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Time to rethink China’s e-commerce business model [Copy link] 中文

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Post time 2019-4-20 10:30:12 |Display all floors
(Global Times) US-based internet giant on Thursday said it is notifying customers that it will no longer operate a marketplace nor provide seller services on its Chinese website from July 18, Reuters reported.

Amazon's decision is not surprising. It's not that anyone wants to drive US companies out of China's e-commerce market, but the market faces severe challenges so it's hard for some enterprises to survive.

Amazon's withdrawal is ringing alarms for China's e-commerce sector.

The global retail world is shifting rapidly and e-commerce is driving this trend. The world's largest and fastest-growing online retail market is in China, but the country's e-commerce sector has reached a bottleneck, with some internet companies having a really hard time.

An internal letter attributed to Liu Qiangdong, founder of Chinese e-commerce giant, said earlier this week that JD Logistics had dropped the base salary for delivery staff because the subsidiary needed to end a 12-year string of losses through reforms.

These negative developments affecting world-class e-commerce players such as JD and Amazon tell everyone how serious the problems are for China's e-commerce sector.

In the past few years, internet technology has penetrated almost every sector of the Chinese economy. The strains affecting e-commerce are being transmitted along the whole value chain, all the way to the end producers, who are ordinary workers and farmers.

Many agricultural products and daily necessities sold online have very low prices, squeezing margins for everyone along the value chain, especially the end-producers who have less bargaining power over profit distribution than manufacturers, distributors and e-commerce platforms.

Online retailers have indeed created an e-commerce miracle in China, but most of them used a low-price strategy to compete for customers. A retail price war will definitely have an impact on upstream manufacturing and agriculture, which are two important pillars of the real economy.

When China's e-commerce sector was in a period of rapid development, there was much talk of the huge success achieved by internet giants such as Alibaba Group, but less attention was paid to the side effects of the expansion of e-commerce on the real economy and the complex challenges it has brought.

E-commerce has been seen as one of China's "four great new inventions" of the modern era. As a new business concept, e-commerce has had a long trial run. Amazon's withdrawal can be seen as a landmark event, pointing to the end of a golden era in China's e-commerce sector and the start of an adjustment period.

Maybe it's time for China to rethink the business model of e-commerce and the role it plays in the real economy. After adjustment, the sector can eventually reach maturity if all goes smoothly.

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