Amazon in China — an example of localization

Amazon’s entry into China is a lesson in understanding the local market and catering to its needs. The most obvious difference is Amazon delivering goods themselves, or at least making it seem like they are. Not only do they understand the local market, but they may even be using a lean approach.

I suddenly started seeing (Amazon’s URL in China) everywhere I looked. At the time, we were still living in Hangzhou — a second-tier city about 100 miles from Shanghai — so the ads on busses throughout the city donning Amazon’s smile stood out. Advertising is pervasive in China and I wouldn’t be surprised if I found babies with logos on their foreheads; but the sheer volume of ads with and the Amazon smile surprised me.

Amazon seemed to focus on books and a few other key categories when I first noticed them making their push, though the range seems to have expanded since then. The similarity between their approach in China and the US isn’t what I find instructive, rather it’s the changes they are making for the local market that should interest entrepreneurs and foreign companies.

Electric scooters everywhere you look

My wife was recently searching for cosmetics online. Although she usually buys them on Taobao (China’s eBay) she noticed and, trusting Amazon, thought it would be a better choice. Their prices were competitive and she was ready to make a purchase, but she noticed many reviewers complaining that Amazon’s delivery was slow.

She read more reviews and learned that Amazon offers to deliver products themselves — not via UPS, or a similar delivery company. This means an Amazon employee riding an electric scooter will deliver your goods to you. For any order over 29 RMB (approximately $5) you even get free delivery.

If you haven’t spent much time in China you may not know there are many delivery services — and they are surprisingly fast. Most of these services consist of guys on electric scooters delivering goods in their local areas, similar to bike messengers in New York or Chicago. But in China this swarm of electric scooters doesn’t just serve delivery companies, you also frequently see McDonald’s and KFC delivery guys zipping by on their scooters, with metal boxes and even helmets donning the golden arches or Colonel Sanders’ image. Having an Amazon employee deliver your products wouldn’t seem out-of-place in China — but it certainly surprised me.

Is Amazon thinking lean?

When searching Amazon for more information we found that their delivery service doesn’t just serve Beijing and Shanghai; they also cover many second-tier cities. We called Amazon’s customer service and confirmed that they aren’t outsourcing delivery in China — the customer service representative said they are delivering products themselves in China’s major markets.

Since Amazon’s push into China is recent, it’s unlikely they have suddenly hired an army of scooter delivery people across China. I think Amazon’s management is thinking lean: they’ve paid smaller companies throughout China to have their staff deliver their goods. Once they determine if is doing well enough to support a large infrastructure investment, they can buy these small companies, hire delivery people, or create long-term partnerships.

This isn’t completely different from what Amazon does in the US: partner with UPS, and some regional carriers, to secure low prices and predictable delivery. What’s interesting with is they understand Chinese consumers expect a large, foreign company like Amazon to have a dedicated delivery force. Not only does Amazon understand local expectations, they also launched with a limited range of categories. They started small, and are slowly adding to the list as they gain traction in China.

Lessons for entrepreneurs and large companies

Because Amazon hasn’t been in China for very long, we should be careful about drawing too many lessons from their story. Feisty competitors will surely make it difficult for them to succeed here. But here are some lessons for entrepreneurs and foreign companies in China based on what I think Amazon has done right:

  • Understand expectations — Understand what local customers will expect from your brand, and at least consider fulfilling those expectations. If locals think a large, American company would deliver their own products, you may want to do that even though it’s not part of your core business. Understand their expectations, and if you choose to ignore them do so deliberately.
  • Start small — Amazon certainly has the resources to invest in a massive workforce. Although I’m not certain, they probably partnered with local companies so it looks like they have hired delivery people, although those delivery people don’t actually work for Amazon. This is an intelligent and lean strategy that allows Amazon to experiment without making a large capital investment.
  • Don’t assume — Amazon has been wildly successful in the US. They could have assumed the same approach would work in China. They are more intelligent than that though, so they figured out how to localize their business. Scrutinize every aspect of your business model to determine if it suits the local market, and adjust it accordingly.

Have you ordered anything from ( Do you think this story has different lessons to offer? Do you think Amazon should start delivering products in the US?  Please share your experiences and thoughts in the “What do you think?” section below. And on your way down there why don’t you enter your email address to sign up for my email updates. That way you won’t miss any future posts.

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  • Summers McKay

    Great post Sameer. When we were there we noticed a fleet of the amazon scooters in Beijing. Surprised us all to see, but clearly something’s starting. Look forward to following your writing!

  • Sameer Karim

    Thanks, Summers. I wish I was with you guys when you saw the Amazon scooters in Beijing. I’ve been watching the streets in Shanghai looking for one so I can try to snap a picture, but haven’t been able to yet. I’m tempted to order something from just so I can take a picture of our delivery guy.

  • Rebecca

    I enjoyed reading this, interesting!

  • Sameer Karim

    Thanks, Rebecca!

  • Varun Nayak

    Great read Sameer.

    Considering the size of capex necessary to build a delivery the way they are going seems the right way to go – esp if they dont have a clear competitive advantage yet. What do you think AMZN value proposition is in China? (convenience or price or reliability or something else?)

    In the US once they start collecting taxes, they lose their price advantage to WMT. I dont see what adding capex of building out a distribution network would do in terms of incremental revenues.

  • Sameer Karim

    Thanks for your comment, Varun. I completely agree that building out the delivery service early would be risky and unnecessary, so they’re taking the right approach.

    I think Amazon’s value proposition varies by product category. For books, it will probably be low prices and maybe even a full ecosystem if they end up launching the Kindle in China — there are rumors that they will but I haven’t seen anything official yet. For most other products, though, their value proposition will probably center around trust.

    As I’m sure you know, fake goods are a big problem in China. If you’re looking for something fake, it’s certainly available. The problem is you often buy something the seller says is real, but it ends up being fake, even though you paid a hefty premium for the “real” product. Amazon is a strong foreign brand, so consumers will trust products sold through them and will probably even pay a premium for those products. That trust would also be very difficult for Chinese companies to replicate, so it’s a defensible strategy.