Despite Amazon having entered China more than a decade ago, it has struggled to make its mark in one of the largest online retail markets in the world.
According to eMarketer, a research company that provides insights and trends related to digital marketing, media and commerce, China is expected to overtake the U.S. as the world's largest retail market, and its gap is expected to grow even wider in the coming years.
Amazon has not made a big impact on the Chinese market dominated by Alibaba, China's e-commerce giant.
Although Alibaba serves the same online retail market, it uses a completely different model for its electronic retail (e-tail market) operations. It assumes the role of a supervisor when it comes to logistics while providing a technology platform that will facilitate transactions between sellers and buyers.
Amazon, meanwhile, is more of a hands-on retail with strong buy and sell activities. This resulted in Alibaba crossing the 30 percent operating margin while Amazon hardly ever gets close to 5 percent.
Amazon currently only has 0.8 percent share of the Chinese market despite having the best e-commerce technology in the world. Tmall, the business-to-consumer portal, controls more than half of the market. JD.com nearly controls 80 percent of the market, which leaves very little space for other e-commerce players.
In the United States, nobody is able to come close to Amazon despite big box retailers pouring billions of dollars every year into e-commerce initiatives. As it currently has the bulk of online shoppers, sellers gravitate to sell on its platform, which moves the Gross Merchandise Volume a lot.
The more GMV moves, the higher Amazon's margins go. This is why it has been reinventing more of its business, which gives some benefits to its customers so that they will be happy and keep ordering.