Oct 09, 2015 01:59 PM

Amazon Doubling Down on China Market, Executive Says

(Seattle) – Since entering China in August 2004 as one of the earliest international Internet companies in the market, the U.S. e-commerce giant Amazon has witnessed the country's online retail market grow into the world's largest. After years of slow growth of its own, the firm is now adjusting its strategy to better adapt to the appetites of consumers in the world's biggest market.

"China's economic transition has brought us a rare opportunity for development," said Doug Gurr, president of Amazon China. "We take China as a strategically important locale from a global perspective and will continue to invest in China."

But the competition is fierce. Data from the China E-Commerce Research Center show that in 2014 Amazon ranked eighth, with 1.3 percent share of the country's business-to-customer market, which is dominated by domestic players led by Alibaba Group Holding Ltd. and Inc.

Gurr said Amazon China's goal is not to become the largest e-commerce platform in the country, but rather to use its specialty in international e-commerce to build a bridge for Chinese consumers and vendors to overseas markets.

Since last year, Amazon China has repositioned its business and focused on cross-border e-commerce deals. The company has ungraded its services to shorten the delivery period for users' overseas purchases through its site, and it also introduced the American shopping event Black Friday to Chinese consumers.

Gurr said Chinese consumers' growing appetite for foreign products creates new business opportunities where Amazon has "unique competitive advantages." According to the Ministry of Commerce, China's cross-border ecommerce transactions in 2014 were worth US$ 71.8 billion, 44 percent more than the year before.

Data from market information provider Nielsen show 18 million Chinese consumers spent 217 billion yuan on overseas e-commerce websites in 2013, and annual spending is expected to reach 1 trillion yuan by 2018.

"These sorts of statistics demonstrate how cross-border e-commerce has become the driving force of the Chinese economy," Gurr wrote in an e-mail interview with Caixin.

Excerpts of that interview follow.

Caixin: China's economy is slowing, shifting from an investment-led economy to a consumption-driven one. What do China's economic situation and prospects mean for Amazon China?

Doug Gurr: As China's economy shifts to a consumption-driven economy, the consumption capability of Chinese consumers has been unleashed, which in turn drives the rapid development of domestic and cross-border online businesses. The growing demand for high-quality overseas products from Chinese consumers drives cross-border online shopping growth even more.

To meet the strong demands from Chinese consumers for imported products and an improved quality of life, Amazon China launched the Amazon Global Store (AGS) last November. This is the first Amazon Global Store residing in local website and with localized shopping experience globally. In addition to the AGS, we are bringing in authentic and high-quality products to Chinese consumers through our direct imports. Around 5 million international orders have been placed since last November through the AGS on and direct shipments through Amazon global sites in the United States and European Union. The statistics have shown that sales through the AGS on tripled in the first five months of 2015. According to AC Nelson, over 50 percent of Chinese consumers who shopped on overseas websites have visited AGS on since its launch.

In August, we upgraded our cross-border e-commerce strategy and launched a free-trade zone (FTZ) model. The innovative service brings in the most popular imported products among Chinese customers and fulfills customer orders directly from the FTZ. With this, customers can enjoy an average localized shipping lead time of three days. We also aim to better meet the diversified needs of Chinese consumers by expanding the AGS selection from Amazon US, Amazon Europe and Amazon Japan, unifying the login accounts for Amazon China and AGS, and supporting more local payment methods within this year.

Would you agree that the growth and development strategy of in the last ten years was too conservative? What opportunities have been seized and missed? What are your plans to expand its market share?

It's true we are not the largest player in China's e-commerce market. Our goal is not about becoming the largest e-commerce platform in China. Our vision in China is very clear, and combines the ideas of "IN" and "OUT." We want to help Chinese customers gain easy access to high quality and authentic international products at fair prices around the world through "IN," and help sellers from China to grow their business globally through "OUT."

Under the "IN" strategy, the FTZ model brings Chinese consumers faster delivery, a more convenient shopping experience and a wider range of international products. And for the "OUT" part, Amazon is doubling down on our efforts to help China-based sellers grow their business and build their brands globally. The series of new initiatives we unveiled this July will empower and support China-based sellers to better leverage Amazon's global platform, resources and capacities. China-based sellers are becoming an important part of Amazon's Global Selling business in the global market and have witnessed their sales more than double in the first half of 2015 compared to the same period last year.

All these bring our export strategy into a new chapter. China-based sellers will be able to better access Amazon's 285 million international customer base and take advantage of Amazon's global logistics capabilities to export to 185 countries and regions. Chinese sellers will able to transform themselves from being "made in China" to "branded in China" to become a global player.

What do you think of overall market environment in China?

The Chinese market has demonstrated great strengths of science, technology and innovation. We see stable growth momentum here, and in time China will definitely become the largest economy in the world. Meanwhile, China has become the largest e-commerce market since 2013 and the growth is still very strong. As a booming trend globally, the cross-border e-commerce represents the most dynamic driving force of China e-commerce development.

China has established many free-trade zones. The Chinese government has also rolled out a series of policies to encourage the development of cross-border e-commerce, so as to break down barriers in the area. We are also actively talking with provincial and municipal governments and all the news we have received is very inspiring.

In your opinion, what are the major obstacles or challenges of doing business in China? Have you encountered anything beyond your expectations?

For Amazon, we focus on utilizing our unique advantages and succeeding through differentiations. I believe our biggest achievement in the past 12 months was repositioning ourselves in China, which is now helping us develop in the right direction. We finally found what we could do that others cannot through our reliable partnership with millions of international vendors and incredible global logistics system.

For example, Manhattan Toy is a very famous, high-end toy brand in America and has been a vendor in Amazon US since 1998. We were able to bring this brand to the China market, which both allowed us to meet demands of Chinese customers and helped our vendors explore a new market. While any e-commerce platform may be able to cooperate with a few such brands like Manhattan Toy and bring them to China, none of them can bring in over 30,000 such brands to China in less than six months like Amazon has.

(Rewritten by Han Wei)

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