CASE 3-8 Amazon in Emerging Markets

In the spring of 2014, Amazon.com, Inc. (“Amazon”), saw its chief retailers from having over 51% ownership.1 As a result, Amazon
competitor in China, Alibaba Group, file documents with the could not replicate its U.S. business of selling its own products in
SEC for an initial public offering that could be one of the largest addition to serving as a selling platform for third-party vendors. In
in history. At the same time, its main competitor in Brazil, Merc- India, Amazon would only be able to function as a pure market-
adoLibre, sustained an approximate 40% loss in stock price despite place that would connect domestic sellers to buyers in the market.
several years of profitability, and its two chief competitors in India, For Amazon, these FDI considerations would be only the first hur-
Flipkart and Snapdeal, formed separate mergers with other related dle encountered in the nascent but fast-growing Indian e-commerce
firms. The intense battle for control of a country’s e-wallet was noth- market.
ing new to Diego Piacentini, senior vice president of International According to World Bank data, as of 2013 India had approxi-
Consumer Business, and Jeff Bezos, founder and CEO. Their deci- mately 189.1 million Internet users (15.1% of the 1.25 billion popu-
sion to launch Amazon.in in June 2013 marked Amazon’s eleventh lation) compared with only 60.7 million (5% of the population) just
country-specific portal after nineteen years of operation. China was four years earlier (see Appendix D for a list of Internet users per
Amazon’s first emerging market website, and India only its third. 100 population for select countries;). The Associated Chambers of
Compared to its experience in China and Brazil, Amazon followed Commerce and Industry of India estimated the Indian e-commerce
a different business model and strategy in India. What led to the industry at $16 billion in 2013, a large increase from estimates of
differing approaches and which, if any, of Amazon’s emerging mar- $8.5 billion in 2012 and $2.5 billion in 2009.2 On the other hand,
kets’ strategies and investments would succeed? The case starts by Forrester Research reported that Indian e-commerce was worth
examining Amazon’s entry into India and then turns to Amazon’s only $1.6 billion in 2012 after online travel sales were factored out
experience in China and Brazil. of the estimates.3 Fast growth was less debated; analysts from the
Indian retail consultancy Technopak believed that the country’s
e-commerce industry could grow 61 times over the next decade.4
AMAZON’S INTERNATIONAL EXPANSION Overall, mom-and-pop stores dominated India’s half-trillion-
Incorporated in 1994, Amazon had evolved from a small online dollar retail market. According to Deloitte’s India group, organized
vendor of books and other information-based products in 1997 into retail in India comprised only 17% of the market versus over 85% of
a global “customer-centric” company serving consumers, sellers, the market in the U.S.5 Moreover, in addition to stringent laws on
and developers with operations in 22 countries. Amazon’s inter- FDI, India still had considerable import duties on certain foreign
national expansion started in 1998 when it acquired Bookseller, products. According to the International Chamber of Commerce,
Ltd. (bookseller.co.uk) in the United Kingdom and Telebook, India ranked 64th out of 75 countries for overall trade and FDI
Inc. (telebuch.de) in Germany. These two sites gave rise to what openness in 2013.6
became Amazon.co.uk and Amazon.de, respectively. It was early In terms of transportation infrastructure, many of India’s roads
in 2000, during this initial European expansion, that Amazon hired were in poor condition and overly congested. Even on the better
Piacentini, who had been Apple’s general manager for Europe. roads, such as between New Delhi in the north and Mumbai on the
Since his hiring, Amazon launched nine other country-specific western coast, driving took almost twice the amount of time it took
websites, in Italy, France, Spain, Japan, China, Mexico, Brazil, to drive the same distance in the U.S., according to Google Maps.
Canada, and Australia. In other countries such as Costa Rica and In addition, nearly 70% of India’s population lived in remote rural
South Africa, Amazon located customer service, software develop- areas, which in some cases had limited access to major highways.
ment, fulfillment or back office operations. Thirty-three percent of villages in India, primarily in the northern
In 2013, Amazon’s Germany, UK, and Japan sites accounted
for 85% of total international revenues of $30.0 billion. Overall,
Amazon’s international markets (excluding its Canadian site) made
1
Julka, Harsimran. “FDI in online retail: Rift arises as MNCs seek 100% FDI,
domestic cos insist on partial opening-up.” The Economic Times. 9 Jan. 2014. Web.
up 40% of Amazon’s total revenues of $74.4 billion (see Appendix <http://articles.economictimes.indiatimes.com/2014-01-09/news/46030049_1_100
B for consolidated financial results). However, despite a growth of -fdi-partial-opening-up-foreign-direct-investment>.
14% in net sales between 2012 and 2013, Amazon’s international 2
“India’s e-commerce market rose 88% in 2013: Survey.” The Economic Times. 30
business had seen a period of declining rate of growth since 2011 Dec. 2013. Web. <http://articles.economictimes. indiatimes.com/2013-12-30/news
(see Appendix C for a geographic break-out). Would this declining /45711192_1_e-commerce-market-online-shoppers-survey>.
growth rate foreshadow what was to come for Amazon’s interna- 3
Dharmakumar, Rohin. “Amazon’s Perfect Timing for India.” Forbes India Magazine.
2 July 2013. Web. <http://forbesindia.com/article/big-bet/amazons-perfect-timing
tional markets, or be merely water under the bridge according to
-for-india/35517/1>.
Bezos and Amazon’s “marathon” mind-set of emphasizing cus- 4
Sen, Sunny. “Moth to a Flame: How China helped Amazon tweak its model for
tomer service and long-term gains in sacrifice of short-term profits? success in India.” Business Today. 16 Feb. 2014. Web. <http://businesstoday.intoday
.in/story/how-amazon-is-faring-in-e-commerce-online-space-in-india/1/202613.html>.

THE INDIAN E-COMMERCE MARKET “Changing times. Changing roles: Retail HR gearing up to become a strategic
5

partner.”Deloitte Touche Tohmatsu India Pvt Ltd. 2013. Web. 8 June 2014. <http://
www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware
On June 5, 2013, Amazon officially entered the Indian market with
/Retail_Sector_-_HR.pdf>.
its launch of Amazon.in. Although the Indian government had lib- 6
“Open Markets Index.” The World Business Organization. International Chamber of
eralized its strict foreign direct investment (FDI) laws in Septem- Commerce. 2013. Web. 8 June 2014. <http://www.iccwbo.org/Global-influence/G20
ber 2012, the resulting regulations still forbid foreign multi-brand /Reports-and-Products/Open-Markets-Index/>.

CS3−28

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 Cases 3  Assessing Global Market Opportunities CS3−29

states, lacked all-weather roads, making them almost inaccessible Competition in India The Indian e-commerce market’s
during the monsoon season.7 Furthermore, addresses in India were promise of rapid growth had already attracted several players,
notoriously difficult to find due to non-sequential numberings, lack domestic and international, to the Indian e-tailing scene. Some of
of street signs, and narrow, winding streets. It was instead common- the largest in terms of revenue and market share included Flipkart,
place in India to describe locations with directions via landmarks.8 Snapdeal, and eBay.
Retailers had tended to prefer commercial airfreight for delivery,
but this option had led to increased delivery costs and a high risk of Flipkart In 2007, two ex-Amazon employees, Sachin Bansal and
merchandise being offloaded to accommodate passengers.9 Binny Bansal (no relation), launched Flipkart, which became the
Over the past few years, India had experienced a series of major leading domestic e-tailing company in India (https://www.flipkart
power failures allegedly due to a shoddily constructed electricity .com). Having copied some of Amazon’s business model throughout
infrastructure. For example, in soaring temperatures on June 10, the country, Flipkart’s founders had been able to capture 4.9% of the
2014, in New Delhi 16 million people were subject to power black- very fragmented Indian e-commerce market by 2013 (Amazon held
outs due to unmanageable demand.10 This power failure came only 1.6% and eBay 1.2%).17 Flipkart found quick success by developing
two years after a record-breaking electricity crisis in 2012 in which its own logistics network and by adopting the “cash on delivery” pay-
600 million people were left without power for two days.11 ment option in 2010 in order to adjust to the cash-centric payment
India also still had a highly impoverished population. In 2013, habits of Indian consumers. Since its launch in 2007, Flipkart had
OECD researchers estimated that 42% of India’s 1.24 billion peo- been dependent primarily on funding from venture capital firms.
ple lived on less than $1.25 a day, reflective of its $4,000 GDP Snapdeal Although they founded Snapdeal.com as an e-coupon web-
per capita.12,13 Much of India’s growth in computing and consumer site in 2010 (similar to Groupon in the U.S.), Kunal Bahl and Rohit
spending, however, came from a growing middle class of over Bansal decided to revamp their site after a trip to China in 2011 dur-
160 million people.14 The Brookings Institution predicted that ing which they witnessed the dynamic growth of the Chinese e-tailing
India’s middle class consumption would surpass that of the U.S. giant Alibaba. Using Alibaba for inspiration, Bahl and Bansal re-cre-
by the year 2030.15 However, despite a growing population heav- ated Snapdeal.com in 2011 as an e-commerce marketplace (https://
ily involved in spending, cash payments remained dominant over www.snapdeal.com). Valued at $1 billion in June 2014, Snapdeal had
credit or debit card payments in day-to-day commerce in India. relied heavily on funding from its investors.18 The largest of these was
Business Today cited that people in India averaged only six non- American e-commerce firm eBay, which invested $50 million in 2013
cash payments each year. As a result, a “cash on delivery” system and was the largest investor in Snapdeal’s approximately $134 million
had become widely accepted in the e-tailing space and accounted round of funding in the first quarter of 2014.19 Other investors in this
for roughly 50% to 80% of all e-commerce payments.16 round included Intel Capital, Saama Capital, Nexus Venture Partners,
Bessemer Venture Partners, and Kalaari Capital.20
Attempting to replicate Alibaba’s business model in India,
Snapdeal offered 5 million products from over 30,000 sellers—
7
“India Transport Sector.” Transport in South Asia. The World Bank. 2013. Web. 10
much more than Flipkart’s network of 3,000 sellers as of May
June 2014. <http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES
/SOUTHASIAEXT/EXTSARREGTOPTRANSPORT/0,,contentMDK:20703625~ 2014. Similar to Alibaba’s logistics strategy, Snapdeal opened 40
menuPK:868822~pagePK:34004173~piPK:34003707~theSitePK:579598,00.html>. fulfillment centers in 15 cities across India with which it stored and
8
Narayanswamy, Harihar. “Despite street-map and address, difficult to find location shipped sellers’ products for a fee.21 Snapdeal planned to open 35
in India.” The Economic Times. 19 Aug. 2009. Web. <http://articles.economictimes more within the next year.22
.indiatimes.com/2009-08-19/news/27653360_1_map-postal-service-direct-marketing
-industry>. eBay The American e-commerce giant entered the Indian market
Bose, Nandita. “E-tailers growth ensnared in India’s logistics jungle.” Reuters. 10 June 2014.
9
in 2005 after it acquired Baazee.com, India’s largest online market-
Web. <http://in.reuters.com/article/2014/06/10/india-retail-idINKBN0EK1YI20140610>. place at the time, for $50 million plus acquisition costs.23 Initially,
10
“Indian protests over power blackouts amid heatwave spread to New Delhi.”
Asia: South China Morning Post. 12 June 2014. Web. <http://www.scmp
.com/news/asia/article/1530342/indian-protests-over-power-blackouts-amid “Flipkart raises $210 million; will utilise funds for acquisitions.” The Economic Times.
17

-heatwave-spread-new-delhi>. 26 May 2014. Web. <http://articles. economictimes.indiatimes.com/2014-05-26/news

Butkiewicz, Lynann. “India’s Electricity Crisis: Background on the Issues.” The
11 /50099162_1_binny-bansal-iconiq-capital-flipkart>.
National Bureau of Asian Research. 7 Aug. 2012. Web. <http://www.nbr.org/research 18
Rajagopal, Divya. “How Kunal Bahl’s Snapdeal scaled a valuation of $1 billion in two
/activity.aspx?id=267>. years.” The Economic Times. 20 June 2014. Web. <http://economictimes.indiatimes
12
“Special Focus: Inequality in Emerging Economies (EEs).” Divided We Stand: Why .com/panache/how-kunal-bahls-snapdeal-scaled-a-valuation-of-1-billion-in-two-years
Inequality Keeps Rising. OECD. 2011. Web. <http://www.oecd.org/els/soc/49170475 /articleshow/36867721.cms>.
.pdf>. 19
“Why eBay Raised Its Stake In India’s Snapdeal.” Forbes. 4 Mar. 2014. Web.
13
“India.” The World Factbook. Central Intelligence Agency. 2014. Web. <https://www <http://www.forbes.com/sites/greatspeculations/2014/03/04/why-ebay-raised-its
.cia.gov/library/publications/the-world-factbook/geos/in.html>. -stake-in-indias-snapdeal/>.
14
Varma, Pavan K. “India’s middle class awakes.” The Times of India. 23 Nov. 2013. “EBay Inc. Makes Strategic Investment in Snapdeal.”eBay Inc. 26 Feb. 2014. Web.
20

Web. <http://timesofindia.indiatimes.com/home/opinion/edit-page/Indias-middle <http://blog.ebay.com/snapdeal/>.

-class-awakes/articleshow/26221440.cms>. 21
Chilkoti, Avantika. “India’s Snapdeal seeks to follow Alibaba playbook.” Financial
Kharas, Homi. “The Emerging Middle Class in Developing Countries.” Brookings
15 Times. 22 June 2014. Web. <http://www.ft.com/intl/cms/s/0/ad7388b6-f9cf-11e3-a412
Institution. The World Bank, June 2011. Web. <http://siteresources.worldbank.org -00144feab7de.html>.
/EXTABCDE/Resources/7455676-1292528456380/7626791-1303141641402 22
Gooptu, Biswarup. “Snapdeal plans to acquire up to 4 companies in FY15.” The
/7878676-1306699356046/Parallel-Sesssion-6-Homi-Kharas.pdf>. Economic Times. 29 May 2014. Web. <http://articles.economictimes.indiatimes
16
Das, Goutam. “Cash-on-delivery: Necessary Evil.” Business Today. 16 Feb. 2014. .com/2014-05-29/news/50182059_1_kunal-bahl-snapdeal-shopo-in>.
Web. <http://businesstoday.intoday.in/story/cash-on-delivery-impact-on-e-commerce 23
“EBay to Acquire India’s Baazee.com.”eBay Inc. 22 June 2004. Web. <http://investor
-companies-customers/1/202680.html>. .ebay.com/releasedetail. cfm?ReleaseID=137656>.

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 CS3−30 Part 6  Supplementary Material

eBay took a cautious approach in India while other e-commerce the company learned to adjust to the difficulties of distribution in
startups were aggressively investing to grab market share early on. India. Just prior to the launch, Amazon had completed the con-
In its infancy, eBay.in concentrated only in selling gift items such struction of a 150,000-square-foot fulfillment center just outside
as chocolates and flowers from third-party traders.24 However, eBay Mumbai. It later built one of similar size in Bangalore to serve
since invested heavily to ensure its place as a leader in the Indian southern India. With so much of India’s retail space dominated by
e-commerce market. By 2014, eBay India listed over 2,000 specific local mom and pop shops, Agarwal and Piacentini decided to offer
product categories from 45,000 traders.25,26 Similar to its model in a “Fulfillment by Amazon” program in which Amazon enabled sell-
the U.S., eBay was functioning solely as a marketplace in India, and ers to store their products at an Amazon distribution center and
offered products for auction as well as for a set price. have Amazon handle the delivery for a fee. Eventually three out of
Much of its investment had gone into logistics options for its every four orders on Amazon.in were fulfilled by Amazon.30
traders as well as into other companies. In 2012, eBay.in launched Agarwal and Piacentini decided to further differentiate Amazon
its PowerShip program option, in which eBay coordinated ship- from its Indian competitors by being the first e-tailer to offer next-day
ping for its member traders among its logistics partners in India— shipping for the orders it fulfilled. In order to compensate for the dif-
FedEx, BlueDart, DTDC, and Aramex. For set PowerShip rates, ficulty of locating addresses and to ensure timely delivery of its sellers’
eBay’s logistics partners would pick up products packaged in eBay products, Agarwal also added PIN code (postal codes similar to ZIP
packing material directly from sellers and ship them to the buyers. codes in the U.S.) and landmark fields on the delivery information
With PowerShip, sellers could offer prepayment or cash-on-delivery page, reaching 21,000 PIN codes versus other retailers’ 12,000.31
options to be handled by their eBay Paisapay account, an escrow Since Amazon would function solely as a marketplace in India,
account that transfered money from buyer to seller after receipt of seller acquisition was a major priority for establishing market share.
the purchased goods. To attract domestic sellers across India, Piacentini and Agarwal
As mentioned above, EBay’s investments included funding offered sellers a promotion for a two-year membership agreement
Indian e-commerce retailer Snapdeal. In return for its investment, with the first year free of cost. After the first year, members were
eBay acquired permission to access Snapdeal’s 20-million-person only required to pay Rs 499 ($8.27) per month in addition to Ama-
user database as well as its logistics network.27 zon’s commission charge of 4%-8% (4% for most electronics, 8%
for watches and jewelry) and a Rs 10 ($0.17) “closing fee” for each
Amazon’s India Approach Prior to Amazon.in, Ama- transaction. Piacentini and Agarwal also stressed educating Indian
zon already had thousands of employees in India performing cus- sellers on Amazon’s platform and services. For small retailers with
tomer service, software development and back office functions.28 In little to no online selling experience, Amazon offered a pilot service
addition, in February 2012, Diego Piacentini and Amazon’s VP for called “Mainstreaming Sellers/SMEs” to teach them how to trans-
International Expansion, Amit Agarwal, led Amazon’s investment act online, catalogue their products, and accept online payments.
in Junglee.com, an online product review site that listed over 10 mil- In addition, sellers could utilize the “Fulfillment by Amazon”
lion products, toward the Indian market in 2012. Through the site, option to give responsibility for delivery to Amazon.32
customers could compare reviews, pricing, and shipping details for In order to attract buyers from India’s growing number of Inter-
each product listed.29 Piacentini and Agarwal were determined to net users, Piacentini and Agarwal offered multiple incentives for
formulate a strategy that would best leverage their learnings from those who referred customers to or bought products from Amazon.
nearly a decade of operations in China. Rather than making piece- in. In the beginning stages of operation in India, Amazon offered
meal investments over their first few years of operation, Piacentini free shipping for the orders it fulfilled. It also offered permanent
and Agarwal decided to invest big from the start. They recognized free shipping on all orders fulfilled by Amazon over Rs 499.33 Pia-
that their competitors had a head start of five to nine years to adapt centini and Agarwal also introduced the Amazon Associates Pro-
their businesses to the Indian market, and so Amazon needed to gram, which offered a commission to all online publishers (e.g.
develop a competitive strategy. bloggers, businesses, authors, nonprofits, and personal websites)
Agarwal brought local knowledge and deep company experi- who directed their viewers to Amazon.in via a link to a “contex-
ence to this endeavor. The Mumbai-born new Vice President and tually relevant product.” If a purchase was made, the commission
Country Manager for Amazon India had joined Amazon in 1999 for referrals would range between 5% for consumer electronics and
after earning his computer science degrees at the Indian Institute 10% for most other product categories, such as books and mov-
of Technology-Kanpur and Stanford University. He rose through ies, and would cover all purchases made by the referred customer.34
the ranks from software development at Amazon headquarters to
Managing Director of Amazon’s Development Center in Bangalore
and then “Shadow and Technical Advisor” to Bezos. Piacentini, Diego. “Customer Focus Builds Global Growth [Entire Talk] - Diego
28

After the launch of Amazon.in in June 2013, much of Amazon’s Piacentini from Amazon.” The Entrepreneurial Thought Leaders Lectures. 3 Nov. 2010.
initial Indian investments went to its core strength in logistics, as Web. <http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2484>
29
Sen, Sunny. 16 Feb. 2014.
30
Sen, Sunny. 16 Feb. 2014.
Bose, Nandita. “eBay shifts gears in India as rivals step up.” Reuters. 27 Apr. 2012. Web.
24 31
Sen, Sunny. 16 Feb. 2014.
<http://www.reuters.com/article/2012/04/27/ebay-india-idUSL3E8FO5L120120427>. 32
Sen, Sunny. 16 Feb. 2014.
25
Batra, Avinder. “eBay India, CAIT pact may help traders grow business by up to 33
Rai, Anand. “Amazon.in cheapest to buy books with promotional shipping
20%.” The Economic Times. 22 Apr. 2014. Web. <http://articles.economictimes policy, Flipkart cheaper for heavy book buyers.” Techcircle.in. 6 June 2013. Web.
.indiatimes.com/2014-04-22/news/49318874_1_ebay-india-cait-latif-nathani>. <http://techcircle.vccircle.com/2013/06/06/amazon-in-cheapest-to-buy-books-with
“Apparel Fast Facts.” The Company: Online Media Centre. Ebay.in. Undated. Web.
26
-promotional-shipping-policy-flipkart-cheaper-for-heavy-book-buyers/>.
Accessed 16 June 2014. <http://pages.ebay.in/community/aboutebay/news “Amazon introduces ‘Amazon Associates Program’ in India.” Press Releases.
34

/pressreleases/category/apparel.html>. Amazon.in. 8 July 2013. Web. <http://www.amazon.in/gp/feature.html?ie

27
“Why eBay Raised Its Stake In India’s Snapdeal.” =UTF8&docId=1000734323>.

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 Cases 3  Assessing Global Market Opportunities CS3−31

Piacentini and Agarwal also attracted buyers by replicating the Chinese consumers were also becoming very active shoppers
cash-on-delivery option it had offered in China. In addition to on mobile devices. With the largest volume of mobile e-commerce
online payment options such as credit cards, debit cards, and bank transactions in the world, China expected purchases via mobile
transfers, cash-on-delivery would allow Amazon customers to pay device to reach $41.4 billion by 2015 from only $7.8 billion in 2012.
for their merchandise at the time of delivery. However, this option This volume of mobile transactions attested to the Chinese con-
had tended to delay payments to Amazon up to one week.35 sumer’s craving for fast shopping at any time of the day.45
E-retailers in India appeared to be fighting to offer the largest China, however, did not represent a consistent market from
selection of products at the lowest cost and with the fastest deliv- region to region. KPMG International highlighted that customers
ery times. Just after Amazon introduced next day delivery, Flipkart in “tier-1” cities such as Beijing and Shanghai varied drastically in
announced that it would be offering “In-a-Day Guarantee” delivery. their shopping preferences and purchasing decisions from other
Soon after, both companies began to offer same day delivery in a consumers in smaller markets, such as Xi’an and Fuzhou. Sales vol-
number of cities if ordered before a certain time.36 ume for higher-end goods, such as cars, jewelry, and handbags, was
While Amazon waited for its rivals to take the lead on the much greater in Shanghai than in smaller coastal and inland cities.
e-tailing side for many years in India, the firm had entered China a This trend was also true for brand loyalty, as consumers in China’s
decade earlier in 2004. smaller markets favored differed products and tended to stress cur-
rent fashion styles less than those in larger cities.46
THE WORLD’S LARGEST MARKET: CHINA By operating in a communist-led country, Amazon faced limi-
tations on its operations that it had not encountered in its prior
In 2002, China had an estimated 27 million online consumers,37 ris- international experience. Chinese law regulated and restricted
ing to over 80 million in 2004.38 By 2014, the country was expected to Amazon’s Internet content, as well as its sale of any media-related
reach 650 million online consumers.39 In 2002, China’s e-commerce products or services. In addition, Chinese law demanded that Ama-
market was valued at an estimated $1.3 billion, growing to over zon’s website, www.amazon.cn, be operated by a Chinese-owned
$16 billion by 2005-2006.40 At the start of 2014, China’s e-commerce corporation in order to comply with local ownership laws.47
market was valued at over $300 billion, expected to reach $540 bil-
lion by 2015. Growing at a compound annual rate of nearly 70%, Competition in China, 2004–2014 
China’s e-commerce market was scheduled to surpass the U.S. as the
largest e-commerce market in the world.41 According to World Bank While the Chinese online commerce market had consolidated
data, China recorded 621.7 million Internet users in 2013, approxi- significantly by 2014, the competitive landscape in the nascent
mately 46% of China’s 1.4 billion population and more than double market of 2004 was far more fragmented. All the players
the amount of Internet users in the U.S. at 266.2 million. started with somewhat different business models that would
At an investor conference in 2013, Jack Ma, founder and chair- continue to evolve. Central competitors in the early battle for
man of Chinese e-commerce giant Alibaba Group, remarked, “In Chinese market share included Alibaba, and Jingdong.
other countries, e-commerce is a way to shop, in China it is a life-
style.”42 Chinese consumers were known to use social media exten- Alibaba Founded in 1999 by Chinese entrepreneur Jack Ma, Ali-
sively. According to McKinsey & Co., China’s 300 million users baba.com was launched in Hangzhou as an online forum for Chinese
of social media spent more than 40% of their time on the Inter- manufacturers to sell their products to domestic and overseas buyers.
net browsing blogs and social networking sites.43 Using popular In 2002, Alibaba made its first profit, only $1. It “badly trailed” Each-
social media sites such as WeChat and Weibo, Chinese users often Net, according to the Wall Street Journal.48 By 2014, Alibaba Group
accessed and posted product reviews, got buy/don’t buy product with Jack Ma as chairman operated several web services including
advice from “key opinion leaders” and friends, and saw advertise- two of China’s largest e-commerce sites, Taobao.com and Tmall.com.
ments of featured products from retailers.44 However, faced by competition from eBay EachNet, little- known Ali-
baba’s quest for market share in the early 2000s was not easy.
In response to the eBay-Eachnet acquisition, Alibaba launched
Taobao.com in 2003 as a way of preventing eBay from taking away
35
Sen, Sunny. 16 Feb. 2014. its customer base.49 Taobao.com began as a marketplace and auc-
36
Sen, Sunny. 16 Feb. 2014. tion site that would later serve as a pure marketplace which con-
37
eBay Inc. Press Release. 17 Mar 2002. Web. <http://investor.ebay.com/releasedetail nected merchants of all sizes to a network of millions of consumers.
.cfm?ReleaseID=74802> According to Helen Wang, author of The Chinese Dream, given that
38
Amazon.com Inc. Press Release, 2004. Web. <http://phx.corporate-ir.net/phoenix Chinese users at the time were unfamiliar with Internet auctions,
.zhtml?c=176060&p=irol-newsArticle&ID=6053 26&highlight=> only 10% of Taobao’s product listings were available for auction,
39
“E-commerce in China: Gain entrance into a completely different world,” 18 Jun. 2013. as opposed to 40% for eBay EachNet. Alibaba also offered longer
Web. <http://www.ptl-group.com/blogs/e-commerce-in-china-gain-entrance-into-a
-completely-different-world>.
and more flexible listing periods for its auction products. Further-
40
eBay Inc. Press Release. 17 Mar 2002. Web.
more, to cater to China’s three hundred million cell phone users
41
KPMG Global China Practice, “E-commerce in China: Driving a new
consumer culture.” China 360. Jan. 2014. Web. <http://www. kpmg.com/CN/en 44
KPMG Global China Practice. 18 Jun. 2013.
/IssuesAndInsights/ArticlesPublications/Newsletters/China-360/Documents/China 45
KPMG Global China Practice. 18 Jun. 2013.
-360-Issue15-201401-E-commerce-in-China.pdf>.
46
KPMG Global China Practice. 18 Jun. 2013.
“E-commerce in China: Gain entrance into a completely different world,” 18 Jun.
42

2013. Web. Amazon 2013 Annual Report. 10 Apr. 2014. Web. <http://phx.corporate-ir.net
47

/phoenix.zhtml?c=97664&p=irol-reportsannual>.
Chiu, Cindy. “Understanding social media in China.”McKinsey & Company. Apr.
43

2012. Web. <http://www.mckinsey.com/insights/marketing_sales/understanding

48
Osawa, Juro, Paul Mozur, and Rolfe Winkler. 15 Apr. 2014.
_social_media_in_china> 49
Wang, Helen.

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 CS3−32 Part 6  Supplementary Material

(compared with only 90 million Internet users at the time), Tao- Amazon’s China Experience
bao offered its buyers and sellers the option of communicating via Amazon first entered China in 2004 by acquiring Joyo.com for
instant messaging and voice mail.50 $75 million. Amazon’s entry came at a time when China’s GDP
The marketing strategies of the two companies also reflected their was growing at a rate near 10% each year, accompanied by a small
different knowledge and experience. EBay purchased exclusive rights but growing Internet user base of 94.6 million people (7.3% of
to Internet ads on major Chinese portals Sina, Sohu, and Netease the 1.3 billion person population) and an e-commerce mar-
whereas Ma blitzed the major TV channels with Taobao ads. At the ket estimated to be worth $8.6 billion. In 2004, Joyo.com had
time, many more Chinese were in front of their TVs than on the Inter- 5.2 million registered users as well as projected revenues of
net. Most importantly, Taobao charged no commission fees to its sell- $15 million.58 Within six months of the acquisition, a little earlier
ers. Signing up was very easy—even five minutes was enough to register than expected from the time of due diligence, the management
on the site.51 Many of these differences appealed to the Chinese and team had departed.59
helped Taobao to quickly overtake eBay Eachnet. In 2013, Taobao For its first year in China, Amazon operated under Joyo.com’s
recorded 7 million sellers and over 800 million product offerings.52 domain name, mainly offering books, DVDs, and CDs to its custom-
Tmall, was Alibaba’s next offering. It was a business-to-con- ers in China’s largest cities of Beijing, Shanghai, and Guangzhou.
sumer marketplace designed for bigger merchants and major labels, Despite the departure of Joyo’s management team, the transition
such as Nike and Gap. Each business selling products on Tmall was seamless to the Chinese consumer.60 By 2007, Amazon had
was required to pay a deposit to set up its business, and was then increased its product offerings thirty-two fold, offering electronics,
charged a fee on each transaction. Created in 2008 as part of baby products, beauty care products, and watches. With $26.1 mil-
Taobao.com, Tmall.com officially became its own website in June lion in sales in the last quarter of 2006, Joyo.com’s market share
2011.53 By the end of 2012, Tmall had attained a 51.5% share of had reached 12%.61 In 2007 Amazon changed the domain name
the Chinese business-to-consumer marketplace (see https://www from joyo.com to amazon.cn, with Joyo Amazon as its name in Chi-
.tmall.com for Tmall’s homepage and https://world.taobao.com for nese. Amazon was renamed Amazon China in 2011, pronounced
Taobao’s homepage). in Mandarin as “Yamashi.”62 Amazon finally launched its Kindle
In 2013, combined transaction volume for the two sites equaled e-reader in China in June 2013.
$240 billion, more than the transactions for Amazon and eBay Amazon strived to replicate the acclaimed customer experience
combined (approximately $100 billion and $75 billion, respec- it delivered to consumers in developed markets. For instance, Pia-
tively); (see Appendix E to compare Alibaba with major western centini liked to tell an anecdote about the delivery of a new Harry
Internet companies). According to The Wall Street Journal, Alibaba Potter book in Chinese on its publication date in 2005. Amazon
controlled nearly 80% of all Chinese e-commerce in 2013.54 China delivered 5,000 books on schedule. However, when a com-
Alibaba Group filed for an initial public offering in the U.S. on petitor undercut Amazon’s price by 5 RMB (less than $1), Amazon
May 6, 2014, with analysts valuing the company at over $150 bil- issued a refund for the difference to the customers, who were not
lion. Alibaba sought to be listed on the New York Stock Exchange expecting a refund. This gained Amazon much positive publicity,
(NYSE) with the ticker, BABA. As of the time of the case, Alibaba and Piancentini hailed it to be the firm’s best public relations and
had since filed various amendments throughout the summer in marketing move in China for the year63.
response to requests for additional information from SEC approval. Amazon had to drastically adjust its logistics operation in China.
The expected IPO date had been pushed back to September 2014. To start, Amazon used Joyo.com’s three existing fulfillment centers
Jingdong Mall/JD.com Other major competition came from Jing- located in Beijing, Shanghai, and Guangzhou. From there, Ama-
dong Mall (JD.com), formerly known as 360buy.com. Reportedly zon distributed orders to its other thirty delivery centers across the
founded in 1998, its marketplace went online in 2004. In 2012, country.64 Piacentini and his team eventually expanded Amazon’s
Jingdong Mall had a market share of 22.7%, making it China’s distribution network by creating fifteen fulfillment centers across
third largest Internet retailer.55 Total merchandise sales reached China, its largest logistics operation outside the U.S. Differently
$16.39 billion in 2013.56,i In March 2014, TenCent Holdings, a
leader in online games and mobile messaging (through WeChat)
agreed to acquire at 15% stake in JD.com for $215 million, in a
move to enter the rapidly growing mobile commerce market.57
58
Wiles, Greg. “Amazon to buy Joyo for access to China.” China Daily. North American
edition. 21 Aug. 2004. Web. <http://english. peopledaily.com.cn/200408/21
/eng20040821_154103.html>.
“Customer Focus Builds Global Growth [Entire Talk] - Diego Piacentini from
59

Amazon.”
50
Wang, Helen.
60
Piacentini, Diego. 3 Nov. 2010. <http://ecorner.stanford.edu/authorMaterialInfo
51
User interview.
.html?mid=2484>
Osawa, Juro. “How Does Alibaba Make Money?” Digits. Wall Street Journal, 9 Sept.
52
61
Tsuruoka, Doug. “Amazon Streaming into China Market with New Services;
2013. Web. <http://blogs.wsj.com/digits/2013/09/09/how-does-alibaba-make-money/>.
‘Fastest-Growing Geography’; U.S. e-tail kingpin planning to double its investment in
Osawa, Juro “Alibaba Isn’t the Amazon of China.” The Wall Street Journal. 16 Oct. 2013.
53
Chinese unit Joyo Amazon.” Investor’s Business Daily. 26 Jun. 2007. Web. <http://
Web. <http://blogs.wsj.com/digits/2013/10/16/alibaba-isnt-the-amazon-of-china/>. news. investors.com/technology/062607-434999-amazon-streaming-into-china-market
Osawa, Juro, Paul Mozur, and Rolfe Winkler. “Alibaba Flexes Muscles Before IPO.”
54
-with-new-services-fastest-growing-geography-us-e-tail-kingpin-planning-to-double-its
The Wall Street Journal. 15 Apr. 2014. -investment-in-chinese-unit-joyo-amazon.htm>.
55
Wang, Xin, and Z. Justin Ren. 62
Sen, Sunny. “Amazon Inc. wants to invest a lot in India and very fast: Diego
Tong, Frank. “China’s No. 2 online retailer posts its first profits.” Top 500 Asian
56 Piacentini.” Business Today. 29 Jan. 2014. Web. <http://businesstoday.intoday.in/story
E-Retailers. Internet Retailer. 2 Jan. 2014. Web. <http://www.internetretailer.com /amazon-diego-piacentini-on-india-investment-plans/1/202790.html>.
/2014/01/02/chinas-no-2-online-retailer-posts-its-first-profits>. “Customer Focus Builds Global Growth [Entire Talk] - Diego Piacentini from
63

Osawa, Juro, Paul Mozur, and Rolfe Winkler. “Alibaba Flexes Muscles Before IPO.”
57 Amazon.”
The Wall Street Journal. 15 Apr. 2014. 64
Wiles, Greg.

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 Cases 3  Assessing Global Market Opportunities CS3−33

from its U.S. model at the time, Amazon played a large role in the In 2014, Brazil ranked 116th in the World Bank’s “Ease of
last leg of the delivery process. Amazon started to handle deliveries Doing Business” measure, ranking as low as 159th out of 189 coun-
in-house by hiring employees to transport the merchandise the “last tries in ease of paying taxes. Parts of Brazil also varied drastically in
mile” to the customer. Instead of vans or trucks, however, intra-city terms of transportation infrastructure. Many major rail, road, and
deliveries in China were commonly carried out on bicycles or scoot- port construction projects that were started in the 1970s during
ers due to China’s tendency for traffic-filled roads.65 When Amazon the “Economic Miracle” period in Brazil had been left unfinished
entered China in 2004, overnight deliveries had only recently been across the country. For example, over half of the Trans-Amazonian
made possible due to new developments in truck, rail, and aerial Highway, intended to connect the eastern and western regions of
transport.66 Brazil in 1972, remained unpaved as well as impassable during
Amazon initially faced payment challenges similar to those it rainy seasons. According to Brazil’s National Confederation of
encountered later on in India. In the early 2000s, many Chinese Transportation, 69% of Brazil’s roads remained in poor condition,
customers were reluctant to pay in advance for their purchases with often narrow and dotted with potholes.73 Brazil’s poor roadways,
credit card. As a result, Amazon’s China team adopted Joyo.com’s inefficient railways, and crowded airspace had led the World Eco-
cash on delivery option. Furthermore, Amazon began to offer free nomic Forum to rank Brazil 104th out of 142 countries measured
shipping on all purchases through its site. Joyo.com also offered in terms of “quality of overall infrastructure.” Brazil ranked behind
product recommendations to customers based on their past pur- both China (69th) and India (86th).74
chase history, something that had proved successful in other Ama-
zon markets.67 Competition in Latin America
Despite its early investment and efforts, Amazon’s share of the
Chinese business-to-consumer e-commerce market stood at a mere MercadoLibre Launched in 1999 by Stanford MBA student Mar-
3.5% at the end of 2012.68 However, as noted by Piacentini, Amazon cos Galperin, MercadoLibre (MercadoLivre in Portuguese and
had at least made its way into the top five e-commerce websites by “free market” in English) served as Brazil’s largest e-commerce
January 2014.69 On the one hand, Piacentini knew there had been marketplace for buyers and sellers (https://www.mercadolivre
mistakes in China, but on the other hand, the glass was half full. .com.br). With headquarters in Buenos Aires, Argentina, Mercado-
Libre offered country-specific sites in thirteen countries through-
ANOTHER EMERGING MARKET: BRAZIL out Latin America and in Brazil and Portugal. Benefitting from
first-mover advantage in Brazil in October 1999, MercadoLibre’s
Amazon launched Amazon Brazil (home to Amazon’s namesake) marketplace had 20.2 million unique buyers and 5.1 million unique
in December 2012, just six months before launching its India site. sellers by 2013. MercadoLibre’s Brazil site accounted for 43.7%
Brazil joined China and India as one of the world’s largest emerg- of its total revenues of $472.6 million, reaching $206.4 million in
ing markets, ranked 7th in the world by GDP at $2.2 trillion. In 2013, 14.9% higher from the year before.
2013, 51.6% of Brazilians used the Internet, or 103.4 million people In addition to its marketplace, MercadoLibre offered Mer-
out of a population of 200.4 million. According to McKinsey & cadoPago, an escrow-based payment service that was one of the
Company, 85% of Brazil’s population would have access to mobile firm’s most important revenue streams—enabling payments for
broadband by 2015, a population that had increasingly used mobile transactions in an environment where credit card penetration was
applications to purchase products and follow retailers.70 limited. Other business lines include MercadoEnvios, a shipping
Despite a record 7.5% GDP growth rate in 2010, however, Brazil solution for sellers, Advertising Services, Classified, and Online
experienced an economic downturn from the end of 2013 through Stores Service, which gave sellers the ability to create their own
the first half of 2014. Brazil’s GDP growth rate reached a mere web stores integrated with the MercadoLibre marketplace.75
2.3% in 2013, and was expected to grow by only 1.5% through 2014.
Saraiva Saraiva, Brazil’s largest bookstore chain and leading book
Low retail sales, declining commodity exports, and reduced pro-
publisher, was another competitor for Amazon. Selling books, CDs,
duction levels served as evidence of the downturn.71 At the start of
and DVDs from its Internet site (www.livrariasaraiva.com.br),
2014, Brazil’s e-commerce market was valued at over $11 billion.72
Saraiva offered 15,000 Portuguese e-book titles in 2013 as opposed
to Amazon’s 13,000.76 Perhaps in response, Amazon added 15,000
more e-books at the start of 2014. Amazon was rumored to have
Tong, Frank. “Amazon China builds its own delivery network.” Top 500 Asian
65
been in talks to buy Saraiva’s Internet business in October 2012,
E-Retailers. Internet Retailer, 14 Mar. 2014. Web. <http://www.internetretailer.com
/2014/03/14/amazon-china-builds-its-own-delivery-network>. just months before starting its Kindle Store in December. As of
66
Tsuruoka, Doug. 2012, Saraiva refused to sell any of its own published 2,500 e-books
67
Tsuruoka, Doug. to its competition, including Amazon.77
68
Wang, Xin, and Z. Justin Ren.
Sen, Sunny. “Amazon Inc. wants to invest a lot in India and very fast: Diego
69

Piacentini.”
73
Novais, Andréa. “Logistics in Brazil.” The Brazil Business. 10 Sep. 2012. Web.
70
Chanes, Livia, Fernanda Hoefel, and Anna Gabriela Martins. “Brazil Briefing:
Where is the e-commerce market going?” Consumer and Shopper Insights. McKinsey “Section II: Infrastructure.” The Global Competitiveness Report 2011-2012. World
74

& Company. July 2012. Web. <http://mckinseyonmarketingandsales.com/brazil Economic Forum, 2011. Web. <http://thebrazilbusiness.com/article/logistics-in-brazil>.
-briefing-where-is-the-e-commerce-market-going>. 75
MercadoLibre Inc. 2013 10-K.
Trevisani, Paulo, and Loretta Chao. “Brazil’s Economy Seen in a Major Downturn.”
71
Sciaudone, Christiana. “Amazon Threat Fails to Damp Saraiva Leading Retail
76

The Wall Street Journal. 14 Feb. 2014. Web. <http://online.wsj.com/news/articles/SB1 Rally.” Bloomberg. 19 Apr. 2013. Web. <http://www. bloomberg.com/news/2013-04-19
0001424052702304703804579383274090741140>. /amazon-threat-fails-to-damp-saraiva-leading-retail-rally.html>.
Israel, Esteban, and Marcela Ayres. “Amazon tests Brazil’s retail jungle with its
72 77
Carrenho, Carlo. “Google and Amazon launch Brazilian e-bookstores, minutes
Kindle.” Reuters. 7 Feb. 2014. Web. <http://www. reuters.com/article/2014/02/07 apart.” Publishing Perspectives. 6 Dec. 2012. Web. <http://publishingperspectives
/us-amazon-brazil-idUSBREA160XM20140207>. .com/2012/12/google-and-amazon-launch-brazilian-e-bookstores-minutes-apart/>.

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Amazon’s Approach in Brazil Faced with webs of Forbes’ Russian language site, Amazon established its first office in
tax codes, labor laws, logistics challenges, and strong competition Russia, rumored to be headed by HBS graduate Arkady Vitrouk,
from established Latin American e-commerce player MercadoLi- director for Kindle Content at Amazon EU.90 With 76.5 million
bre, Amazon ultimately launched in Brazil by only introducing its Internet users (53.3% of the population) and an e-commerce indus-
Kindle (e-book) Store. Estimates suggested that Brazilians pur- try expected to grow to $36 billion by 2015 from only $12 billion
chased 435 million books in 2012 valued at $2 billion.78 However, in 2012, according to Morgan Stanley, Russia would be an attrac-
e-books accounted for only 3% of these sales.79 Upon its launch, tive market for Internet retailers in the years to come.91 However,
Amazon listed 1.4 million e-book titles on its site, 13,000 of which Russian laws, political uncertainty, and poor infrastructure would
were offered in Portuguese.80 Amazon’s launch of its Kindle Store, inhibit e-commerce growth in this market.
however, came only after lengthy negotiations with Brazilian book Previously, in 2008, Amazon was rumored to have entered an
publishers who wanted control over pricing in fear of Amazon’s exclusive distribution agreement with the Saudi Arabian e-com-
aggressive discounting strategies. To date, Amazon had formalized merce firm Taufeer.com to become a part of its e-channel retailers
contracts with over thirty book publishers, prominently including program. Through Taufeer.com, Amazon would be able to sell its
the Distribuidora de Livros Digitais (DLD) group whose seven products to millions of people across the Middle East.92 According
publishers controlled close to 35% of the market and whose to an article from March 15, 2009, in Asharq Al-Awsat, an Arabic
demands caused Amazon to delay its entry into the country.81,82 As international newspaper, Amazon had sent $280 million of mer-
of February 2014, Amazon had increased its e-book selection to chandise to the Kingdom of Saudi Arabia since 2007.93 However,
28,000 titles in Portuguese, Brazil’s national language.83 no mention of such an agreement existed in Amazon’s company
In addition to its Kindle Store, Amazon introduced its Kindle records and the Taufeer.com website was defunct as of 2014.
e-reader in Brazil in February 2014. As of then, Amazon planned While Piacentini spearheaded Amazon’s international strategy,
to leave logistics to its external partners in Brazil.84 In June 2014, the rest of Amazon’s leadership continued to focus on develop-
Amazon’s Kindle Paperwhite retailed for R$479 (USD 215.62) on ments in new products, services, and logistics. In order to increase
Amazon.com.br, nearly twice its price in the U.S. of $119.85 This its role in logistics, Amazon had tried its own hand at delivery
significant price difference could most likely be attributed to Bra- with Amazon Fresh in select cities across the U.S. It had also been
zil’s high duties on electronics imports. Amazon offered customers experimenting with 30-minute delivery using drone technology.
the option to pay for the Kindle in up to 12 installments, given In terms of new products and services, Amazon introduced
the predilection for Brazilian consumers to use payment plans for the second generation of the Kindle Paperwhite, the Kindle Fire
expensive products.86,87 Amazon also offered free shipping on its HDX, and its Amazon Fire Phone in the year leading up to July
Kindle products.88 The Kindle may not be the only physical product 2014. Furthermore, Amazon was expanding its Amazon Web Ser-
Amazon would choose to sell moving forward. vices (AWS) to reach over 190 countries.94 In December 2011,
Amazon announced a Sao Paulo Region for AWS (aws.amazon.
com/pt/), and later introduced a Beijing Region in December 2013
OTHER MARKETS: DIVERSITY (amazonaws.cn).95,96 Amazon also catered to AWS customers on
IN GEOGRAPHY, PRODUCTS, the Indian subcontinent by opening edge locations in Chennai and
Mumbai in July 2013.97 Through offerings such as AWS and its
AND CUSTOMERS
Most recently, similar to its approach in Brazil, Amazon launched
its Kindle Store in Mexico in August 2013 (www.amazon.com.mx),
its twelfth international expansion as of July 2014.89 On the other “News: Amazon Launches Mexico Kindle Store!” Amazon Kindle Forum. Amazon.
89

side of the globe, Amazon was also making a move. According to com, 29 Aug. 2013. Web. <http://www.amazon. com/forum/kindle?_encoding=UTF8
&cdForum=Fx1D7SY3BVSESG&cdThread=Tx1FU6VLCA6H0NA>.
90
Zhohova, Anastasia, and Peter Rudenko. “Amazon пришел в Россию.” Forbes.
78
Israel, Esteban, and Marcela Ayres. 19 Apr. 2013. Web. <http://www.forbes.ru/kompanii/potrebitelskii-rynok/237640
-amazon-prishel-v-rossiyu>.
79
“E-books chegam a 3% das vendas de livros.” Ilustrada. Folha de S.Paulo, 1 Apr. 2014.
Web. <http://www1.folha.uol.com.br/ilustrada/2014/01/1392978-e-books-chegam-a-3
91
Lunden, Ingrid. “Amazon is finally setting up shop in Russia, says report, expanding
-das-vendas-de-livros.shtml>. its international footprint again.” TechCrunch. 19 Apr. 2013. Web. <http://techcrunch
.com/2013/04/19/amazon-is-finally-setting-up-shop-in-russia-says-report/>.
Lunden, Ingrid. “Amazon Reclaims Its Namesake, Launches In Brazil With Kindle Store;
80

Kindle Devices Coming In ‘Weeks.’” TechCrunch. 6 Dec. 2012. Web. <http://techcrunch.com “Amazon joins Taufeer.com e-channel program.” Middle East Company News. 7 Sep. 2008.
92

/2012/12/06/amazon-finally-reclaims-its-namesake-launches-in-brazil-with-kindle-store/>. <http://search.proquest.com.proxy.lib. umich.edu/docview/232799912?accountid=14667>.

81
Israel, Esteban. “Exclusive: Amazon to take on Brazil’s ecommerce jungle.” Reuters.
93
“Amazon.com shipped $280 million products.” Info-Prod Research. 16 Mar. 2009.
29 June 2012. Web. <http://www.reuters.com/article/2012/06/29/us-amazon-brazil Web. <http://search.proquest.com.proxy.lib. umich.edu/docview/457418994?accoun
-idUSBRE85S1FU20120629>. tid=14667>.

Carrenho, Carlo. “Is Amazon Really Buying Brazil’s Biggest Bookstore Chain?”
82 “Global Infrastructure.” Amazon Web Services. Amazon.com, 2014. Web. <https://
94

Publishing Perspectives. 19 Oct. 2012. Web. <http://publishingperspectives.com/2012 aws.amazon.com/about-aws/globalinfrastructure/>.

/10/is-amazon-really-buying-brazils-biggest-bookstore-chain/>.
95
“Announcing the AWS China (Beijing) Region.” What’s New? Amazon.com,
83
Mari, Angelica. “Amazon kicks off physical goods operation in Brazil.” ZDNet. 18 Dec. 2013. Web. <https://aws.amazon.com/about-aws/whats-new/2013/12/18
10 Feb. 2014. Web. <http://www.zdnet.com/amazon-kicks-off-physical /announcing-the-aws-china-beijing-region/>.
-goods-operation-in-brazil-7000026146/>. “Announcing the South America (Sao Paulo) Region.” What’s New? Amazon.com,
96

84
Israel, Esteban, and Marcela Ayres. 14 Dec. 2011. Web. <http://aws.amazon.com/about-aws/whats-new/2011/12/14
/announcing-the-south-america-sao-paulo-region/>.
85
Israel, Esteban, and Marcela Ayres. 97
“Amazon CloudFront and Route 53 Add India Edge Locations in Chennai and
86
Chanes, Livia, Fernanda Hoefel, and Anna Gabriela Martins.
Mumbai.” What’s New? Amazon.com, 28 July 2013. Web. <https://aws.amazon
87
Israel, Esteban, and Marcela Ayres. .com/about-aws/whats-new/2013/07/28/amazon-cloudfront-route53-announce
88
Israel, Esteban, and Marcela Ayres. -india-edge-locations/>.

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 Cases 3  Assessing Global Market Opportunities CS3−35

Kindle Store, it seemed that Amazon’s international strategy could QUESTIONS

perhaps transcend the domain of physical consumer products.
Whether Amazon would choose to continue its expansion in 1. Did Amazon succeed in China? What did it learn?
Latin America, capitalize on Russia’s dynamic e-commerce growth, 2. Did Amazon make sensible choices in its emerging markets
export its business model to the Middle East, or stay focused on its entry strategies? Consider location, entry mode, and timing.
current markets, the road to success in emerging markets would 3. How should companies and investors measure success in
not be an easy one for Bezos and Piacentini. However, according to emerging markets?
Bezos’ oft-repeated mantra, “it’s still Day 1” for Amazon, for every
one of its markets around the world. 4. Should Amazon enter additional emerging markets imme-
diately? If so, why and where? If not, why not and where
should its focus be? More broadly, how sustainable is Ama-
ACKNOWLEDGMENTS zon’s simultaneous pursuit of geographic, horizontal, and
The authors thank Nowfal Khadar (MBA, 2014) for his insights in vertical expansion?
the creation of the India portion of this case.

APPENDICES
Appendix A1
Amazon Country-Specific Web Pages

Country Web URL Launch Year

Germany www.Amazon.de 1998
United Kingdom www.Amazon.co.uk 1998
France www.Amazon.fr 2000
Japan www.Amazon.co.jp 2000
Canada www.Amazon.ca 2002
China www.Amazon.cn 2004
Austria www.Amazon.de 1
2009
Italy www.Amazon.it 2010
Spain www.Amazon.es 2011
Brazil www.Amazon.com.br2 2012
India www.Amazon.in June 2013
Mexico www.Amazon.com.mx 2
August 2013
Australia www.Amazon.com.au2 November 2013
1
Amazon Austria (www.Amazon.at) operates within Amazon Germany (Amazon.de)
2
Web page functions solely as a Kindle Store

Source: “History & Timeline,” Amazon.com, Jul. 2014, Web.

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Appendix A2
Amazon Global (Non-U.S.) Locations

North America
Canada Development Centers Fulfillment Centers Subsidiaries
Toronto Delta, British Columbia AbeBooks.com
Vancouver Mississauga, Ontario Victoria, British Columbia
Mexico Corporate Offices
Mexico City
Costa Rica Customer Service
Heredia
San Jose
Africa
South Africa Development Center
Cape Town
Egypt Egypt Subsidiary
The Book Depository
Alexandria
Morocco Customer Service Center
Rabat
Europe
Luxembourg European Headquarters
Luxembourg City
France Corporate Offices Fulfillment Centers Amazon Web Services
Paris Montelimar Sevrey Marseille
Saran (Orléans) Paris
Germany Corporate Offices Fulfillment Centers Customer Service Center
Munich Augsburg Leipzig Berlin
Werne Pforzheim Regensburg
Development Centers Koblenz Rheinberg
Dresden Bad Hersfeld Amazon Web Services
Berlin Frankfurt
Ireland Development Center Customer Service Center Amazon Web Services
Dublin Cork Dublin
The Netherlands Development Center Amazon Web Services
The Hague Amsterdam
Italy Corporate Offices Fulfillment Amazon Web Services
Milan Castel San Giovanni Milan
Poland Amazon Web Services
Warsaw
Romania Development Center
Iasi
Slovakia Corporate Office
Bratislava
Spain Corporate Office Fulfillment Center Amazon Web Services
Pozuelo de Alarcon, Madrid San Fernando de Henares Madrid
Sweden Amazon Web Services
Stockholm

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 Cases 3  Assessing Global Market Opportunities CS3−37

United Kingdom Corporate Offices Fulfillment Centers Customer Service Center

Slough, Berkshire Hemel Hempsted Edinburgh, Scotland
Hertfordshire
Development Centers Marston Gate, Milton Amazon Web Services
Edinburgh, Scotland Keynes London
London, England Swansea, Wales
Dunfermline, Fife, Scotland
United Kingdom Subsidiaries Gourock, Inverclyde, Scotland
dpreview.com - London Doncaster, South Yorkshire
IMDb - Slough, Berkshire Petersborough, Cambridgeshire
Rugeley, Staffordshire
Asia
China Corporate Headquarters Fulfillment Centers Customer Service Center
Beijing Beijing Chegdu Beijing
Guangzhou Wuhan Amazon Web Services
Shenyang Xiamen Beijing
Suzhou Xi’an (Hong Kong)
India Corporate Offices Fulfillment Centers Customer Service Center
Bangalore Mumbai Hyderabad
Chennai Bangalore Amazon Web Services
Hyderabad Mumbai
Chennai
Japan Corporate Headquarters Fulfillment Centers Customer Service Centers
Meguro Daito Sakai Sapporo
Ichikawa Takimi Sendai
Kawagoe Tosu Amazon Web Services
Kawashima Tachiyo Tokyo
Odawara Osaka
The Philippines Amazon Web Services
Manila
South Korea Amazon Web Services
Seoul
Singapore Amazon Web Services
Singapore
Taiwan Amazon Web Services
Taipei
South America
Brazil Corporate Offices Amazon Web Services
Sao Paulo Sao Paulo
Rio de Janeiro
Australia
Corporate Offices Amazon Web Services
Melbourne Melbourne Sydney
Sydney Brisbane

Source: “Amazon’s Global Locations.” Amazon.com, Jul. 2014, Web.

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 CS3−38 Part 6  Supplementary Material

Appendix B
Amazon Consolidated Financial Results ($millions, except per share data)

Year Ended December 31

Statements of Operations: 2013 2012 2011 2010 2009
Net sales $ 74,452   $   61,093   $ 48,077  $ 34,204  $ 24,509 
Income from operations $    745   $    676  $    862  $   1,406  $    1,129 
Net income (loss) $    274     $       (39)  $    631  $    1,152  $     902 
  Basic earnings per share $  0.60     $  (0.09)  $   1.39  $    2.58  $    2.08 
  Diluted earnings per share $  0.59    $  (0.09) $   1.37  $    2.53  $    2.04 
Weighted average shares used in computation of earnings per share:
Basic       457         453        453       447        433
Diluted       465         453        461       456        442
Statements of Cash Flows:
  Net cash provided by (used in) operating activities $  5,475   $   4,180  $   3,903  $    3,495  $  3,293 
 Purchases of property and equipment, incl. internal-   (3,444)      (3,785)     (1,811)       (979) (373)
use software and development
  Free cash flow $  2,031   $    395  $  2,092  $     2,516  $  2,920 

Source: 2013 Amazon.com Annual Report. 10 Apr. 2014. Web. http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsannual.

Appendix C
Amazon Partial Break-out of International Revenues ($millions)

Year Ended December 31

2013 2012 2011
Germany $10,535 $8,732   $ 7,230
Japan     7,639   7,800    6,576
United Kingdom     7,291   6,478    5,348

Source: 2013 Amazon.com Annual Report. 10 Apr. 2014. Web. <http://phx.corporate-ir.net

/phoenix.zhtml?c=97664&p=irol-reportsannual>.

Appendix D
Internet Users (per 100 people)

Country 2009 2010 2011 2012 2013

Brazil 39.2 40.7 45.7 48.6 51.6
China 28.9 34.3 38.3 42.3 45.8
France 71.6 77.3 77.8 81.4 81.9
Germany 79.0 82.0 81.3 82.3 84.0
India   5.1   7.5 10.1 12.6 15.1
Japan 78.0 78.2 79.1 86.3 86.3
Mexico 26.3 31.1 37.2 39.8 43.5
Russian Federation 29.0 43.0 49.0 63.8 61.4
South Africa 10.0 24.0 34.0 41.0 48.9
Turkey 36.4 39.8 43.1 45.1 46.3
United Arab Emirates 64.0 68.0 78.0 85.0 88.0
United Kingdom 83.6 85.0 85.4 87.5 89.8
United States 71.0 71.7 69.7 79.3 84.2

Source: “Internet Users (per 100 people).” Data. World Bank. 2014. Web.

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 Cases 3  Assessing Global Market Opportunities CS3−39

Appendix E1
Comparison of Selected Electronic Commerce/Technology Companies

Source: Osawa, Juro, Paul Mozur, and Rolfe Winkler. “Alibaba Flexes Muscles Before IPO.” The Wall Street
Journal. 15 Apr. 2014.

Appendix E2
Comparative Metrics, Selected Electronic Commerce / Technology Companies 2013

Note: Alibaba total includes Taobao and Tmall only

Source: Osawa, Juro, Paul Mozur, and Rolfe Winkler. “Alibaba Flexes Muscles Before IPO.” The Wall Street Journal.
15 Apr. 2014.

Source: Published by WDI Publishing, a division of the William Davidson Institute (WDI) at the University of Michigan. ©2014 Amy Nguyen-Chyung and Elliot Faulk. This case was
written by Elliot Faulk and Amy Nguyen-Chyung (Assistant Professor of Strategy) of the Ross School of Business at the University of Michigan. It was created as a basis for class
discussion, not to illustrate either the effective or ineffective handling of a business situation. Secondary research was performed to accurately portray information about the fea-
tured organization and to extrapolate the decision points presented in the case; however, company representatives were not involved in the creation of this case.

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