Amazon failed in China because of business issues, not the government - Shaun Rein

Shaun Rein

Amazon was the latest online Western casualty in China. The US company has been clueless in organizing its business in China, and it was not the government who killed Amazon, says business analyst Shaun Rein, author of The War for China’s Wallet: Profiting from the New World Order in the Voice of America.

The Voice of America:

China is considered by many as a difficult market for foreign players even without taking into account hindrances caused by government policy. In the case of Amazon, however, analysts said the reasons for its poor performance lie in its not being able to localize to meet the requirements of the market. 

Shaun Rein, managing director of Shanghai-based China Market Research Group (CMR), said Amazon's Chinese platform could not survive because it did not have a strong and stable management team. He does not think Amazon was hampered by government policy. 

"I don't think it is a problem of government protectionism," he said, adding, "They (Amazon executives) didn't have the necessary relationship in China and were unable to build the right ecosystem for people to sell on Amazon." 

Getting a large number of local sellers is crucial for an e-commerce platform to provide goods at competitive prices and in sufficient variety to customers... 

Foreign internet-based businesses have very little presence in China, which has the biggest number of web users in the world. This is partly because a large number of U.S.-based sites including Google, YouTube and Twitter are banned, while e-commerce companies have walked away. Amazon's departure will likely only make it harder for other foreign retail companies to succeed there. 

"I think it would be very hard for large e-commerce players from foreign countries to build in China. It is still possible for niche players like there are opportunities in luxury space and cross-border trade," Rein said. 

American and European brands will have to depend heavily on local e-commerce companies like Alibaba and jd.com to see their products, analysts said. Although Amazon will continue to sell foreign-made goods, its reach is limited in China because local companies dominate the cross-border trade as well. 

"Unfortunately, Alibaba is almost a monopoly in some ways and they have way too much power because they control the eyeballs," said Rein, adding, "They (Alibaba executives) control traffic so they are able to force Western brands to discount even if Western brands do not want to,"Rein said. "Alibaba controls the relationship with the customer rather than the brand controlling the relationship with the customer."

More in the Voice of America.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on e-commerce in China? Do check out this list.  

China Weekly Hangout: hashtag #CWHCWH

Hashtag  

Tomorrow we will use the China Weekly Hangout to try a new commenting feature. You can leave questions and comments at Twitter, Google+; make sure you use the hashtag  (You do not have to try it now :-))
Also comments on our YouTube channel will be monitored real time. Relevant messages will to displayed during the hangout. If you are not participating in the hangout (you can register here), you can still share you messages with us.
Participants in the hangout will get instructions on how to use this tool, if they want to. You can ping me at +Fons Tuinstra for more instructions.
The original invitation you can read here. 

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A short survey for the China Weekly Hangout 2013

Local man setting off a firework in downtown Shanghai, during Chinese New Year. (Photo credit: Wikipedia)

In September 2012 we started the China Weekly Hangout. We expect to resume broadcasts again around Chinese New Year, but also want to know what you think and how we can improve.
I have posted the survey here, but will send it out also tomorrow by the different tools Google+ is offering, at a time that more people will be working and watching the internet.

Why a blanket ban of Google will not happen

Internet Access (Photo credit: whurleyvision)

China's leadership is gathering in Beijing for the meeting of the Communist Party and that typically means internet censorship is turned a notch higher. Filters work at full speed, and internet speed is even lower than normal. It is not only heavy filtering; in my time in Shanghai during high-profile gatherings, internet speed for visiting delegations, including journalists, had to be guaranteed, often at the expense of residents and regular companies, who suffered from lower capacity. That might still be the case for the poor citizens of Beijing.

In this sensitive climate, where everybody is a bit itchy, you find a fertile ground for hoaxes. Last week the first hoax was that 'somebody' had been messing around with the twitter accounts of foreign correspondents in China. Journalists discovered they had to reset their pass words after getting a warning from Twitter suggestion possible malicious use of their accounts. In this case it proved to be a problem of Twitter itself, who had mistakenly reset the pass words of 20 million accounts worldwide. Foreign correspondents in China gave their own twist to the event, and it took a few hours to discovered they shared a problem with millions elsewhere in the world.

Second hype was the supposed blanket ban on Google, initially reported by Greatfire.org. They actually suggested China was heading for a full closure of the internet, not only limted to Google:

Many VPNs and other circumvention tools have been working poorly or not at all in the last few days. The free iPhone app OpenDoor is still working, though it has also suffered glitches recently. Another method of accessing Google Search is to use one of their other country versions such as http://www.google.co.uk https://www.google.co.uk orhttp://www.google.ca https://www.google.ca. These may also be blocked of course.

Many media took the story for granted and copy-pasted the story. (At the bottom you find a nice selection of media reports on this issue.)

I was suspicious from the start. I got emails and even had a Google Hangouts without any problems. Nobody from my contacts in China reported they were having other problems in stead of a slow internet connection. Of course, in China you regularly have problems with your internet, but nothing suggested a blanket ban of Google, VPN's or a combination of both.
A day later Greatfire.org reported the Google blocked was over, and offered a few explanations for the hype they caused. One option they did not mention: there might have been no blockade at all. If there has been a blockade, it was at least not noticed by many. At their website, Greatfire speculates a bit on the reasons for the blockade nobody else noticed.
There are good reasons, why such a blockade would never last very long. During my time in China I learned that Google, VPN's and proxies were not only needed for the foreign community. Large sections of the Chinese government depends on those tools, so they can monitor what is going on. Some services are blocked, like Twitter and YouTube, since China is offering domestic services that work of better for Chinese users. But a blanket ban of crucial services? That would be big news if it would be true.
Also Chinese journalists would at their first working day get a VPN (in my days actually developed by the Falun Gong), because they needed access to blocked websites too. With that experience as background, I tend to find every story about a blanket ban on China's internet highly suspicious.

While it is certain, filtering of the internet is in full swing during tense times, few people on the ground in China supported the claim of a blanket ban. So, why would a rumor like this be launched? I have a suspicious nature and would assume here an NGO is looking for funding, and might be a bit less critical just to get some headlines?
You think my theory is too far fetched? If I find enough participants we will hold on short notice a (Yes, Google) Hangout where people can share their experiences from China. If it works out, the YouTube video will appear here, at my profile in Google+. If you want to participate, or host the video at your site, drop me a line. Let me also know what time works best for you.

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Why are foreigners leaving China? - China Weekly Hangout

A Hangout in action

When all goes well, on Thursday September 6 the first China Weekly Hangout will take place. Planned subject: why are foreigners leaving China?

A group of high-profile foreigners has draw attention to the changing situation in China and the position of foreigners. Why are they leaving, and does it say something about those foreigners, about China, or both?

During the first China Weekly Hangout we will focus on this issue, hopefully with a few of those who left as participants: in Google+ Hangouts we can bring together people from different continents, so that makes the subject a neat one for our first hangout.

There are different ways to participate and follow announcements on future China Weekly Hangouts. This weblog will feature the hangouts and some of the official announcements, but when you follow our China Weekly Hangout page at Google+, you will miss nothing. Everything is subject to change.

Despite this warning, a few notes on the logistics. The official hangout can be attended by a limited number of people, a maximum of nine. But since a moderator, a technical person and three or four panelists will get preferential access, additional places are limited. If you are interested (or a returnee yourself who wants to participate), let us know. It is useful when you have signed up for Google+ but not necessary to participate.

The rest of humanity can watch a live stream on YouTube and participate by sending questions and comments. We will keep a few places open, so we can even invite people during the hangout (This is literally, there is no limitation on the size of the audience.) We are still discussing the logistics of comments during the hangout, but for the time being, you can leave suggestions here at the comments or send them by email. The session will be recorded on YouTube, and will be available here. Ahead of time we will announce the event and shortly before the hangout starts the YouTube link will be available. It will be hosted on this weblog, and if you think this is such an exciting event you want to host it on your website, drop us a line. 

Typically, our China Weekly Hangout will take place each Thursday 9pm Beijing Time, 3pm CEST and 9am Eastern. Both subject and timing can vary though to facilitate the participation of panelists and your humble moderator. We picked this time, because it allows most time zones to participate.

We try to limit the hangout to 45 minutes max.

Planned subjects for the rest of September are: 13/9: Chinese investments abroad; 20/9: internet censorship in China; 27/9: Favorite tourist destinations for Chinese.

Did we forget anything? Most likely, so stay tuned.

Update: You can sign up for our last session to prepare the launch here. 

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