Amazon Failure

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Failure of Amazon in China, an analysis
• E-commerce market in China
• Online consumer product retailers in China
• Performance of Amazon in China

Amazon is a global e-commerce player selling a wide variety of products online. The firm is a market leader in the United States, the United Kingdom, Germany and Japan. It is a dominant player in the West, but has struggled in the Chinese market since the time of its footing in the country. China’s B2C e-commerce market size is almost identical to that of the US.
The market share of the prominent online departmental stores in China can be seen through the below chart.
Amazon occupies a mere 0.8% of this market. It is a stark contrast in relation to a very high market share that the company occupy
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Additionally, Alibaba, which until recently solely operated in China has much higher active customers than Amazon which operates worldwide. The number of active customers for Jingdong, which also operate only in China is almost 50% of the total global active customers for Amazon. This means that the success of Amazon was as a result of more repeat purchases by its active customers rather than deep penetration through the addition of new customers. The number of active customers for Jingdong (2014) doubled in a year (2015). However, global active customers for Amazon increased by mere 11% (2014-15), this was despite the entity entering new international markets. These figures highlight the increase in the reach of Jingdong and Alibaba to newer customers in the Chinese market. These numbers also strengthen the argument that regional companies understand the consumer behaviour better than international…show more content…
It acts as a middleman between the buyers and the sellers and does not operate fulfilment centres. The EBITDA of these Chinese firms correlate negatively with the number of fulfilment centres operated by these entities as seen in the below chart. Jingdong has faster moving inventory than E-commerce China Dangdang. However, the high number of its fulfilment centres result in high fulfilment expenses and therefore, its EBITDA is much lower than that of E-commerce China Dangdang. Alibaba saves considerable storage costs and fulfilment expenses due to the zero-inventory model. These savings are passed to the sellers to help them innovate, grow and sustain. However, Amazon China has made investments year after year to build the necessary infrastructure since its entry into the
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