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Apr. 18 (NBD) -- Amazon.com Inc is preparing to close its Chinese marketplace business by mid-July, and to focus on cross-border business and cloud services in the country, Reuters reported citing a source on Wednesday.

In response, the e-commerce giant emphasized its strong commitment to the Chinese market in a statement, saying that it will continue developing other businesses in the country, including Amazon Global Store, Global Selling, Kindle and Amazon Web Services (AWS).

Tiny market share in domestic e-commerce domain

Amazon said Thursday it is notifying Chinese sellers that it will no longer operate a marketplace nor provide seller services on its Chinese website, disclosed Reuters.

Though shoppers won't be able to buy goods from third-party domestic merchants on the Chinese website, they can order goods from the United States, United Kingdom, Denmark and Japan via Amazon's global store, the company added.

It has been 15 years since the U.S. company set foot in the domestic e-commerce market in 2004 by acquiring the online retailing platform Joyo.com for 75 million U.S. dollars.

The fierce rivalry in China brings serious difficulty for Amazon China to keep a foothold in the country.

Last year, the firm's market share in the business-to-customer market plunged to 0.6 percent, down from its peak of 15.4 percent in 2008, data from research firm Analysys shows. Alibaba Group's Tmall and JD.com took the first and second place respectively with a market share of 61.5 percent and 24.2 percent.

"Amazon China has no obvious price and service advantages and offers fewer promotion compared to counterparts Tmall and JD.com," e-commerce analyst Li Chengdong explained to NBD. 

A consumer surnamed Xu also said so, adding that there are a wide variety of goods on Taobao and JD.com for customers to choose from.

An informed source also said that the e-commerce giant will shut down its logistics centers in China in three months.

Instead, it will go all out to develop its Kindle, Global Selling and AWS businesses. 

AWS, as the major income source for Amazon in the global market, generated 25.6 billion U.S. dollars worldwide last year.

In the fourth quarter of 2018, AWS became the third largest cloud infrastructure provider in China grabbing a market share of 9.7 percent, after AliCloud and Tencent Cloud, market researcher Synergy Research Group reported.

Reasons behind the giant's exit

Regarding Amazon's decision, analyst Michael Pachter at Wedbush Securities said, "They're pulling out because it's not profitable and not growing."

Insiders held that Amazon's Waterloo in China can be attributed to insufficient localization and the lack of decision rights of the Chinese operations' management team.

In contrast to other online platforms such as Tmall, JD.com and VIP.com which launch several shopping festivals throughout a year to entice consumers, Amazon is much more quiet.

Besides, Amazon directly copied the purchase page and payment process from American Amazon website with no adaption to the preference of Chinese consumers.

The Prime membership program, which was launched in October 2016 to compete with Alibaba's VIP loyalty program, was not well received in China, different from the popularity of Prime in the U.S. region.

The lack of rights to independently create strategy for the domestic market expansion resulted in a laggard response to the fast changing sector. JD.com's founder Liu Qiangdong once pointed out insightfully that Amazon shows no trust in its Chinese team. 

Wang Hanhua, then head of Amazon's China operations, admitted the unit always played a role as operation center rather than decision-making center in the e-commerce giant's global system.

Email: lansuying@nbd.com.cn