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You’ve got to know when to fold ‘em

Strategic Decision-Making

Even the New England Patriots have to send out the punting unit from time to time. If Belichick is facing 4th and 25 and the ball is on the Pats’ 10-yard line, they’re punting (unless, of course, desperation necessitates it). But desperation and Amazon don’t really go together. The clock isn’t ticking down on them any time soon. They’re not trailing in the game. So, it may come as a shock to learn that they’re punting on most of their business operations in China. It’s especially surprising considering Amazon is known for fighting through short-term losses to enjoy long-term gains. But, when you’re facing juggernauts Alibaba and JD.com, another Chinese e-commerce behemoth, in their own backyard, apparently Amazon has decided it’s 4th and long. “Let’s punt.”

It will all happen on July 18th, after which consumers logging into Amazon.cn will only be offered products from its global store. It will mark the end of a fifteen (15) year venture in China, which began in 2004 after Amazon bought an online bookstore there for $75 million.

Over the years, Amazon has invested in data centers and warehouses in China, and even programs designed to educate Chinese sellers on how to get their goods into the hands of Amazon customers. And, two (2) years ago they launched Amazon Prime in China to try and lure Chinese consumers into buying more Western products. They offered free shipping, to boot. But, Alibaba launched multiple counter attacks, including offering deeply discounted products manufactured outside China. You could buy American-grown produce, clothing manufactured in England, beauty care products from Australia, et al. It worked. Amazon was never able to garner more than a one percent (1%) market share there.

They’re not entirely washing their hands of China

Amazon hasn’t totally turned its back on the Chinese marketplace, however. Instead, they’ll now focus their efforts there on offering consumer products manufactured outside China’s borders. For instance, they’ll continue selling AWS (Amazon Web Services) and Kindle e-books. And, they’ll maintain their cross-border operations, which help ship Chinese goods to buyers abroad.

Next up for Amazon?

Amazon launched their website in India in 2013, and since then they’ve pumped billions of dollars into that market over the past six (6) years. They’ve purchased over fifty (50) warehouses in India, and, now that China has moved off Amazon’s radar—at least partly—they’re ready to shift focus and funds toward a market in which they believe they’ll have a better chance of competing.

Guess who else is ramping up their investments in India? Yep, Alibaba and JD.com. It’s 1st and ten—let the game begin.

Questions about Digital Transformation, new products on the horizon, or, better still, how your company can get the most from technology? Talk to the experts

If you’d like to learn about how GDT’s design engineers and solutions architects turn traditional, legacy infrastructures into innovative, agile machines that make customers more competitive, help them bring applications to market faster, and deliver a superior customer experience, contact them at SolutionsArchitects@gdt.com or at Engineering@gdt.com. They’d love to hear from you.

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