After two years of negotiation, yesterday Jeff Bezos led Amazon.com Inc. AMZN rolled out a new store on Alibaba’s BABA shopping site, Tmall.com. The new store offers wine, food, kitchenware, shoes and toys sourced from overseas suppliers.
Amazon’s Run in China
It’s no secret that the Chinese e-commerce space is dominated by Alibaba and as Sucharita Mulpuru, a Forrester Research analyst, puts it, “At some point you go fish where the fish are.”
In 2004, Amazon entered China by acquiring the 33rd largest Chinese website, Joyo.com. Ever since then, it has been fighting an unsuccessful battle in China’s flourishing e-commerce space.
It looks like the 10 not so successful years are not enough. Amazon isn’t ready to give up on China — even if that means allying with its biggest competitor, Alibaba.
This partnership is very important for Amazon as domestic rivals Alibaba and JD.com JD have 90% of the market share in China. This hardly leaves any space for Amazon. This alliance gives the world’s largest Internet retailer exposure to 334 million active buyers on Taobao bazaar and Tmall.com. This platform houses dozens of well-known international brands like Costco Wholesale Corp. COST.
Amazon has been trying hard to emulate its success with American consumers overseas. Its international sales declined to 38% in 2014 from 48% in 2009.
In such a scenario, China happens to be a very important market for Amazon. According to reports by EMarketer Inc., e-commerce in China is predicted to reach $1.01 trillion in 2018, more than doubling from $426.3 billion in 2014.
Amazon knows this. It is thus trying its best to expand in China. In November last year, it advertised for a huge amount of jobs in China, posting positions for HR managers to transportation managers. It also went on to hire developers who know Chinese. It also set up operations in the Shanghai Free Trade Zone in August to take advantage of the less strict rules there and to sell more goods to Chinese consumers.
While Amazon carries a Zacks Rank #4 (Sell), Alibaba holds a Zacks Rank #3 (Hold).
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