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Originally published Friday, February 8, 2013 at 10:00 PM

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Amazon struggling with e-books in China

The absence of Kindle e-readers from the China site — amid regulatory roadblocks and the prospect of lackluster demand — is an apt symbol of the troubles Amazon founder Jeff Bezos faces in the world’s largest Internet market by users.

Bloomberg News

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When Amazon.com unveiled its Kindle store in China in December, something was missing: the Kindle.

The online shop sells most e-books for less than 10 yuan ($1.61), yet doesn’t offer Amazon’s best-selling line of e-readers and tablets. Consumers must download reading apps for Apple iPads and iPhones or Google’s Android software, or use e-readers from domestic competitors.

The absence of Kindle e-readers from the China site — amid regulatory roadblocks and the prospect of lackluster demand — is an apt symbol of the troubles Amazon founder Jeff Bezos faces in the world’s largest Internet market by users.

After more than eight years of effort and a $74 million acquisition of a local online retailer, Amazon has less than 1 percent of China’s $196 billion e-commerce market. The world’s largest Internet retailer had the same share four years ago as it struggles to catch Jack Ma’s Alibaba Group.

“Any Internet company coming to China has to play an incredibly long game, a decade or more,” said Michael Clendenin, managing director of RedTech Advisors, a consulting firm that sells research to U.S. investors. “Their competitors for the foreseeable future can give up margin for market share.”

Amazon is investing “heavily” in China, Chief Financial Officer Thomas Szkutak said on a Jan. 29 conference call to discuss fourth-quarter results. He didn’t provide a figure, and the company didn’t discuss why it doesn’t sell Kindles in China.

Amazon is trying to profit from exploding growth of online transactions in China, where the number of users gained 10 percent last year to 564 million, the government-run China Internet Network Information Center said last month.

In the third quarter, Amazon accounted for 0.8 percent of China’s online retail sales, No. 5 behind Alibaba’s 76 percent, according to Analysys.

Huang Lei, the Beijing-based spokesman for Amazon, said in a statement that, “In China we only support Kindle Store and have not supplied other Kindle products at this time. We’re doing our best to bring our service to customers around the world as fast as we can.”

Amazon isn’t the first U.S. e-commerce company to struggle against Alibaba. eBay entered China in 2002 and couldn’t survive against Taobao.com, Alibaba’s auction business. The site was shut down in 2006.

No company has built a profitable business in China around e-books, Clendenin said. The country’s biggest e-commerce companies instead rely on sales of clothing and electronics because pirated e-books limit the prices of legitimate volumes.

“The outlook for Amazon’s Kindle store in China is full of challenges,” said Julia Zhu, founder of Observer Solutions, a market researcher helping foreign companies invest in e-commerce in China.

“The majority of Chinese consumers are unwilling to pay for e-books at this stage.”

Wireless devices require at least three layers of regulatory approval in China, including from the state Ministry of Industry and Information Technology.

Amazon and the ministry declined to comment on why its devices aren’t available in China or whether the company is seeking regulatory approval.

Amazon’s approach to introducing e-books without the readers may be getting the market backward, said Shaun Rein, managing director of China Market Research Group in Shanghai.

“People will pay for good quality hardware, but they won’t pay for content,” Rein said. “If I were Amazon I’d be selling the hardware, not the content.”

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