Amazon.com in China: Can Elaine Chang Crack the Chinese Market?
Case Code: BSTR541
Case Length: 20 Pages
Period: 2004 - 2018
Pub Date: 2018
Teaching Note: Available
Industry: e-commerce, Retail
Themes: International Management, Entry and Expansion Strategy
Abstract Case Intro 1 Case Intro 2 Excerpts
E-Commerce Market in China
The e-commerce market in China started developing in the 1990s and experienced quick growth. According to the World Bank Development report, by January 1999, there were only 0.14 internet hosts for 10,000 people in China as compared to 1,132 per 10,000 people in the US. Most Internet Service Providers (ISPs) offered connections at 33.6 kilobytes per second. Thus, logging into any site with even the simplest graphics involved a considerable waiting time. Moreover, secure pay channels for online payments were not available in China. Shoppers chose their own mode of payment – online, cash-on-delivery (COD), postal remittance, or telegraphic money order...
Amazon's Foray into China
Amazon was one of the first overseas e-commerce firms permitted to do business in China. By purchasing Joyo in 2004 for about US$75 million in cash and stock, it had become “Joyo Amazon.” Joyo, founded by Chinese entrepreneur Lei Jun in 2000 and headquartered in the British Virgin Islands, sold items like books, music, and videos. Before 2000, it had been an IT information service and download website. At that time, Joyo functioned as a subsidiary of Kingsoft and had only five employees. But, by the latter part of the year 2000, it had grown to become the 33rd largest Chinese website...
Amazon's Expansion in China
In China, Amazon had ten operations centers and 400,000 square meters of logistics-based floor space by 2011. It had signed a memorandum of understanding (MOU) with the Beijing and Ningxia governments to develop cloud computing services in 2013. As a result, it expanded AWS to China in 2014. As part of that move, AWS China developed an incubator in partnership with the Shanghai Jiading Industrial Zone Development (Group) Co. Ltd . It associated with local players to provide groundwork to support AWS, and also started a program to nurture more localized services to run in the AWS cloud....
According to experts, many successful multinational companies had failed in the Chinese markets because they could not design an effective localization strategy. China’s language, culture, and politics offered distinctive challenges for international companies. Amazon had been trying hard to hit the sweet spot in this regard in China. For instance, non-Chinese customers typically clicked and hit the back button when they were looking back and choosing products....
Challenges in China
According to analysts, Amazon’s investment in China had not paid off. They pointed out that the release of the Kindle had not been successful and wondered why Amazon had not added a Kindle store on its Chinese website till December 2012. By that time, its competitor sites had four times the number of Chinese language books as Amazon’s Kindle Store...
The Road Ahead
The cross-border shopping via AGS had shown significant growth in China. In the first quarter of 2017, total sales from China were 11 times as much as in 2015. Chinese consumers had purchased nearly 17 million pieces of cross-border directly-delivered merchandise from Amazon China since the official opening of the cross-border direct-delivery service in October 2014...
Exhibit I:Amazon Flywheel
Exhibit II: Selected Consolidated Financial Data of Amazon.com, Inc.
Exhibit III: Segment-Wise Consolidated Net Income (Loss) of Amazon.com, Inc.
Exhibit IV: Net Sales Generated from Internationally-focused Websites of Amazon.com, Inc.
Exhibit V:Value of E-commerce Transactions in China and USA
Exhibit VI: China’s Internet Users as of June 2016
Exhibit VII: China’s Ecommerce B2C Market Share as on 2016
Exhibit VIII: Selected Product Categories Offered by Amazon in China
Exhibit IX: Top Online Marketplaces among Chinese Sellers as on 2016
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