Crisis Of Amazon.com And The Success Of Its Imitators

April 5, 2009 - PRLog -- The stock prices of Amazon.com remain high. The low profit margin and high capital output maintain the constant growth of online sales, but there is something the investors is neglecting: the development of current online sales is slowing down and overrated stock prices compared with its competitors like ebay, google and Walmart reflects what they will be like soon.

Last year, there was an 39% increase of profits of the online retailers, reaching 14.8 billion dollars amazingly. To stimulate the growth, Amazon.com had to make great capital injection.  During the same period, Amazon.com invested 224 million dollars in its online IT business and the expansion of sale items, which was as much as 50% of their net profit. Last quarter, 42% of their profit were from non-media sales.

Most of the new sale items are low-profit goods like DVD players. To increase the sale volume, Amazon.com frequently offers discounts and make promotion programs to further compact its profits.

Now online sales seem heading for a tough time. According to statistics from Comscore, there was the first drop in holiday sales this year, by 1%. According to Emarketer, the growth rate will drop from 20% in 2007 to 4% next year.  This descending trend also reflects that online retailing industry is more mature than generally expected. And the low profit margin of Amazon.com will be a key element to make it in crisis during the economic slump.

But at the same time, some Chinese B2C platforms, copying Amazon.com’s pattern
to wholesale Chinese-made products directly to the US and Europe, is booming. Among those imitators, many newly built companies are growing at an amazing speed – Pandaoo.com, a B2C platform for Chinese products, has attracted 100,000 users to register within the first month since it was established and successfully squeezed into the top 50,000 on ALEXA. Most prices of their products are only half of the prices of the same products supplied by American retailers and they can still maintain a relatively favorable profit. They are wholesaling made-in-China products around the globe. Under the current economic crisis, the people’s cutting their spendings transfers part of the consumption to those Chinese products who can offer much lower prices. 80% of registered users on Pandaoo.com are from the US and Europe ,who also have high repeated purchasing rates.This is quite a good proof.

Generally speaking in the current economic crisis, dangers and opportunities are co-existing and the domestic sale is slowing down, while some Chinese suppliers are copying the B2C pattern of Amazon.com to sell made-in-China products at lower prices. We should focus on the “opportunities” offered by the economic mess to create new businesses.

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