The South China Morning Post recently reported that Amazon would be making its comeback in China with a “pop-up shop” on Pinduoduo, the Chinese social commerce platform renowned for enabling shoppers to source cheap deals as a group.
In a statement, Amazon said that it would be making around 1,000 overseas products available in its Amazon Global Store on Pinduoduo, which would remain open until the end of December. The partnership is kicking off with a three-day sales campaign beginning on 28th November, with promotions on overseas items like Nintendo Switch consoles and Australian baby formula.
The move is mutually beneficial for both companies, as Pinduoduo is seeking to shed its association with cheap (and occasionally shoddy) goods and thrifty shoppers as it moves to attract more well-off customers. Amazon, meanwhile, has the opportunity to sell to Chinese shoppers during a major shopping holiday – and in a more “China-native” fashion than its Amazon.cn website was known for.
When Amazon announced that its China marketplace would cease operation in July this year, Chinese netizens greeted the news with derision and a lack of surprise, saying that Amazon had failed to adapt to the Chinese market.
“No kidding. Amazon came into China with guns blazing, but it didn’t try hard enough,” wrote one user on gaming website Gamersky.com. “It failed to adapt to the local market and the preferences of Chinese consumers. Who is going to buy from them?”
A commonly-cited problem was Amazon’s design, which like its western counterparts, was clean and ordered – a far cry from the colourful, busy homepages belonging to most Chinese ecommerce websites. Chinese shoppers were unimpressed by this, with one shopper commenting that “the moment I see it, I lose all desire to make a purchase.”
Why do Chinese websites look so busy?
Another factor in Amazon’s withdrawal from China (its website still serves as a cross-border shopping business for Chinese consumers looking to import products from countries like the US, UK and Germany, but no longer supports third-party sellers) was the stiff competition from incumbent giants like JD.com and Alibaba-owned Tmall and Taobao. According to China Internet Watch, Tmall and JD.com had a combined share of more than 85% of China’s B2C ecommerce market in Q4 2018.
But Amazon clearly hasn’t given up on China, and its pop-up venture is a testament not only to its belief in the potential of ecommerce in China but also to the extent to which Pinduoduo, a start-up founded in 2015, has succeeded in disrupting Chinese ecommerce thanks to its popularity with China’s often-overlooked rural communities.
With that said, things haven’t all been smooth sailing for Pinduoduo recently. Last week, it suffered a massive $11 billion slump in value after posting a much wider-than-expected quarterly loss, driving its shares down by nearly 25%. While the company is still growing rapidly and has seen a 123% increase in revenue during the third quarter of 2019, its operating costs have more than doubled as it tries to woo wealthier customers in major cities – a reverse of the strategy pursued by Alibaba and JD.com, who are now aggressively expanding beyond their usual customer base of wealthy urban shoppers and into rural markets.
The partnership with Amazon could be just the shot in the arm that Pinduoduo needs, giving it a range of high-quality overseas products to market to the wealthy consumers it is targeting, not to mention a partnership with the biggest name in western ecommerce.
At the same time, the alliance gives Amazon another shot at selling to the Chinese market during a key shopping period – and while the pop-up will be available for a limited time only, the venture is sure to provide useful lessons that Amazon can apply to its ecommerce business in China if it ever decides to fully re-enter the Chinese market.
If the pop-up is a success, we could see Amazon repeat the move for future Chinese holidays such as the upcoming Spring Festival (or Chinese New Year) in late January, perhaps Labour Day in May or Mid-Autumn Festival in October, and of course the biggest of them all, Singles Day, in November. By limiting its ecommerce presence to temporary pop-ups, Amazon can take advantage of a sense of exclusivity and urgency to drive sales – and then withdraw before the novelty has a chance to wear off.
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