It’s no secret that China is a coveted market for businesses looking to grow their business. It’s the second largest consumer economy in the world, primed to surpass the U.S. in a few years. Amazon has been wildly successful in the U.S., with 43% market share, but they’ve been “inching along in China, trying to figure out a combination of offerings that will allow it to gain a bigger piece of the market.” It’s no easy feat, considering they’re going up against the native market leader, Alibaba. To make matters more difficult, Amazon also faces strict government regulations and restrictions on foreign companies.
On a side note, Alibaba has taken full advantage of this challenge by offering to partner in joint ventures with foreign companies trying to break into the Chinese market.
Amazon has entered several foreign markets (Canada, China, Europe, etc) and they still haven’t found the “secret sauce” of success like they have in the U.S. Further, they’ve been slow to grow their Prime business internationally as well as it has grown in the U.S. The program consists of 80 million customers world-wide; however, 75% of these members are from the U.S. The remaining ~25% include Canada, India, Japan, U.K., and Germany.
According to Ovide and Abboud, Prime is essential to Jeff Bezos’s mission of making Amazon the sun of the consumer spending universe and analysts estimate the roughly 70 million Prime members spend at least twice as much as the typical Amazon shopper and more of their total spending on the site. Amazon began offering Prime membership in China in 2016, yet they haven’t realized the growth they desire.
As a result, they’ve resorted to launching a store on Alibaba’s Tmall site and a localized storefront with over “30 product categories, including those that appeal to Chinese consumers like apparel, shoes, baby, toys, home, kitchen and beauty.” Russ Grandinetti, Senior Vice President of Amazon, stated that “launching a unique program designed for our Chinese customers shows our obsession with Chinese customer needs, and demonstrates our long-term commitment to growing our business in China and we will continue to innovate for customers in China to deliver more value over time.” Amazon’s strategy is to enter the market at multiple angles. This seems like a good strategy to generate awareness in the minds of consumers, but is it enough to go up against Alibaba? Perhaps, Amazon could integrate with the WeChat app to streamline their benefits?