Why Is Amazon.cn Going Nowhere in China?

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By Jacob Maslow

Woman receiving parcelChinese e-commerce is huge. We are talking about over $500 billion in sales annually, and growing. Unfortunately, American e-commerce giant Amazon (NASDAQ:AMZN)  isn’t getting a big slice of that giant pie. In fact, among all other e-commerce players, Amazon barely registers.

If you look at total market share of the Chinese e-commerce market, Alibaba’s Tmall weighs in at 57.6%, followed by distant second, Jd.com. Amazon China comes in at a measly 1.3%. It is not going anywhere and it appears that its fortunes are not going to change anytime soon.

The interesting thing about Amazon’s efforts is that it is not for lack of trying. In fact, Amazon has been spending a lot of money on its international operations. But its international operating income has actually been bleeding the company. It has been down in 2014 by close to $300 million.

It is not for lack of effort that Amazon is falling behind in China. Its Amazon.cn presence simply isn’t going anywhere. Maybe it is an issue of bad cultural translation. Maybe it is the fact that Amazon is trying to sell cheap goods in a market that is already flooded with cheap goods. I believe the answer turns on how Amazon is positioning its store in Alibaba’s Tmall.

It is going to be focused primarily on imported goods as well as branded goods from small international premium brands. This appears to be the strategy that is missing from Amazon.cn. It should be very interesting how this Amazon initiative pans out.

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