Amazon.com will increase its spending on its money-losing online retail unit in China to bolster sales in the largest Web market behind...
Amazon.com will increase its spending on its money-losing online retail unit in China to bolster sales in the largest Web market behind the U.S.
The Chinese Web site, renamed Joyo Amazon.cn today, is the company’s fastest growing by sales, Chief Executive Officer Jeff Bezos told reporters in Beijing, without providing figures. Amazon bought the Beijing-based unit formerly known as Joyo.com for $75 million in 2004. China is the only market where Amazon has kept the local brand in its official name because it is “established,” Bezos said.
“With something growing this fast and doing this well, as far as investment goes, we would like to double down,” Bezos said. “Double down is a term used in backgammon, which means when you like the odds, you want to increase the investment.” He declined to provide figures.
Seattle-based Amazon, the world’s biggest online retailer, will increase spending in China on warehouses, bicycle couriers and inventory to boost sales of products including books, watches, electronics and makeup, Bezos said.
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In the first quarter, Joyo ranked second in the local online retail market with a 12 percent share, behind Dangdang.com with 18 percent, according to Beijing-based researcher Analysys International. Sales in China’s electronic-commerce market may more than triple to 18.83 billion yuan ($2.5 billion) in 2010, from 5 billion yuan in 2006, the research firm said.
Same-day deliveries are available in Beijing, Shanghai and Guangzhou, where Amazon’s warehouses are located. The company allows cash-on-delivery payment in more than 330 Chinese cities, where most packages are sent by bicycle to speed up delivery in congested areas.
More than 70 percent of orders choose that payment method because credit-card usage is not widespread, said Wang Hanhua, president of the Chinese unit. Amazon is “actively looking at how to take advantage” of rising credit-card use, Wang said.
Amazon’s warehousing space in China totals 35,000 square meters, equivalent to the size of four soccer fields.
Amazon, founded in 1994, took seven years to be profitable in the U.S. and typically takes between five and seven years in other markets, Bezos said.
“We are very fortunate because we have the resources to continue to invest until the right time that business has the scale it can be profitable and start being a cash contributor,” Bezos said. “At the rate it keeps growing at, it may happen in a very acceptable time period” for the Chinese unit, he said, declining to be more specific.
Amazon’s sales from the U.S. and Canada fell to 54 percent of total revenue in 2006, from about 90 percent six to seven years ago, Bezos said. Sales from international sites including China, France, Germany, Japan and the U.K. accounted for 46 percent, he said. The company doesn’t break down revenue by countries.
Contributions from international sales will increase and outpace that from the U.S., Bezos said, without giving a time frame.
Amazon will be “practical and open minded” when considering more acquisitions in China, he said.