Amazon's Marketing Missteps in China

Today's Wall Street Journal's Marketplace section carried a wonderful little piece about a Chinese couple whose online retailing business is beating US giants in China.

The company, Dangdang.com, was founded by Peggy Yu and her husband, Li Guoqing. You can read the details on the WSJ website, or in print.

What drew my attention was this gem, about a third of the way through the piece,

"...But equally critical to the success, analysts and executives say, is the ability of domestic companies to understand and adapt to some of the other peculiarities of China's market. Ms. Yu says Dangdang had to make adjustments to the model pioneered by Amazon.com and others. For example, the vast majority of Dangdang's Chinese buyers of books pay cash on delivery- a result of the fact that credit cards are still relatively uncommon in China.....Edward Yu, president of Analysys International, a Beijing-based technology research company, says foreign Internet companies sometimes don't give local managers enough leeway to adapt their businesses to local customs."

Further on, Ms. Yu is quoted as restating a time-honored marketing principle,

"Don't try to change consumer behavior. If consumers don't want to pay with credit cards, then ask them how they want to pay. If they want to pay cash, then figure out a way to get their cash."

Of course, sometimes marketing success comes from changing consumer behaviors. But typically, that is with some technological 'must have,' like a Walkman, iPod, or VCR. And that may involve changing usage habits, not purchase habits.

In this case, it's clear that the local firm employed classically simple marketing concepts. Provide something familiar, books, in a new way, online, with a better value proposition. Taking care of details like payment methods, which Dangdang did not do immediately, made the difference between success and failure.

The article goes on to report that Dangdang's major competitor, Joyo, purchased recently by Amazon, grew sales at 50% last year. Dangdang's grew at a reported 175%.

Some things don't change. Size, as I have discussed in earlier posts (e.g., Starbucks, Intel, GM), can chill innovation and suck in mediocre managers who simply warm seats and "do their jobs."

It's refreshing to see a smaller company apply intelligent marketing principles, work hard, and outperform a larger, duller giant in the same product/market space.