Amazon China to close local marketplace and place more focus on cross-border

Amazon has finally given up the fight with Chinese online shopping giants to capture the domestic market. On Thursday, the Seattle-based ecommerce company announced it will shut down its marketplace on Amazon.cn, which connects mainland Chinese buyers and sellers, while other units of its local venture will stay intact.

“We are working closely with our sellers to ensure a smooth transition and to continue to deliver the best customer experience possible,” an Amazon spokesperson told TechCrunch, adding that this segment of the business will end on July 18.

The partial retreat, first reported by Reuters and Bloomberg, is indicative of the relentless ecommerce race in China where Alibaba and JD.com dominate, with newcomer Pinduoduo closing on the incumbents’ heels.

But this is hardly the end of Amazon’s China story. The American giant has over the years attracted waves of cross-border sellers, many of whom have hailed from China’s traditional export industry looking to sell cheaply manufactured goods to consumers around the world for lucrative margins. To date, Chinese export suppliers are able to sell to 12 countries that include India, Japan, Australia, Canada, the United States, and five Western European countries.

Other global ecommerce players also have their eyes set on the massive raft of goods flowing out of China, though each comes with a different geographic focus. Alibaba-backed Lazada, for example, is the bridge between Chinese merchants and Southeast Asian shoppers, while Jumia, which just listed in the U.S., exports from China to Africa.

“The biggest appeal [of exporting through Amazon] is the low costs because we are close to a lot of supply chain resources,” a Shenzhen-based vendor selling water-resistant placemats on Amazon told TechCrunch.

In the meantime, China has developed a big craving for imported goods as middle-class consumers now demand higher quality products. Amazon is in the import business, too, although it lags far behind more entrenched players such as Alibaba, of which Tmall Global takes the lead with 29 percent market share in the cross-border ecommerce space according to data from iResearch, dwarfing Amazon’s 6 percent.

That could change if Amazon finds a prominent local partner. Rumors have swirled for months that Amazon was reportedly in talks to merge its import unit with Kaola, the cross-border shopping business run by Chinese internet giant Netease with a 22.6 percent market share.

Not to be forgotten, Amazon also offers cloud computing services to Chinese enterprises although, in this space, it’s again in a direct face-off with Alibaba Cloud, the dominant player in China. Lastly, China remains the largest market for Kindle, so pivotal that the e-reader launched a localized model just for China.

“Over the past few years, we have been evolving our China online retail business to increasingly emphasize cross-border sales, and in return we’ve seen very strong response from Chinese customers,” said the Amazon spokesperson. “Amazon’s commitment to China remains strong—we have built a solid foundation here in a number of successful businesses and we will continue to invest and grow in China across Amazon Global Store, Global Selling, AWS, Kindle devices and content.”