Amazon.com Inc has agreed to buy Joyo.com, China's largest online retailer of books, music and videos, for US$75 million to gain access to the world's second-biggest Internet market in terms of users.
Amazon.com, the world's largest Internet retailer, will pay US$72 million in cash and assume employee stock options to buy the company. Closely held Joyo.com, which is based in Beijing, operates two websites in co-operation with Chinese subsidiaries and affiliates, Seattle-based Amazon said.
The purchase, which will give Amazon.com its sixth international website, follows investments in China by competitors Yahoo! Inc. and EBay Inc. Amazon.com is trying to grab a share of the estimated 27.7 million online shoppers in China as the company's international revenue growth outpaces that of the US.
"It looks like a way for Amazon, for a relatively cheap price, to get exposure to one of the best growth areas geographically in the next decade," said Norm Conley, who helps manage US$930 million at St. Louis-based J.A. Glynn & Co, including 127,000 Amazon.com shares. "They're getting a bigger footprint internationally and I think that's the right thing to do."
Amazon.com Chief Executive Officer, Jeff Bezos, 40, wants to increase the company's sales by expanding into new merchandise types and countries. Bezos has also allowed other retailers to sell clothing, food and jewelry through the online store.
During the second quarter, sales at sites outside the US rose 50 per cent to US$595 million. They climbed 13 per cent to US$792 million in the US.
The company, which has sites in the US, Canada, France, Germany, UK and Japan, said it expects international sales to surpass US revenue in the future.
Amazon.com wasn't advised by an investment bank in the transaction, which is expected to close in the third quarter of 2004, Amazon.com spokeswoman Patty Smith said.
Joyo.com operates three fulfilment centres in Beijing, Shanghai and Guangzhou that feed 30 delivery centres, Smith said.
Piper Jaffray analyst Safa Rashtchy estimated in a note that Joyo's 2004 revenues will be as much as US$15 million. Joyo.com has 5.2 million registered users, according to the site.
Internet retailers will sell US$8.59 billion worth of merchandise in China this year, according to the International Data Corp. That's less than one-tenth of sales in the US, the world's largest market.
The combination of Amazon.com and Joyo.com "will bring the development of e-commerce and online customer experience in China to a new level," said Lei Jun, founder and chairman of Joyo.com and president of Kingsoft Holdings Limited, the largest shareholder of Joyo.com.
In China, credit and debit cards are only used by 38 per cent of those making online purchases, according to the China Internet Network Information Centre. Joyo also offers cash payment on delivery.
(China Daily August 21, 2004)
