You would be forgiven for not knowing Amazon has been operating in China for more than a decade but perhaps not for much longer. The company is allegedly in negotiations to merge its Chinese import business with local player Kaola, the cross-border action platform run by Chinese Internet behemoth NetEase, reported Caijing (Chinese link) Tuesday.
The agreement, which NetEase initiated and will take place through a stock exchange listing, was signed at the end of 201
The timing of marriage is interesting since Amazon recently spoke with Western Union to better serve the backpackers across Asia (who did not include mainland China). Amazon also connects Chinese sellers to consumers worldwide, and only last week WorldFirst, a London-based payment company that strongly believes in working with Amazon small and medium-sized merchants, was purchased by Alibaba a direct competitor to Amazon.
According to Caijing, the NetEase merger will not affect Amazon's export manager.
NetEase Kaola refused to comment on the case. Amazon China cannot be reached immediately for comments.
Amazon entered China in 2004 after purchasing local bookstore business Joyo for $ 75 million. In 2014, it began offering an overseas shopping service to capture Chinese consumers' growing appetite for imported goods. Since then, the Titan has developed various marketing gimmicks – including its annual Black Friday campaign – to entice customers, but the business was never able to establish a leading position in China where major weapons such as Alibaba and JD.com dominate.
According to the research company iResearch, Amazon, held less than 1 percent of the Chinese trading market in 2016. Within the arena of import, Amazon China claimed a 6 percent share in the second quarter of 2018, while Alibaba's Tmall Global took the lead by 29 percent per data from research company Analysys. NetEase Kaola and JD.com retired at 22.6 per cent and 13.7 per cent respectively.
Despite a weak presence in China, Amazon's vast global reach could be a sought after asset for its local rivals. "Netease needs to get more inventory and it's difficult because they don't do marketing as well as Alibaba abroad," said Ivy Shen, vice president of Shenzhen-based cross-border e-commerce startup, Azoya, to TechCrunch.
"Kaola is also opening more offline stores, so it may need more capital to expand, and Amazon can provide that capital. The cross-border market is not big enough for Amazon, but the online store can be," said Shen.
NetEase is best known as China's second largest gaming publisher after Tencent, but its success dates back to the PC era where it ran a popular news portal and e-mail business, and over the years, the Hangzhou-based company has reinvented and jumped into a wide range of ventures including streaming music, a segment competing with Tencent's QQ Music; comics, which it sold to Bilibili, an anime streaming business supported by Tencent and Alibaba; and e-commerce, a device that has recently driven a lot of its growth and contributed 27 percent of its total revenue in the last quarter.