The rise of technology 'duplicates' in China


Dominating globally, but Airbnb, Amazon, Uber... are still surpassed by "late birth" competitors in the Chinese market.
 
Based on the size of its economy and population, China has long been one of the must-see destinations for global businesses. However, a series of recent exits, particularly in the technology sector, suggest that this is still a tough market for multinationals.
 
According to experts, the combination of strict management mechanism, fierce competition from domestic rivals and changing preferences of Chinese consumers puts many companies in a difficult position. Last month, the accommodation model Airbnb became the latest foreign tech service to leave China.
 
"China's strict implementation of social distancing, as well as restrictions because of Covid-19 are only a contributing factor to Airbnb's withdrawal, not the main reason. The most basic reason is stiff competition. that Airbnb faces from local rivals such as Meituan and Ctrip with multi-feature services," commented Angela Zhang, an associate professor of law at the University of Hong Kong.
 
Field American company Year of leaving China Rivals in China
Ecommerce eBay 2016 Alibaba, JD.com
Ecommerce Amazon 2019 Alibaba, JD.com
Buy together Groupon 2011 Meituan
Service of transportation Uber 2016 Didi
News Yahoo 2015 Sohu, Tencent
Email Yahoo 2022 Tencent, Net2Ease
Share accommodation Airbnb 2022 Tujia, Xiaozhu, Meituan
EBooks Amazon Kindle 2023 Tencent
A series of American companies left China because they could not compete with domestic services. Source: SCMP
 
Not long after Airbnb's announcement, Amazon also said it would stop the Kindle business in China. They have stopped selling Kindle devices to local distributors, and the online bookstore will close from June 30, 2023.
 
Amazon's retreat from China actually started in 2019, when the company closed its e-commerce portal. The decision was made after the company faced fierce competition from rivals such as Alibaba or JD.com. These are also the names that knocked eBay out in 2016.
 
A series of technology giants had to leave China after years of competition from domestic rivals. Late last year, Microsoft's LinkedIn professional social network announced it was shutting down in the world's most populous country. Yahoo has closed its news portal here since 2015 and continued to terminate the email service this year. Nike also withdrew its online shopping app this month.
 
These moves mark a stark contrast from a few years ago, when China was seen as a developed market with loads of potential. When visiting China in 2017, Brian Chesky, the founder of Airbnb, once expressed great ambition when he announced that he would double investment and triple the workforce. However, this service was not able to survive after 5 years.
 
"The discount offered by Airbnb is not equal to local platforms like Fliggy and Trip.com, so consumers prefer to switch to domestic services," said Tong Wenhao, an analyst at research firm LeadLeo. , explain. "Local platforms are also easy to win the trust of consumers because they have many years of experience in the travel industry."
 
According to Wenhao, that is also one of the weaknesses of foreign Internet companies like Amazon and eBay, which are expanding globally but unable to break the Chinese market. Amazon and eBay are dwarfed by the local platforms that were born later like Alibaba and JD.com.
 
In the case of Amazon in 2019, Wenhao thinks the company was trying to find a way to include the Prime subscription model in its service. While everything is free in China, requiring users to sign up for a fee of 288 yuan ($43) per year causes many to switch to other products.
 
Another reason is that Chinese consumers have changed the way they shop online. For example, Alibaba's Taobao leads in sales in the e-commerce market, while Amazon invests very little in this form.
 
According to Rui Ma, founder of Techbuzz China Podcast, it is more difficult for foreign businesses to grasp Chinese trends and user psychology.
 
 
The Chinese market is considered harsh for foreign online services. Photo: SCMP
 
In contrast, companies that specialize in hardware are less affected. For example, Apple is still the third largest smartphone brand here, selling 13 million iPhones in the first quarter of 2022, according to Counterpoint. Electric vehicle maker Tesla also led the way, with 321,000 units sold last year, far ahead of local brands like Nio, Xpeng Motors and Li Auto with a combined total of more than 280,000.
 
According to Rui Ma, although China remains an attractive place for foreign companies, he is more optimistic about the globalization of Chinese businesses than about international companies entering China.
 
"China now has an ecosystem that's different enough from the rest of the world. It's quite complicated to navigate. I think, only companies with advanced, differentiated technology or very strong brands can have it. can work for a long time," Ma said. "The opposite is different. China has some good business models, especially in e-commerce and digital entertainment. They will succeed, especially when it comes to supply chain advantages." .



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