Amazon is set to close its online shops in China as local e-commerce giants JD.com and Alibaba maintain their hold on the market.
Amazon announced on Thursday that it will be shuttering its Chinese domestic e-commerce business. By July 18th, Amazon.cn will no longer be open to third-party sellers, implying it will not take on Chinese e-commerce giants like Alibaba and JD.com.
Consumers in China will still have the capability to purchase items from the U.S., Germany, Japan, and the U.K. through Amazon’s worldwide site. Additionally, Amazon’s cloud company will reportedly continue to run in China, though it faces stiff competition, as well.
However, this is certainly not the end of Amazon’s China story. The American retail behemoth has a huge user-base of cross-border merchants, many of whom will continue to utilize the platform to sell cheap goods to customers across the globe – with hefty profit margins.
Amazon’s shift underscores how established home-grown competitors have become, making it tough for Amazon to compete. Chinese customers are accustomed to having perks like overnight low-cost shipping, with domestic business like Alibaba’s Tmall and Taobao taking the cake.
JD.com and Alibaba account for 82 percent of the Chinese e-commerce market share, according to figures from iResearch Global last year.
This could change, however, if Amazon can seal a deal with a popular regional partner. Rumors have actually swirled for months that Amazon was supposedly in talks with Kaola, a Chinese online shopping portal. Though some analysts suggest the deal could be “too little, too late.”
Amazon isn’t the only Western business struggling
China’s digital economy has experienced colossal growth over the last years, dwarfing the expansion of other markets.
Around 2010, China represented less than one percent of the international e-commerce market. Now, it’s closer to 42%. And Western companies are scrambling for a piece of the pie …
However, that may be easier said than done.
Amazon’s withdrawal follows the Chinese e-commerce retreat of other prominent Western merchants.
Wal-Mart abandoned its Chinese e-commerce business in 2016, offering the platform to JD.com in return for a stake in JD’s brick-and-mortar shops.
While Wal-Mart’s alliance with JD.com has flourished since the deal was made, Amazon, and other U.S. businesses, may not be as lucky.