Amazon in Emerging Markets

The Entry Strategies of Amazon in Emerging Markets

When it comes to emerging markets, Amazon did make several right decisions in terms of its entry strategies. Before it entered the Indian market, Amazon had nearly a decade studying Indian costumers’ preferences based on various factors (e.g., age, location, gender) through their website Junglee.com. The knowledge that Amazon gathered was useful to the company in developing its strategies. Not only Amazon was able to learn from its customers, but also its main competitors. Because Amazon entered the Indian market relatively late compared to its main competitors, Amazon was able to learn from the mistakes of its competitors. These reasons explain why Amazon decided to invest big right from the start rather than making piecemeal investments. Due to Amazon’s inability to sell its own products in India as what it has been doing in the US, entering the Indian market sooner would not have made Amazon gain any advantages. In fact, Amazon could have encountered some disadvantages if it would have entered the Indian market sooner. The company would not have been able to learn from the customers as well as its competitors. After entering the Indian market, Amazon quickly built its own distribution network as well as differentiated itself from its competitors. Since Amazon can only function as a marketplace, these strategies have allowed it to maximize its share of the Indian market.

In the case of China, Amazon made a smart move into the Chinese market. By acquiring Joyo.com for $75 million, which is a relatively low price, Amazon was able to gain access to one of the best growth areas geographically. However, Amazon’s investment in China has not paid off as it did in other emerging markets. Until 2013, the Chinese e-commerce market was dominated by Alibaba, and Amazon was only able to hold a one percent share of this market. To improve its situation in China, Amazon launched its Kindle e-reader in China in June 2013. Amazon should have launched its Kindle earlier. Amazon’s Kindle was undoubtedly a pioneer in the e-book industry in the US. However, by the time Amazon launched its Kindle, the Chinese market was crowded. At that time, some of Amazon’s competitors had a larger number of Chinese-language books than Amazon’s Kindle Store. Furthermore, Chinese customers could read Kindle books using the Kindle app on their Apple or Android devices. All these factors made it harder for Amazon to increase its share in the Chinese market. With respect to the logistics operation, Amazon’s strategy was sensible. When Amazon entered China, the logistics service in China was immature. Amazon made a smart choice by establishing a delivery team of its own. Amazon employed drivers who make deliveries using their own vehicles (e.g., bicycles, motorcycles, and scooters). Because of this, Amazon has been able to deliver fast and fulfill orders on special occasions (holidays, New Year, etc.). Nevertheless, Amazon still faced fierce competition. Its competitors have also invested in their contribution networks. Amazon is not really successful in China, and it needs to differentiate itself furthermore to be able to increase its share in the Chinese market.

In the case of Brazil, which is another emerging markets, Amazon’s choices were reasonable as well. Until 2014, Amazon was able to hold a sixty percent share of Brazil’s digital market. Amazon first entered Brazil by introducing Kindle Store in spite of Brazil’s corrupt bureaucracy, poor service, and infrastructure. By doing this, Amazon was able to minimize the risks and claim its share in Brazil’s market. Because of the bad infrastructure, Amazon has outsourced its logistics to local companies. Although Amazon could avoid all the risks and costs by leaving logistics to its Brazil partners, its delivery time is longer than that of Saraiva, which is one of its main competitors. Amazon should decrease its delivery time to improve its competitive advantage. Another smart move by Amazon is that it has not offered big publisher discounts. The company’s current discount rate is lower than that of other competitors. Amazon has not been really demanding in its discount negotiation for acquiring books from Brazilian publishers. This strategy has enabled Amazon to formalize contracts with over thirty publishers.

Some people may ask whether Amazon should enter additional emerging markets immediately. The answer to this question depends on those markets’ conditions and how well Amazon understands those markets. Amazon should pay more attention to Southeast Asia. Like in Vietnam, the demand for e-book increases with the need for Amazon’s Kindles. Yet, it is challenging to buy e-books directly from Amazon in Vietnam. Vietnamese customers have to buy e-books from third parties and go through a complicated process. The demand for e-books and Amazon products is high not just in Vietnam, but also in other Southeast Asian countries. China has influenced Vietnam and other Asian countries for a really long period of time. Therefore, customers’ preference based on age, gender, or location in Southeast Asia is somewhat similar to that of China. Amazon could take advantage of this when it enters the Southeast Asian market.

Besides, it’s not sustainable for Amazon to simultaneously pursuit geographic, horizontal, and vertical expansion in emerging markets. The horizontal expansion means providing similar products or services in different locations. This is costly to Amazon since different locations have different types of economic conditions, lifestyles, or populations. The vertical expansion means providing a broader range of products or services in one location. This kind of expansion is more useful to Amazon since, in some countries (like China and India), it’s not really successful. By broaden its products or services to customers, it may be able to differentiate itself from its chief competitors. In terms of geographic expansion, it is necessary that Amazon should pursuit this kind of expansion. As said earlier, Southeast Asian countries are in high demand for Amazon’s e-books and Kindles. If Amazon does not enter these markets soon, other companies may take over (e.g., Alibaba already launched its Taobao service in Singapore). To sum up, it is not useful for Amazon to pursuit geographic, horizontal, and vertical expansion at the same time. Instead, it should focus on strengthen its business in some countries that it has not been really successful by vertical expansion and enter new potential markets before its competitors take over by geographic expansion.

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