Reading between the lines of Amazon’s Q1 earnings statement reveals international expansion is becoming more of a priority for the retailer. Keywords such as “global, expand, Germany, and India” were all frequently used by the Jeff Bezos brain trust to describe recent accomplishments.
Indeed, one in three net sales dollars earned by Amazon in 2016 came from markets outside North America. Growth abroad is roughly inline with domestic growth fluctuating between 23-28% YoY in 2016.
Profits, and Amazon strategies for growth, vary by market. Amazon’s seller services such as Fulfillment by Amazon give it an advantage over competing retailers in developing markets such as India, where the transportation of goods for small- and medium-size merchants is expensive and complex. Accordingly, Amazon has been increasing its share of the e-commerce market in India while local competitors Flipkart and Snapdeal are both losing share.
By contrast, Amazon has largely conceded defeat in China to Alibaba as it current offerings provide little value to local or international merchants. Rather than selling directly through Amazon.cn, some brands may be better off selling cross-border to China via one of Amazon’s other localized marketplaces.
Meanwhile in nascent markets such as those in the Middle East, Amazon is seeking growth through acquisition; most recently, the buyout of Souq.com. The $800 million purchase gives Amazon increased visibility in Bahrain, Qatar, and the UAE, all which have internet penetration rates above 90%.
So far, Amazon appears to be more focused on succeeding in India than trying to cover its losses in China where the retailer controls less than 1% of the e-commerce market. Amazon executives are stressing to shareholders that the company will “keep investing in technology and infrastructure while working hard to invent on behalf of small and medium-sized businesses in India.”
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