Amazon is struggling to duplicate its US success overseas

Amazon may rule in the US, but it’s a very different story overseas.

The company’s quarterly earnings on Feb. 1 showed US sales accelerating to $37 billion last quarter, a 42% increase from a year earlier. Overseas sales also rose to a record $18 billion last quarter, but quarterly growth rates were flat: 29% year-on-year, the same rate as the previous quarter.


A look at Amazon’s international activity last quarter suggests why. Most of the moves highlighted by Amazon on Feb. 1 were in small countries: it launched a retail and third-party market offering in Australia, while introducing Prime in the Netherlands, Luxembourg, Belgium, and Singapore. Compared to China and India, those markets hardly move the revenue needle for Amazon.

It’s not for lack of trying. In June 2016, CEO Jeff Bezos announced a total $5 billion commitment to fuel the company’s growth in India, while doubling down on its expansion in China. Those investments have yet to return big dividends. Amazon told company shareholders during a recent presentation that most of its international losses were due to heavy investments in Indian subsidiaries. Flipkart, backed by billions from investors including Softbank, Tencent, eBay, and Microsoft, is aggressively fighting for market share.

In China, Amazon faces even tougher trials competing with Alibaba in an environment hostile to foreign companies. Where Flipkart’s focus on commerce has left Amazon room to peddle its other offerings, Alibaba has matched and often beaten Amazon’s portfolio diversification. Before Amazon acquired Whole Foods, Alibaba had already begun its expansion into brick-and-mortar retail. Alibaba’s cloud services division, AliCloud, rivals Amazon’s AWS. Alibaba also has a significant advantage that Amazon simply can’t compete against: its CEO, Jack Ma, “couldn’t be on better terms with Xi Jinping,” writes Niall Ferguson, a senior fellow at Stanford University’s Hoover Institution. Today, Amazon’s share of the Chinese market is stuck below 1%, according to iResearch.

Amazon tried to paint the recent slowdown as a reflection of a strong third quarter. It cited third quarter sales from “Prime Day” that allowed customers with Prime memberships to access special deals as a reason for a flat fourth quarter. “India continues to be a good story for us,” Brian Olsavsky, Amazon’s CFO, told investors on the call. “We feel that it’s had a lot of growth in the past year. In fact, more Prime members joined India’s Prime program in the first year than we’ve seen in any other country in the history of the world.” He said the company would pursue the same international strategy as it has in North America by adding Prime benefits, devices, video content, AmazonFresh, Prime Now and other services.

As Alibaba and Flipkart expand their beyond their respective home countries, Amazon’s opportunities to develop new international revenue will only narrow.

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