Amazon to close domestic marketplace business in China: sources

San Francisco: Amazon.com Inc plans to close its domestic marketplace in China by mid-July, people familiar with the matter told Reuters, focussing efforts on more lucrative businesses selling overseas goods and cloud services in the world’s most populous nation.

Amazon shoppers in China will no longer be able to buy goods from third-party merchants in the country, but they still will be able to order from the United States, Britain, Denmark and Japan via the firm’s global store. Amazon expects to close fulfilment centres and wind down support for domestic-selling merchants in China in the next 90 days, one of the people said.

The move underscores how entrenched, home-grown e-commerce rivals have made it difficult for Amazon’s marketplace to gain a foothold. Consumer insights firm iResearch Global said Alibaba Group Holding Ltd’s Tmall marketplace and JD.com Inc controlled 81.9 per cent of the Chinese market last year.

“They’re pulling out because it’s not profitable and not growing,” said analyst Michael Pachter at Wedbush Securities.

Ker Zheng, marketing specialist at Shenzhen-based e-commerce consultancy Azoya, said Amazon had no major competitive advantage in China over its domestic rivals.

Unless someone is searching for a very specific imported good that can’t be found elsewhere, “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,” he said.

Amazon’s customers in China will still be able to purchase the firm’s Kindle e-readers and online content, said the sources, who spoke on condition of anonymity. Amazon Web Services, the company’s cloud computing unit that sells data storage and computing power to enterprises, will remain as well.

The U.S.-listed shares of Alibaba and JD.com rose 1 percent on Wednesday after Reuters first reported the move, before paring gains later in the day. Amazon’s shares closed flat.

US RETREAT

The withdrawal of the world’s largest online retailer - founded by the world’s richest person - comes amid a broader e-commerce slowdown in China. Alibaba in January reported its lowest quarterly earnings growth since 2016, while JD.com is responding to the changing business environment with staff cuts.

It also follows the Chinese e-commerce retreat of other big-name Western retailers. Wal-Mart Stores Inc sold its Chinese online shopping platform to JD.com in 2016 in return for a stake in JD.com to focus on its bricks-and-mortar stores.

Similarly, the country appears to factor less in the global aspirations of fellow US tech majors Netflix Inc, Facebook Inc and Alphabet Inc’s Google, Pachter said.

Amazon bought Chinese online shopping website Joyo.com in 2004 for USD 75 million, rebranding the business in 2011 as Amazon China. But in a sign of Tmall’s dominance, Amazon nevertheless opened an online store on the Alibaba site in 2015.

The firm is still expanding aggressively in other countries, notably India, where it is contending with local rival Flipkart.