In its second-largest acquisition, Amazon buys the company for $970 million.
Amazon operates 15 fulfillment centers in China, the e-retailer’s largest distribution network outside of the United States.
As it has in the United States, Amazon.com Inc.'s China subsidiary is building a nationwide network of distribution centers. What's different is that Amazon China also employs workers who deliver the goods to the consumer.
Amazon operates 15 fulfillment centers around China, with 800,000 square meters of warehouse space. It is Amazon’s largest distribution network outside the United States, says Fang Quan, vice president in charge of the marketplace platform for Amazon China. Amazon also employs drivers who make deliveries using their own vans, bicycles, motorcycles and scooters (how Yihaodian delivers fast ).
Creating a network of distribution centers was necessary to ensure good service, Fang says. “Once we entered the China market, we noticed that the logistics service was immature and far away from what we’ve expected,” he says. “That led us to establish a delivery team of our own. Inside Amazon, Amazon China is the first to take delivery in-house, and we hope that in the near future it could be extended to other countries.”
Because of its own delivery network, Amazon could fulfill orders during the Chinese new year holiday period, known as the Spring Festival, when competitors that relied on outside carriers could not, Fang says. “On the other hand, Amazon expended the festival distribution from 30 cities and areas to 47 in this holiday season,” he says.
Fitness equipment retailer Hangzhou Aigous Trading Co., which sells on the Amazon China marketplace and other shopping portals in China, is benefiting from Amazon’s logistics expertise, says company director Chen Huaibei. “Amazon China has a smart logistics system and it can help you automatically manage your inventories in different warehouse,” he says. “For example, they can predict your sales in different cities and put the right amount of products in regional warehouses. Some domestic marketplace providers can’t do that, and I have to hire more people to manage it manually.”
Amazon’s Chinese competitors are also investing in fulfillment. For example, JD.com, No. 1 in Internet Retailer’s recently released China 500, operates 82 warehouses with a total area of over 1.3 million square meters in 34 cities, as well as 1,453 local delivery stations in 460 cities across China. Meanwhile, China’s largest online marketplace operator, Alibaba Group is investing heavily in building a nationwide logistics network in collaboration with several delivery companies.
Amazon China, which was built around Amazon.com Inc.’s 2004 acquisition of web-only retailer Joyo.com in 2004, is No. 4 in the China 500 and No. 1 in the Internet Retailer Top 500, which ranks North American retailers by their online sales and also No. 1 in the Europe 500. Outside of Amazon.com in the U.S., Amazon operates 11 e-commerce sites, including Asian sites in China, Japan and India.