Amazon’s Asia strategy is to be patient
January 29, 2013 12:47 PM
In Asia and other e-commerce markets around the Pacific Rim, Amazon.com still isn’t the biggest kid on the block.
In online retail markets such as China and Japan where marketplaces operated by Alibaba Group and Rakuten Inc. account for the biggest share of direct-to-consumer e-commerce sales, Amazon’s Internet Retailer estimated Asian and Australian web sales of $5.44 billion, up 23.1% from $4.42 billion in 2011, put Amazon in the top tier—but not number one.
Alibaba dominates online retailing in China through its two online marketplaces, Taobao and Tmall. Together, they accounted for more than $161 billion in sales in the first eleven months of 2012, the company says. In Japan, Rakuten, which is by far the biggest online retailer, generated Japanese web sales of about $11.93 billion in 2011, the company says. Rakuten has yet to break out its 2012 financials. At this year’s Internet Retailer Conference and Exhibition in Chicago, Rakuten CEO and chairman Hiroshi Mikitani will give a keynote address entitled “Spanning the Globe for E-Commerce Opportunity.”
But Amazon, No. 1 in the 2012 Internet Retailer Top 500 isn’t in a hurry to assume a dominant position in some of Asia’s biggest web retailing markets—at least not yet, says Scot Wingo, a veteran Amazon watcher and CEO of ChannelAdvisor, a U.S. company that helps retailers sell online at marketplaces such as eBay Inc. and Amazon. Instead Amazon’s attitude toward Asia is to remain patient, continue to build up its infrastructure and wait for the Japanese consumer market to rebound from a lingering economic downturn and for emerging consumer spending to continue to grow in China, India and elsewhere.
Amazon is no stranger to selling online in Asia, especially in larger countries. Amazon has been selling online in Japan since 2000 and in China in 2004 when it paid about $75 million to acquire Joyo, an online books retailer. “Amazon is being patient because they have the infrastructure in place and they’ve building it out for a pretty long time now,” Wingo says.
Amazon currently has about 25 distribution centers established across key Asian markets, including 13 in China, 11 in Japan and one in Mumbai, the largest city in India. Together those fulfillment centers occupy more than 6.7 million square feet of space, according to MWPVL, a global supply chain and logistics consulting firm.
Amazon doesn’t discuss its international plans for business development. But it’s network of distribution centers located in big population centers in China, India and Japan are there to help rollout some of its other strategic developments such as Amazon Prime--which charges a $79 annual fee for two-day shipping on Amazon purchases.
Another strategic advantage Amazon’s enjoys over other Asian retailers is a trusted name and the ability to source and ship name brand products, Wingo says. “Asian shoppers know they can trust that Amazon will probably have the brands they want and a secure online order process,” he says. “They are being patient in Asia because they are setting the bar everyone else will have to meet.”