Amazon is set to shut down its domestic marketplace in China by mid-July. Citing people familiar with the matter, Reuters reported that the eCommerce giant has decided to focus on selling overseas goods and cloud services in the country.
While Amazon shoppers in China won't be able to buy goods from local third-party merchants, they can still order from the U.S., Britain, Denmark and Japan through the company's global store. Amazon is planning to shutter fulfillment centers and support for domestic-selling merchants in China in the next 90 days.
“They’re pulling out because it’s not profitable, and not growing,” said Analyst Michael Pachter of Wedbush Securities.
Another issue, according to Ker Zheng, marketing specialist at Shenzhen-based eCommerce consultancy Azoya, was that Amazon had no real competitive advantage in China over its domestic rivals, with Alibaba's Tmall marketplace and JD.com controlling 81.9 percent of the country's market last year. Zheng explained that, unless a customer wants a specific imported good that can’t be bought anywhere else, “there’s no reason for a consumer to pick Amazon, because they’re not going to be able to ship things as fast as Tmall or JD."
The U.S.-listed shares of Alibaba and JD.com rose 1 percent on Wednesday (April 17) after the news broke, while Amazon’s shares closed flat. Customers in China will still be able to purchase Kindle eReaders and online content. Amazon Web Services, the cloud computing unit that sells data storage and computing power, will also stay in business in the country.
Amazon isn't the only Western retailer that has made changes to its plans for China's eCommerce market. Walmart sold its Chinese online shopping platform to JD.com in 2016 in return for a stake in the platform. In addition, major U.S. tech companies — such as Netflix, Facebook and Google — have slowed down their expansion plans in the country.