Will Kindle’s early success in China be the beginning of a renaissance for Amazon in the country? Maybe.
After years of speculation, Amazon released its Kindle Paperwhite and Kindle Fire HD in China on June 7. Despite many analyst projections that the Kindles would struggle in the competitive Chinese e-reader and tablet market, a recent report by the Financial Times indicates that the devices have proven extremely popular. If these reports are accurate and the Kindle continues to sell well, its release could be a rebirth for Amazon in China, a country where the internationally popular tech giant’s e-commerce services have languished. Such a rebirth would initiate the beginning of a brave new era for Amazon in the Middle Kingdom, one in which its success is dependent not on its traditional strengths, such as e-commerce, but rather on its newer products and services, such as digital content distribution.
The Kindle’s road to China was long and tumultuous. Rumors of an impending Kindle release in the country began in early 2010 and were particularly prevalent in the six months preceding its launch, a period which included the Chinese Kindle Store’s December launch and the Amazon Appstore’s China debut in early May. Along with these rumors came many assessments on the likelihood of Kindle achieving success in China. Most of them were negative, exemplified by an editorial in the state-run Global Times, which predicted the Kindle line of products would “fizzle” in China and a TechNode column that laid out “Why Kindle in China Won’t Work.”
The logic underwriting these projections was driven by three simple facts:
1) The e-reader and tablet market in China was already highly competitive, with both domestic and international players present.
2) Piracy in digital content remains rampant, undercutting the ability for its purveyors to profit. AND
3) Amazon’s track record in China is poor. Despite entering the Chinese market through the acquisition of China’s top online bookseller in 2004, Amazon currently holds a paltry less than one percent share of the e-commerce market. The company has also been slow to release its latest products and services in China andlost its long-time head of in-country operations amidst a cloud of rumors late last year.
Nearly a month after the Kindle’s release, however, the argument that the devices will fail in China is looking extremely shaky. Indeed, according to a late June Financial Times report, the two Kindle products released in China – the Kindle Fire HD and Kindle Paperwhite – sold out “almost immediately.” So quickly, in fact, that many Chinese consumers began putting their names on waiting lists to make sure they can get their hands on a device sooner rather than later. Suning, the Chinese electronics giant that is teaming up with Amazon to distribute the Kindles, reportedly referred to the product’s first round of sales as “spectacular.” While these early results aren’t enough to proclaim Kindle a bonafide success in the country, they certainly are promising news for the Seattle company.
Kindle’s early results also inspire new questions about Amazon’s trajectory in China. Could the Kindle’s success drive a dramatic turnaround in Amazon’s fortunes in the country? It’s no secret that the profits Amazon accrues from Kindles come not from the sale of the hardware, but rather from the sale of the digital content distribution the hardware enables. Putting Kindles in the hands of Chinese consumers eases the process by which Amazon can sell them books from the Kindle Store and apps from the Amazon Appstore, which remains the only fee-based Android app store in China. In short, the Kindle is a gateway to many, many more sales by Amazon to the device’s buyers.
Will these sales be enough to transform Amazon from a company that is “losing” in China to one that is reaping profits? That remains to be seen. If Amazon does succeed, though, it will mark the beginning of a brave new era for the company’s China operations.
Though Amazon has come a long way since its early days as an online bookseller, it remains best known for its original service – e-commerce. In China, however, the battle for e-commerce supremacy appears to be over – Alibaba has emerged king while Amazon, with less than a one percent market share, “missed the bus.” Thus, if Amazon is to achieve success in the Chinese market, it will have to do so not on the back of the core services on which it was founded, but rather through its more recent innovations, like digital content distribution.
Simply put, if the Kindle’s popularity is the beginning of a profitable new era for Amazon China, it will be one in which the international e-commerce phenom succeeds in spite of, not because of, its e-commerce market share. Is that even possible? Stay tuned.
Editor’s Note: contextChina is a Seattle-based media company following the growing impact of China on the Pacific Northwest across business, technology and policy. You can follow contextChina on Twitter @contextchina.