It’s been nearly two years since Amazon was poised to launch its B2C ecommerce platform throughout Asia-Pacific. How well has it gone – and should marketplaces and brands still be worried?
In a post from June 2nd 2017 I wrote about how Amazon was poised to launch in Asia-Pacific and regional retailers were about to experience the ‘Amazon effect’.
At that time, Amazon had not yet made a formal announcement about its plans for the region but early in 2017 the company had reportedly rented 100,000 sq. ft of warehouse space in Singapore and was advertising for 100 roles in Sydney.
So, since then, what has happened? Has Amazon been as successful in Asia Pacific as in other countries? And, more importantly, should those who have the most to lose from Amazon succeeding in Asia-Pacific still be concerned?
To answer these questions, Econsultancy recently held a Digital Outlook 2019 event in Singapore. Amazon’s current and future role was one of the many topics covered in the Digital Trends section on the day, a summary of which is presented below.
Amazon’s recent struggles in Asia Pacific
It turns out that Amazon was indeed hiring in Sydney in January in 2017. By December of that year, Amazon launched a full-service Amazon site in Australia, similar to its country sites in Japan, Canada, Brazil, the UK, and several other European countries.
According to its tax filings in 2018, though, things did not start well. In its first month of operations, Amazon Australia reported a A$9m loss with just over A$17m in revenue.
Additionally, the company faced a crisis in 2018 when, due to Australian tax laws, it barred Australians from buying from any other country’s Amazon site (though the company reversed this decision later in the year).
Merchants, too, expressed disappointment. Many had invested thousands to set up their Amazon operations and start advertising, but few reported positive returns.
This bleak picture led Australian retail industry website Power Retailer to conclude late in 2018 that Australians ‘have high expectations for Amazon that aren’t being met’.
Amazon did indeed start operations in Singapore in 2016 renting warehouse space and then officially launched on 27 July 2017.
Amazon Singapore, however, is significantly different from its offering in other markets. Called PrimeNow, the platform is a scaled-down version of its full-service site and available on mobile only.
It’s difficult to say how Amazon is doing in Singapore as numbers aren’t reported, but the few signs aren’t good:
- The Amazon Prime App is in not currently top 100 of app store downloads on App Annie (as of March, 2018)
- Singapore Business Review reports that Amazon’s category in the country (online groceries) is only 2% of the total grocery market and that Amazon has a ‘measly share’ of it.
- Amazon faces competition from several platforms which are well-established in the country such as SEA’s Shopee, Korea’s Qoo10, and Lazada which is majority-owned by Alibaba.
Overall, Singapore’s Business Review concluded that Amazon’s ‘bid for ecommerce supremacy’ is ‘falling short’.
Perhaps the most vivid indicator of Amazon’s struggle to gain a foothold in Asia-Pacific is the sorry state of its presence in China. According to China Internet Watch, Amazon commanded just .6% of the B2C ecommerce market in Q4 2018.
This is down from 2% in 2016 and around 1/100th of the current market leader, Alibaba’s Tmall. And while pesky details such as how market share is measured (i.e. whether to include international orders), Amazon is far from achieving the same success in China that it enjoys in other countries.
In fact, some analysts are wondering why Amazon stays in China at all. Amazon’s massive catalogue and short delivery times have been matched by local competitors and Amazon’s mobile experience, according to Business Intelligence, lacks localisation and ‘falls behind’ competitor apps.
Indeed, in a recent post in Harvard Business Review, Feng Li concludes that Amazon has ‘failed’ in China.
Down, but not out
At first glance, these reports seem to indicate that Amazon has failed in the Asia Pacific region as a whole, too.
Coming to that conclusion would be hasty – and wrong. Amazon has had two successful launches in the region and may yet succeed in many more.
First off, the biggest success Amazon has had in Asia-Pacific is its Japan operations. Since its debut as an online book-seller in 2000, Amazon has continuously innovated in the country to meet local tastes and consumer expectations. While the company has remained second to Japan’s local ecommerce provider, Rakuten, The Economist recently reported that Amazon had taken the lead with 20.2% market share, compared with Rakuten’s 20.1%.
The company’s success is the country is noticeable not least because Japan is the fourth largest ecommerce market in the world after China, the US and the UK. Japan’s market size makes it Amazon’s third largest international market, behind the UK and Germany (due to its larger market share in Germany).
The battle for ecommerce dominance in Japan may be far from over, but it is clear Amazon is still in the game with a fighting chance.
Amazon is enjoying success in India, too. Having previously committed to investing US$5 billion to develop its platform in the country, Amazon committed a further US$2 billion in 2018.
The investment has paid off. Recent reports state that Amazon now has the same market share (30%) as India’s previous B2C ecommerce leader and is posed to grow to 35% over the next few years.
As the size of India ecommerce market is growing fast, too, Amazon’s investment is now worth more than double its US$7 billion investment.
Australia may be Amazon’s next success story in the Asia-Pacific region. Previous reports about Amazon’s lackluster performance in the country were based on a month’s worth of sales data (December 2017) and anecdotes from consumers and retailers.
UBS, in its report Evidence Lab on Australian Online retail, took a more sober look at Amazon’s presence in the country. The report, which includes a survey of over 1,000 Australian shoppers and industry analysts, states that Amazon will eventually have a dramatic impact on retail in Australia, with some large domestic retailers facing a loss of a third of their revenue.
“In our view,” the report concludes, “[Amazon] ticks most boxes for a successful launch in Australia albeit the impact will vary by sector.”
Amazon in Asia-Pacific: The long-term view
So, back to the original question – should brands and market places in Asia-Pacific still be concerned about Amazon?
The answer is a qualified ‘yes’. Those who operate in India and Japan are probably already experiencing the Amazon effect including reduced margins for branded goods and a dramatic increase in consumer expectations for market place fulfillment.
For those in Australia and Singapore, it’s too soon to tell. Both markets have well-established ecommerce platforms already and Amazon is fighting an uphill battle. To stay safe, though, marketers should explore relationships with existing ecommerce heavyweights, but be prepared to learn the nuances of Amazon as their influence grows. Marketplaces should look for categories which are not popular on Amazon and seek to establish a niche before they arrive.
As for China, most brands and market places are already dealing with fierce competition in the country, and Amazon’s small footprint is unlikely to make a difference any time soon.
As for other countries in Asia-Pacific, it’s unknown what impact Amazon will have. The company will surely expand in the region, though, so ecommerce players should monitor the trade press for announcements that Amazon is hiring or renting warehouse space in the country.
Like with Singapore and Australia, Amazon may not strike quickly – but if Japan and India are any indication of its future strategy in the region, it will strike hard. It pays, therefore, to remain vigilant and prepared.