon was not the first mover in the e-commerce business in China as shown in the above table. This strategy widens Amazon's moat against rivals like Walmart (NYSE:WMT) and Target (NYSE:TGT) in the ongoing race to sell the cheapest products and boosts its U.S. sales as its home market matures and its growth decelerates. The Ascent is The Motley Fool's new personal finance brand devoted to helping you live a richer life. By July 18th, Amazon.cn will no longer be open to third-party sellers, meaning it won’t compete with the massive e-commerce giants of China, including Alibaba and JD.com. In 2008, Amazon’s China market share was roughly 15.4 percent. Amazon entered China in 2004 after it bought out local book-selling business Joyo for $75 million. Actually, both Amazon and eBay have tried to be in China, but have mostly failed. Alibaba never takes possession of the products sold on Taobao, and the deliveries are all handled by a third-party logistics service. @themotleyfool #stocks $AMZN $WMT $TGT $JD $BABA, Amazon Says It Is Now the No. Competing against Alibaba, the company perceived losses for 11 years. Disclaimer. To see the potential consequences, we should study the differences between Alibaba's Taobao and JD.com. While the ecommerce giant got a relatively early start in China, launching there in 2004, it failed to adapt to the native ecommerce culture and finally bowed out in 2019 after struggling for many years against local rivals like Alibaba and JD.com. Amazon has also yet to turn a profit in Australia, where it launched in 2017, and has made no attempt to launch in most Southeast Asian countries, where … If I Could Buy Only 1 Stock, This Would Be It, Copyright, Trademark and Patent Information. Amazon entered the Chinese market in 2004 through the acquisition of Joyo, a domestic online shopping market. Follow him on Twitter for more updates! Users logging onto Amazon's Chinese site after July 18 will see products sold from its global store, the company said. The number of top Amazon.com sellers based in China has surpassed US sellers. If Amazon carves out a successful niche, there’s plenty of money to be made in China’s thriving ecommerce market. We have built a solid foundation here in a number of successful businesses and we will continue to invest and grow in China," the company added. In August 2004, Amazon settled on the great Chinese market through the purchase of Joyo.com ($75 million) an online bookstore, providing Amazon kindle with a new marketplace in China. "We are notifying sellers we will no longer operate a marketplace on Amazon.cn, and we will no longer be providing seller services on Amazon.cn effective July 18," the company said in a statement. To understand Amazon's desire to court Chinese sellers, we need to look back at its previous missteps in China. All times are ET. Its eCommerce net sales are generated almost entirely in Greater China. Coming in at $296 billion for the 12 months ended March 31, Amazon's revenue is more than four times as high as Alibaba's. Amazon’s e-commerce business has struggled to gain share in China , which is dominated by local players including Alibaba and JD.com. Taobao is a third-party marketplace that connects merchants to buyers. "After disappointing results in China, Amazon – led by its founder/CEO Jeff Bezos – has been determined to win in India," say report authors Mark May and Hao Yan. The exit marked an end of the company’s 15 years of journey into the China market for their rigid localization in business strategy … Factset: FactSet Research Systems Inc.2018. "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.". The company then rebranded as Amazon China in 2011. Together, they command 85% of the online retail market … What percent of China’s retail ecommerce market is attributable to Amazon? It sells less in the country than in Japan, the smallest market that it does report, which had $13.8 billion in sales last year, about 6 percent of Amazon’s business globally. In terms of profits, however, Amazon's Chinese equivalent is … Amazon's admission of defeat in China — where it once had a 16% share — erodes the future growth potential of the world's biggest publicly traded company by market value. BEIJING—Amazon.com Inc. is checking out of China’s fiercely competitive domestic e-commerce market. Amazon entered the China market by acquiring Joyo in 2004, the biggest online book seller in China. Chinese rivals JD.com and Alibaba controlled 82% of the market last year, leaving little room for the US e-commerce giant. But is Amazon playing a dangerous game by opening its floodgates to Chinese sellers? Amazon's platform competes for Chinese sellers with Tmall, owned by the country's e-commerce leader, "There is too much domestic competition and Amazon lacks the kind of brand awareness that Tmall or JD.com have," said Ben Cavender, an analyst at China Market Research Group. The Hundred-Year Marathon: China's Secret Strategy to Replace America as the Global Superpower by Michael Pillsbury | Mar 15, 2016 4.7 out of 5 stars 1,018 In 2015, Amazon decided to join forces with Alibaba, and started doing business through the Chinese platform’s “Tmall” website. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. I don't plan to sell my shares of Amazon anytime soon, but I'm keeping a close eye on its troublesome third-party marketplace and its opaque product listings -- which could push shoppers toward Walmart and Target's e-commerce ecosystems instead. The report claims that between May and August, it found 10,870 items that "have been declared unsafe by federal agencies, are deceptively labeled, lacked federally required warnings, or are banned by federal regulators.". These industries could be Amazon's next targets, Watch Ring's indoor drone prototype patrol a house, Dozens of AmazonBasics product are flagged as dangerous, but many are still being sold, See Amazon's new wearable it says can tell if you're stressed out, We bought a car seat on Amazon. This worries me, both as a longtime Amazon investor and a shopper who accidentally bought counterfeit products on its third-party marketplace before. Morningstar: Copyright 2018 Morningstar, Inc. All Rights Reserved. Amazon doesn't require its third-party sellers to disclose their real-world locations or label the origins of their products. It's still tough for Alibaba to get rid of counterfeit and low-quality products on Taobao, and that lack of progress caused the platform to be placed on the U.S. Trade Representative's latest blacklist of "notorious" platforms. Amazon already serves over 100 million Prime members in the U.S., according to CIRP, so it needs new ways to boost its domestic revenue per member instead of reaching more shoppers. "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," Amazon said. See you at the top! The market size of China's cloud computing industry is huge, but the segment is still in its infancy, said Gu Fan, general manager of product management at AWS China. The Case of Amazon in China Amazon entered the Chinese market in 2004, when it acquired online book retailer Jojo. According to iResearch China, Amazon's market share was less than 1% when they decided to shut down as Amazon China. Amazon China has less than 1 percent of the market, according to iResearch Global Inc., and eBay China is not even on the map. His wheelhouse includes cloud, IoT, analytics, telecom, and gaming related businesses. Most of the largest e-commerce markets in the world have Amazon and eBay with major market share, but not in China. It shattered in a crash test, Will the government attempt to break up Amazon?​, Protests and competitors take aim at Amazon Prime Day. Singles Day, Alibaba's annual online spending blitz, regularly racks up bigger sales than Black Friday and Cyber Monday combined. Joyo was rebranded to Amazon China in … Is Wall Street Tiring of the FAANG Stocks? It will retain its other operations in China, such as cloud computing services. "Amazon's commitment to China remains strong. However, Amazon stayed invested in China by maintaining an online store on Alibaba's Tmall and opening up its third-party marketplace to Chinese sellers. Let's conquer your financial goals together...faster. Leo is a tech and consumer goods specialist who has covered the crossroads of Wall Street and Silicon Valley since 2012. Alibaba and another local company, jd.com, account for nearly 75 percent of the Chinese market. Corrupt Amazon employees will steal a business report of any desired competitor showing … Unfortunately, this strategy could also backfire by alienating shoppers and merchants. Amazon has rapidly grown its sales over the past two decades, but some analysts are now questioning whether the U.S. market is becoming saturated, putting an … All rights reserved. Amazon China. Cumulative Growth of a $10,000 Investment in Stock Advisor, Is Amazon Turning Into a Flea Market for Lousy Chinese Goods? All rights reserved. WHAT’S IN THIS REPORT? But the ratio of Amazon’s to Alibaba’s advertising revenues flipped from 0.6x in 2016 to 1.1x in 2018. Amazon entered the Chinese market with the acquisition of Joyo (2004), the firm was the largest online bookseller and was acquired for $75 million. It became big news in 2018 that Amazon employees in China were selling stolen internal competitor information to other sellers. As seen previously, Amazon Kindle is ranked in the top 5 of western brands on Alibaba’s Tmall. That business model is more capital-intensive than Alibaba's, but it kept JD off the trade blacklist. JD is China's leading supermarket operator. Amazon … Amazon will close its domestic e-commerce marketplace business in China, effective from July 18. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. Amazon initially entered China in 2004 by acquiring the online bookstore Joyo.com for $75 million and rebranding it as Amazon China. Motivated by low prices and convenience, Chinese buyers have fully embraced online shopping in a country where Alibaba, Amazon, JD, and Zalando are the big players.Yet the focus is often on the world’s two largest e-tailers, Alibaba and Amazon. Amazon initially entered China in … Returns as of 12/12/2020. Market Share of Amazon Sellers Based in China on EU-5 Sites, by Country, May 2018 & May 2019 (% of total on each country's site) Description This chart shows the share of Amazon sellers (including Marketplaces) based in China in the EU-5 countries' sites (UK, France, Germany, Italy, Spain) comparing May 2018 and May 2019. Amazon continues to offer limited services in China, like Amazon Prime, but without the on-demand video benefits. Hong Kong (CNN Business)Amazon is partially retreating from the world's biggest market for online shopping. That’s largely because of Alibaba, which will make up 58.2% of retail ecommerce sales in China this year. Amazon will account for less than 1% of China’s retail ecommerce market in 2018. Market data powered by FactSet and Web Financial Group. To understand Amazon's desire to court Chinese sellers, we need to look back at its previous missteps in China. JD's core business is a first-party marketplace that takes on inventories and fulfills orders with its own logistics service, which makes it much tougher for counterfeit products to slip through the cracks. Updated 1413 GMT (2213 HKT) April 18, 2019. Joyo.com was later renamed Amazon.cn. How did Amazon lose its way in China? Amazon's market share in China has fallen from about 15 percent a decade ago to about 6 percent. The e-commerce market is growing globally, but in China, the expansion is even more remarkable. That move significantly boosted sales of third-party products, which account for over half of its physical gross merchandise sales, but customer complaints about counterfeit and low-quality products soon followed. After more than 15 years of trying, Amazon has secured less than 1% of the e-commerce market in a country of … Last year, however, Amazon China’s market share has plummeted to 0.6 percent, according to a research intelligence firm Analysys International. JD sells groceries both online and offline in China and is … Amazon first entered the Chinese market 15 years ago, when it … This is how it works: mid to senior-ranking employees within Amazon China have direct access to Amazon’s internal network that allows them to access private information related to all sellers. For more insights into China tech, sign up for our tech newsletters If Amazon continues down this path, it could tarnish its own brand and reputation. In its 10-K filing, it also admits that it "may be unable to prevent sellers from collecting payments, fraudulently or otherwise, when buyers never receive the products they ordered or when the products received are materially different from the sellers' descriptions.". Amazon claimed that the report's 38% figure was "a significant exaggeration" and that Marketplace's methodology was flawed. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. Joyo was rebranded as Amazon China in 2011. Can Amazon afford to get into the ad business? Based on Marketplace Pulse's estimates, as cited by the report, 38% of Amazon's 10,000 most-reviewed accounts were from China, up from 25% three years ago. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. The firm also claims that out of 1,934 merchants whose addresses could not be determined, 54% actually came from China. Amazon is using AI in almost everything it does. 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