Amazon Built Its Name on "One-Click." In China's Cross-Border Shopping Boom, It Moved Too Slow | Top 15 Annual Report

Amazon China had an edge in helping Chinese shoppers buy from abroad that JD.com and Tmall could never match. But its hands were tied.

In 2015, nearly every e-commerce player in China, large or small, was chasing cross-border shopping.

Early that year, Liu Qiangdong personally led his team on a whirlwind tour of France, Australia, South Korea, and the United States, signing up overseas brands to sell on JD.com's global buying platform.

Meilishuo spent heavily to sponsor the reality show Running Man, where celebrities like Lu Han and Angelababy paused mid-sprint to tell viewers, with a straight face, what imported goods they could find on Meilishuo HIGO.

For Double 11, Tmall papered subway stations from floor to ceiling with ads for Tmall Global. Even Tongrentang, the venerable traditional-medicine brand, opened a website to sell imported health supplements.

The fourth Friday of every November is known as "Black Friday", the start of America's biggest shopping season. On November 27, 2015, this entirely foreign calendar was transplanted to China.

Subway cars, elevators, and television screens cycled through a barrage of red, purple, and black Friday ads from every cross-border platform. Even the thirty seconds before an American show streamed offered no escape from cross-border pitches. Yangmatou, originally a cross-border logistics company, had booked its late-November subway slots a full year ahead for its biggest annual promotion.

Data source: Carat Media

But in none of those subway cars, television screens, or elevator billboards would you find a single cross-border ad from Amazon China.

To promote Kindle in China, Amazon could turn an entire wall of the Jing'an Temple subway station in Shanghai into a library. In the United States, it papered the New York subway with Nazi imagery to push its original series The Man in the High Castle. But none of this touched Amazon China's retail business.

Amazon's New York subway ads: modified German Iron Crosses and Japanese Rising Suns printed on cars passing through Times Square

After running subway ads in 2011 to mark the launch of the z.cn domain, Amazon never ran another e-commerce ad.

Not even in 2015, when cross-border shopping went mainstream.

Cross-border shopping should have been Amazon's moment

If any e-commerce company had the structural edge to bring the world's goods to China, it should have been Amazon. Data from Smzdm (What's Worth Buying) showed that half of all do-it-yourself overseas shoppers bought from Amazon in the United States. And the products cross-border platforms pushed hardest came mostly from the United States, Germany, and Japan, countries where Amazon was, without exception, the largest online retailer.

A few years earlier, buying from abroad was nowhere near as easy as it is now. Even if you muddled through a foreign website with translation software, getting the goods home was another ordeal. To hunt for deals across an ocean, you needed a dual-currency or overseas credit card, a tool to get over the wall, and an account with a package-forwarding company.

Most overseas orders could ship only to a forwarding company's address, which then reshipped to your address in China. After a month or two the package might finally land in China, only to sit in customs for days. And if something was wrong when you opened it, or it had been damaged in transit, you were out of luck: returning it could cost more than the item itself.

The sheer friction of cross-border shopping was an opening for Amazon. Amazon had spotted it early, tracking the Chinese users who visited its American site: the product pages they opened, the items they saved, the orders they placed.

"Based on data from Amazon US, we saw more and more Chinese IPs visiting Amazon in America," Zhao Li, Amazon's senior manager for cross-border business, told QDaily in an earlier interview. "We check the database regularly to see which products Chinese IP addresses browsed most over the past six months, even if they never bought."

Just as Amazon had held the "one-click ordering" patent since 1999, shrinking cross-border shopping to a single click was, in principle, no great feat for the company.

Most cross-border shoppers were already heading for Amazon's sites around the world, and those products already sat in Amazon's supplier system. The hardest part of cross-border shopping, international shipping, was also a solved problem: Amazon US could ship straight to Amazon China, with no forwarding company in between.

None of this was infrastructure that Alibaba, JD.com, Yangmatou, or anyone else could count on.

As one of Amazon's fourteen sites worldwide, Amazon China had to stay aligned with global headquarters in almost everything: website design, operating systems, even the habit of not advertising.

A single global back-end spared Amazon China from much of the software-development load, but any change to the China business still had to be coordinated with headquarters.

"When we talk about the best time to plant a tree, the first best time was a hundred years ago, and the next best time is today." That was how Amazon China's recently appointed CEO, Ge Daoyuan, answered when asked, more than a year earlier, why it had taken Amazon so long after entering China to let people buy overseas goods directly.

Whether that "next best time" meant rivals had proven the business worked, or that US headquarters had finally been talked into helping Amazon China build it, 2015 was the year Amazon China got serious about cross-border shopping.

On November 11, 2014, Amazon launched a "Hai Wai Gou" (Overseas Buying) channel that showed Amazon's overseas inventory directly to Chinese shoppers. Without jumping to the American site, users could search and browse products from Amazon US in Chinese.

But localizing the pages took time, and a product on the US site might fall under a different category on the Chinese one. During the early trial, Chinese users had very few options, just 80,000 products across baby, apparel, footwear, and outdoor goods. To buy, they still had to log in to an overseas Amazon account, enter an address in English, and pay with a foreign-currency credit card.

By August 2015, the Overseas Buying channel had merged the Chinese and American accounts. By then you could buy Amazon US products directly on z.cn and in the Amazon China app, and pay with a UnionPay card.

Today, Overseas Buying carries more than 9 million products across every major category. "Even as I stand here speaking, our Overseas Buying inventory keeps growing. It's an automated process now," Niu Yinghua, Amazon China's vice president for international brand strategy, told QDaily.

Overseas Buying got this far mainly because Amazon is a technology company

In the first quarter of 2015, Amazon reported financial results for Amazon Web Services (AWS) for the first time. Over the next year, Amazon's market value rose by $143 billion, doubling.

AWS is a business built on internet infrastructure. Its customers don't build their own data centers; they pay to use Amazon's computing resources, spread across the world, to host websites, store data, and run complex calculations.

Since the late 1990s, Amazon founder Jeff Bezos has insisted that Amazon is a technology company, not a retailer. Today that holds up.

What sells, who buys what and where, the user data needed to choose products for the platform, were all resources Amazon already had. For both direct overseas sourcing and Overseas Buying, the key to picking products was mining the data on what Chinese shoppers browsed and searched on Amazon US.

That is how the count grew from an initial 80,000 products to 2 million, then 4 million, 7 million, and 9 million, and how Amazon chose the "flash sale" items shipped from bonded warehouses inside China, which launched in August 2015.

While large platforms like Tmall Global and JD.com had to negotiate supplier deals market by market, Amazon China did not.

Amazon China vice president Zhang Saiying once told QDaily that thanks to suppliers' existing relationships with Amazon's local teams, the whole sourcing process had shrunk to a single step: a supplier ticks a box on its contract with Amazon US, "consent to sell products outside the United States," and the product goes live on Overseas Buying automatically.

Pricing needs no manual touch either. Amazon runs a pricing algorithm: in plain terms, a bot constantly scrapes rivals' prices for the same product and, if Amazon's price is not the lowest, cuts it to the lowest.

The cross-border shipping that every rival had to build from scratch was, for Amazon, already part of one global network.

Over the past decade, Amazon built a logistics network in China second in scale only to North America. Inside the warehouses Amazon calls "fulfillment centers," computers work out each worker's best picking route and send it straight to the handheld scanner in their hand. The digital management runs down to predicting, by computer, how many temporary workers to hire each month and how many overtime hours each week.

Today, an order from a Chinese user can be processed within an hour, shipped from a US warehouse, and loaded onto one of the flights that leave for China every day.

After clearing customs in China, the order passes to Amazon China's delivery network. Every Overseas Buying order that reaches a fulfillment center is handled within 24 hours, and in practice it rarely takes that long: one more sorting pass and the overseas goods are loaded onto trucks bound for customers.

Backed by Amazon's technology and the low prices its lead in the US, German, and Japanese markets won it, Amazon China could hardly fail to show some results.

In the first ten months of 2015, Chinese shoppers' cross-border purchases on Amazon already matched the total of the previous twenty years combined. Amazon China's annual user count grew more than tenfold, and sales of "direct overseas sourcing" products sold inside China rose 150 percent.

On Black Friday two months earlier, Amazon China sold nine times as many overseas products as it had on Double 11. At a recent forum on cross-border shopping trends, Amazon China's spokespeople seemed plainly pleased with the figures.

But against the bustle of China's cross-border market, Amazon China still does not count as a major e-commerce player.

On that Double 11, themed around globalization, 30 million Chinese shoppers bought imported goods on Tmall. Tmall Global general manager Liu Peng said that, judging by the trend over the first 20 hours of November 11, Tmall Global's total imported-goods sales for the day would match the annual total of all other cross-border import platforms in China combined.

On the Apple App Store charts, Xiaohongshu and Yangmatou each climbed to the top of the shopping category during Black Friday. Amazon hovered around 20th to 30th, reaching only 14th even on Black Friday itself.

Just as she would not reveal Overseas Buying's 2015 sales, Niu Yinghua gave no numbers for Amazon Overseas Buying's 2016 forecast, saying only: "All I can say is that it's a pretty aggressive target."

For Amazon, the market it faces in 2016 will only grow more complicated.

In China, what Amazon needs to simplify isn't the buy button

From the day it started cross-border shopping to the day it gave Chinese users a true "one-click overseas" purchase, Amazon took eleven months, or close to two years counting the work before Overseas Buying went live.

In its day, Amazon poured huge effort into one-click ordering. The year after it sold its first book, the company began filing for the one-click patent: Amazon stores the identity and payment details a customer enters on a first purchase, so that on the next visit, with no need to re-enter payment or address, the order is done.

In February 2000, Tim O'Reilly, the O'Reilly Media founder who coined "Web 2.0," organized an online protest against Amazon over the patent. Even Apple paid to license it for use on the App Store.

But simply copying a one-click button onto a Chinese page would not give Chinese users the same ease. American e-commerce users had practically grown up alongside Amazon; characters in Sex and the City and Friends bought books on Amazon, and the one-click system was built for American users used to paying by credit card.

In China, Amazon's page design, payment methods, and buying flow all clashed with local habits.

As phones and e-commerce grew together, every platform's main concern became grabbing users' attention through content on their phones and turning that browsing into orders. Amazon's product descriptions still read like the US site's, and Overseas Buying descriptions often bore the marks of machine translation. Rivals, meanwhile, were using live video, community haul posts, and editorial picks to stoke the urge to buy.

And in 2015, as mobile payment spread, paying through WeChat or Alipay had shrunk to a single fingerprint. Next to Amazon Overseas Buying's credit-card checkout, the ease of WeChat and Alipay payment counted for more than any "one-click" patent, even though Amazon's rivals held no such patent.

Any change Amazon China wanted to make to its app interface or back-end systems still had to be requested by the China team and approved by US headquarters before it could go ahead. That process was plainly too cumbersome against rivals like Alibaba and JD.com.

Whether Amazon China can use cross-border shopping to reboot its Chinese business: it is now pointless to ask why it took so long to solve "one-click overseas shopping." The real question is whether Amazon can, as it once did with its long-held patent, truly meet the needs of China's cross-border shoppers, rather than fixate on "what we have and what we can offer."

Whether it can manage the complexity that cross-border shopping holds for Chinese shoppers, and the complexity that the Chinese market holds for Amazon, is the hinge on which Amazon China's reboot will turn.

(Illustration: Xu Bingqing)

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