According to analysts in the retail sector the launch of Amazon’s Prime program in China hasn’t paid off as was expected. In launching the membership program in the world’s most populous country Amazon was hoping free international deliveries and products from the West would give it traction in China but that hasn’t materialized.
One of the reasons why Amazon has not found it easy in the biggest e-commerce market in the world is the fact that it is facing competitors who increasingly sophisticated. Outsider companies also face hurdles in the world’s second largest economy and this includes regulatory ones.
Tough policy environment
Tech firms such as Google and Facebook are some of the American companies that have had to grapple with censorship and stringent government controls in China. Apple has also faced various hurdles and over time its market share especially for the iPhone has been declining as domestic makers of smartphones such as Huawei, Oppo, and Xiaomi steadily rise as they offer high-performing but less-expensive devices.
“Over time, companies from Apple to Microsoft are seeing Chinese rivals move up the value chain and narrow the gap between them and their products,” said Marbridge Consulting’s managing director, Mark Natkin.
Discounts and promotions
According to retail analysts Amazon’s efforts in China have mostly been challenged by its Chinese competitors and not the operating environment. For one membership programs are not as popular in China as they are in the United States. Also Amazon’s mobile device app lacks appeal and ease of use in China.
While Amazon’s main pitch was offering authentic products from the West shipped at no cost, that has been weakened by Chinese competitors who have been dangling discounts and strengthening their offerings. JD.com and Alibaba have for instance made heavy investments in broadening the product range. The two have also been heavily promoting and discounting their products. Free delivery also fails to entice customers even when it is across borders. This is because overseas shipping fees are usually low or basically free.
An analysis conducted by consumer research firm Kantar Worldpanel has estimated that Amazon’s market share in the fast moving consumer products category in China was 1% which was the same percentage in 2016.
To lure more Chinese consumers to take up Amazon Prime membership, the online retail giant has reduced the annual fee to $30. In the United States the membership fee to Amazon Prime is $99. JD.com and Alibaba also have membership programs which are lower-priced.