Why Amazon failed in China
A Comparison Analysis of amazon.cn and its Chinese Competitors
On 17th of April Amazon announced [1] to shut down its marketplace business in China. As a consequence, its shoppers will only be able to buy a selection of goods from Amazon’s global store.
Thus, Amazon became one of many other western companies who failed to establish a lasting presence in the Chinese mainland. Numerous reasons are brought up by experts and interest groups as to why so many western corporations seem to have difficulties on the Chinese market.
Often used explanations range from political reasons like corruption to unfair practices by Chinese competitors. While this occasionally might be the case they generally tend to overlook other and more fundamental aspects. So what is the secret sauce that lets companies like BMW or Microsoft thrive in China, while others like Amazon or Tesco fail?
One major reason why Amazon failed in the Middle Kingdom is that it didn’t trust the management abilities of local employees. As Liu Qiangdong, CEO of JD and a main competitor of Amazon in China, put it: To make it in China you need people in managing positions who know the country, its people and their mentality in and out. When Amazon came to China at the beginning of the 2000s, it put foreigners in leading positions who had no experience with China at all. They implemented American — or generally speaking: Western — business practices which proved to be inferior to that of their Chinese competitors.
Another very important aspect: Chinese companies go to great lengths to deliver a product or service that is often superior to what their western counterparts offer. To prove this point we will take a close look and do a comparison of amazon.cn and its Chinese competitors JD, Tmall and Dangdang.
Tough Competitors
JD.com and Tmall.com are the two largest B2C platforms in China. They both cover a wide range of products from apparel, electronics, cosmetics to fresh food. Tmall is operated by Alibaba Group, it allows companies in China and overseas to open their own online store on the platform to sell products to customers in China. [2] Dangdang.com started as an online book store in 1999 but expanded its product range to other categories such as home appliances, digital products, textile, groceries, etc. It also offers its own brand E-book reader, which is similar to Amazon’s Kindle. [3]
In order to explain, why Amazon failed in China while its competitors thrived, we will compare various aspects. Here’s an overview of 7 categories that we want to analyze:
1. Homepage
2. Product Presentation
2.1. Buying a Baby Overall
2.2. Buying a Book
3. Payment Methods
4. Online Customer Service
5. Range of Available Products
6. After Sale Services/Additional Services
7. Logistics & Distribution
1. Homepage
On a first glance, the homepage layout of all the websites mentioned above is quite similar: They all feature a search bar on the top, as well as sections that focus on product categories, promotions, etc. The layout of these sections varies, though. Amazon has adapted its homepage to a more Chinese friendly way. On the European presence as well as the US homepage, visitors do not see all the available product categories on the left side. Here is a screenshot from amazon.co.uk:
On the contrary, the Chinese version on Amazon prominently displays the product categories section on the left side of the page:
JD.com, Tmall.com and Dangdang.com offer a similar experience:
Amazon has also adapted their Chinese website according to Chinese browsing habits. When clicking on any product or link, a new tab will open automatically. Whereas on Amazon’s European and US websites, visitors will be directed to that link, without the creation of a new tab.
2. Product presentation:
For easy comparison examples, we are going to compare the product pages for a baby overall on amazon.cn, JD and Tmall, as well as a book’s product page on amazon.cn and Dangdang.
2.1. Buying a Baby Overall
Amazon.cn presents its products [4]in a standard way like in the US and Europe. On the upper left side, users can browse through a set of product pictures. On the right side, customers can choose between different colours and sizes. Potential buyers can also find a short description and additional product information.
Below that comes a section “Customers who viewed this product also viewed:”, followed by more basic product information, shopping tips and customer reviews.
Now let’s look at an example from JD.com [5]. Similar to Amazon’s product page, visitors find a selection of product pictures on the left part of the site. In its center the page displays information on the price as well as on the use of vouchers and special offers. Similar to what Amazon offers, potential buyers on JD can also choose between different colours and sizes. Before putting a product into the shopping cart, customers also can choose if they want insurance for this product. The section below displays relevant product information.
After that comes general product information such as product grade, used materials, suitable season for wearing, product category, etc. followed by some more advertisement for other children’s clothes.
Next comes detailed information presented in pictures, so that customers can see every detail of different parts of the product, since they cannot physically touch the product. This is very important for Chinese customers.
After this sections comes more product information such as brand name, materials used, suitable occasions to wear it (home, outside), product dimensions. Then it is followed by a section showing reviews from other customers.
Now let’s take a look at Tmall’s product presentation [6]. In this case, we will analyze the presentation of a product from the vendor YEEHOO. As mentioned above, Tmall is a platform that enables companies to open their own shops. The site’s layout is quite similar to what we saw on JD. But again, the available information is much more than what can be found on the Chinese Amazon.
After the product pictures, there is product information.
Next is a selections of various offers and a friendly reminder that the colours of the product in the pictures might vary from the real colour due to light and different angle. There’s also information that the sellers/producers of the overall have recently improved the buttons of the product. There are even pictures to show the difference before and after the improvement.
Next, we find an introduction about the baby overall’s material (organic cotton).
This is followed by more product information. The sellers also included a reference about which size to buy for what weight and age. This is very considerate, because some customers might have kids who are taller and heavier than the age group that they are in.
Next comes information how the organic cotton is cultivated, harvested and processed:
This is followed by pictures of every detail of the product.
Information on the company’s cooperation with the institute of agriculture in Gansu (a Chinese province). This information is given to further increase trust of potential buyers in the seller.
Pictures of certificates and anti-counterfeit measures.
There’s even an explanation on why there might be little black dots on the material due to the use of organic cotton. In addition, there’s a picture of the sellers physical store and other relevant products it sells which could be interesting for the customer. Finally, there’s a section displaying the reviews from customers. The seller’s customer service also replies each review to show that they care about their customers.
2.2 Buying a Book
Amazon started as an online book selling platform. So did Dangdang which is why we will look at how they present books, and why Chinese customers are more likely to buy books on Dangdang.com
In the following, we will compare the product pages for the same book on amazon.cn and Dangdang.
The layout on Amazon [7] is the same as on its global website: Product pictures of the book on the left. On the right side there is information on the product’s availability, delivery date, supported payment methods, followed by a short description of the book.
Next comes the “Frequently bought together:”-section as well as the “Customers who viewed this item also viewed:” -feature.
These are followed by basic information such as the publisher, number of pages, ISBN, dimensions and weight, etc. Amazon.cn also asks customers if they have found the book somewhere else with a cheaper price. This is followed by a more detailed product description such as reviews, information on the author, content and an excerpt. Below, there’s another display of the “Customers who viewed this item also viewed:”-section, and reviews.
On Dangdang we once more see the classic way of online product presentation [8]: On the left there is a picture of the book and next to it is a one sentence introduction, followed by information on the author, publisher, publish time and the book’s rank on Dangdang literature section. This is followed by the price as well as promotion/discount information.
Next comes delivery information. Shoppers can also select other books written by the same author and buy them together with this book. On the left column is a “Customers who viewed this item also viewed:”-section. The middle part features the “Items that are often bought together with this item” feature.
Below, there is additional product information, presented in a “posh way”, including information on the author, introduction, reviews, etc. For some books, this section could include the size of the book, a few photos of what it looks like inside (for example children’s books and pop-up books), even the material of the book.
This is followed by the review section.
Conclusion
Chinese online platforms put a lot of effort in showing potential buyers as much information as possible about their products. A very detailed presentation of a product is very important and necessary for Chinese customers. It plays a vital role when it comes to making a decision whether to buy a product or not. As a foreign company, amazon did some changes to meet Chinese customer’s needs. But they kept their classical product layout, which does not include as much information as their Chinese competitors.
2. Payment method
Amazon.cn:
- Credit/ debit card
- Transfer money into your amazon account and use the balance to pay
- Amazon Prime credit card
- Alipay and WeChat pay
JD.com:
JD.com offers a wide range of payment methods [9]:
- Payment upon delivery (which means the customer can pay the delivery man when they receive the package), customers can pay cash, via POS machine the delivery person carries, or use the JD App to scan the bar code on the package to pay
- Online payment
- Post office remittance
- Company transfer
- They currently allow limited number of customers to pay by instalments with credit card
- JD offers credit to customers, and then they can use the credit to pay for things they have ordered and pay back at a later date
- Customers at Beijing and Shanghai can also pay by cheque
- Scan QR code to pay via Alipay or WeChat
Tmall.com also offers more payment methods than amazon.cn:
- Debit card
- Credit card (national and international)
- Alipay (customers need to transfer amount to their Alipay account first)
- Credit service offer by Alibaba, which allow customers to buy with credit now and pay back within a given period
- Prepaid Alipay card
- Online payment
Dangdang doesn’t offer as many options for paying as JD or Tmall but still lets customers pick from more payment methods than Amazon:
- Cash payment upon delivery
- Credit card /debit card
- Different online payment services such as Alipay, Union pay, WeChat Pay
- Payment with gift card
- Bank transfer
Conclusion
Amazon’s Chinese competitors offer their customers more options when it comes to paying. For example, Amazon does not support payment upon delivery.
3. Online customer service
It is a very important shopping experience for Chinese customers that there is some kind of online custome service available, be it a bot or real human service. Amazon.cn, doesn’t offer such a service at all on its product pages.
JD has an online customer service on every product page. If shoppers have any questions, they can login and ask the service for support.
Stores on Tmall also offer online customer service. The service time varies from shop to shop. If no one is online, normally a message can be left. Alibaba developed its own chatting software that can be used to connect customers and sellers together.
Finally, Dangdang also offers a service bot.
Conclusion
Once more, Amazon missed out on an opportunity to make the shopping experience on their website more convenient for customers by not implementing any online customer services on its platform.
4. Range of Available Products
The product range of Amazon’s competitors in China is considerable larger than that of Amazon. JD has expanded its product range to fresh food, travel-related offers like plane tickets or hotel bookings. JD’s customers can also access or buy various financial products like insurances.
Tmall also offers various kinds of food online, including fresh products ranging from fruits to meat, seafood, or ice-cream. At Tmall Global customers can buy all kinds of international products.
Tmall’s travel site fliggy.com offers train or flight tickets, as well as discounted tickets for all kinds of tourist attractions not only domestically but also internationally. It also offers hotel booking as well as a visa service for travelling abroad.
Conclusion
Be it seafood, plane tickets or a pair of new socks — Chinese online shops let customers choose from a much broader range of products than Amazon.
5. After sale services/ additional services
In addition to the products they sell, Chinese online shopping platforms also offer various additional services.
JD.com has a so called “Service Plus” [10] site where customers can pay at affordable price for technicians or specialist to come to their homes in order to install or set up big home appliances, furniture, bathrooms, kitchens, even fish tanks. On JD.com users can also buy services such as apartment cleaning, maintenance for their expensive shoes, watches, etc.
Both JD and Tmall also offer companies discounts if they buy things in bulk quantity.
6. Logistics/ Delivery
Dangdang offers next day deliver in 165 cities in China. In some cities, orders placed before 10:30 can be delivered on the same day.
Although stores on Tmall normally arrange their own logistics, but Tmall also invests in building its own logistic infrastructures so that it can better serve its customers. Tmall has 4 distribution centres which cover 24 provinces and 269 cities in China, these distribution centres and their cooperation with a number of delivery companies allow them to make next-day deliveries in 40 cities and two-day delivery in 114 cities. [11]
JD invested heavily in logistics, which includes over 520 logistic centres, more than 300 000 end-service outlets and 250 000 logistic vehicles. Their cold chain network covers more than 300 cities and can process one million orders on daily basis. JD also develops delivery drones, unmanned delivery vehicles, unmanned warehouses, unmanned supermarkets. [12]
To see one of their automated warehouses in action, check out this video:
JD offers a variety delivery services, a standard one is called 211 express delivery for products including big-sized home electric appliances. In many cities, orders placed before 11:00 will be delivered on the same day, orders placed before 23:00 will be delivered before 15:00 next day, without asking customers paying extra fee.
Amazon also has its own very automated warehouses and it has invested heavily in delivery drones. It also offers next day delivery in the European market if customers pay an extra delivery fee (or join Amazon prime).
Final Conclusion
Customers are not just simply buying products. When they buy something from an online shopping platform for a better price than in a physical retail store, they are also paying for a satisfying shopping experience. In China this includes a series of services, such as online assistant, quick delivery, convenient payment methods, after sale maintenance, etc.
In western countries many people still believe that these Chinese companies copied the operation model of their western competitors. This assessment was probably true at the very dawn of online shopping in the 90s or early 2000s. But today, critics have to accept that these companies did not win the market competition because they are copy cats but because they are willing to adapt to customer needs. Companies like JD, Tmall or Dangdang are willing to invest heavily and develop offline services such as distribution centres, logistics services, to make sure whatever the customers are paying for will arrive fast. Simply said, they aim to bring maximum amount of convenience to their customers.
For many foreign companies — not only in the field of online shopping — it is time to re-think and adjust their business model if they want to succeed in the Chinese mainland. Because not always what they think their customers want is actually what their customers really want.
Sources
[1] https://www.nytimes.com/2019/04/18/technology/amazon-china.html
[2] http://about.tmall.com/
[3] http://t.dangdang.com/companyInfo
[4] https://www.amazon.cn/dp/B072R4665M/ref=sr_1_12?__mk_zh_CN=%E4%BA%9A%E9%A9%AC%E9%80%8A%E7%BD%91%E7%AB%99&keywords=%E5%A9%B4%E5%84%BF%E8%BF%9E%E4%BD%93%E8%A1%A3&qid=1555940105&s=gateway&sr=8-12
[5] https://item.jd.com/31842113890.html
[6] https://detail.tmall.com/item.htm?spm=a220m.1000858.0.0.27b23d03JIvQoR&id=549407849898&skuId=3340025728354&is_b=1&cat_id=2&q=%25D3%25A4%25B6%25F9+%25D3%25D0%25BB%25FA%25C3%25DE+%25C1%25AC%25CC%25E5%25D2%25C2
[7] https://www.amazon.cn/dp/B076BXHVDT/ref=sr_1_1?__mk_zh_CN=%E4%BA%9A%E9%A9%AC%E9%80%8A%E7%BD%91%E7%AB%99&keywords=%E7%BA%B8%E4%B8%8A%E7%9A%84%E6%95%85%E5%AE%AB&qid=1555950506&s=gateway&sr=8-1
[8] http://product.dangdang.com/25174809.html#ddclick_reco_book
[9] https://help.jd.com/user/issue/list-172.html
[10] https://anzhuang.jd.com/
[11] https://e56.tmall.com/?spm=875.7931836/B.a2226n1.20.66144265XjpsuN
[12] https://www.jdwl.com/
