When rumors emerged about Kindle’s potential withdrawal from the Chinese market, Caixi, who has been a loyal kindle user for seven years, felt like it was “the end of the world”. But she wasn’t surprised.
Although Amazon’s official online store on Tmall had been closed since last October, people began to realise that Kindle e-readers had been out of stock across all major Chinese e-commerce platforms since early January. Domestic media reported, citing sources close to Amazon, that the Kindle hardware team had already been dissolved in November. The hashtag #Kindle may be retreating the Chinese Market# soon went viral on the Chinese Twitter-like social media platform Weibo.
Amazon denied the rumor stating that the current unavailability was only due to chip shortages, and that the company would continue to service Chinese users, but the discussion around Kindle’s fate in China did not die down. Media reports and netizens alike speculated that it was only a matter of time before Amazon would give up its e-reader and digital reading business in China, like it did with its e-commerce business three years ago.
Whatever happens to the Kindle, the rumor itself, and the heated discussion that followed, show a lack of confidence by Chinese consumers in the e-reader that has reshaped the digital reading landscape and the publishing industry as a whole.
According to a government report on the Chinese digital reading market, by the end of 2020, China had 494 million people who read digitally, a 5.56% growth over the year. The percentage of adults using e-readers for reading increased from 7.8% in 2016 to 27.2% in 2020. Meanwhile, Chinese readers read only 6.2 paper books per person in 2020, a decrease of 2.6 paper books from the year before. Other reports also point to a noticeable growth in the digital reading market.
The question is, then, if there are more Chinese who are reading, and more are choosing digital reading over paper books, why is the Kindle, as one of the earliest movers in the market and arguably the best performer in the U.S. so far, losing the game in China?
Before we can answer this question, it is worth doing a quick check of the facts — just how bad is Kindle doing in China? Is it really, as many claim, losing the Chinese market?
Amazon stopped releasing data about the Kindle’s market performance in China back in 2018 when the e-reader had already sold millions in the country. At that time, China-based consumers accounted for 40% of the device’s world sales volume, making China its largest global market. In 2016, China was the third largest market in the world for registered users of the “Kindle Unlimited” monthly e-book service, behind only the U.S. and the UK.
Within China, the Kindle’s sales performance is also far from “losing the game”. Despite growing pressure in recent years from competitors like BOOX and iReader, in 2020, Kindle still topped the sales lists of e-readers across major e-commerce platforms in China including JD.com and Alibaba’s Tmall.com. Kindle is also the most recommended e-reader in multiple product reviews and brand ranking lists.
If anything, the fact that Kindle is one of the most traded products on China’s largest online second-hand marketplace, Xianyu, explains some of the overwhelming pessimism about its situation in China — a large number of Kindle owners in China do not use it after purchase. According to data released by Xianyu in August 2020, the past year had seen more than 400,000 Kindle e-readers traded on the platform, and some estimated that for every three Kindle e-readers sold by Amazon, one will appear on Xianyu.
Among Chinese Kindle owners, a joke that has been around for years — “Kindle is most useful when you need a lid to cover your instant noodle cup” — conveys a similar message, i.e. no one uses Kindle for reading any more. So the answer seems clear now: the Kindle e-reader may sell well in China, but the Kindle e-book store lacks customers, and Amazon makes little profit out of the hardware, as confirmed by Jeff Bezos himself.
Commenting on Kindle’s business model in China, Professor Cui Lili from the Shanghai University of Finance and Economics, said that Amazon’s strategy to sell the hardware at cost while looking to profit from e-book sales did not work in China. In a recent interview with Pandaily, Cui explained that a “platform economy logic” may be more suitable for the Chinese market as Chinese readers’ reading habits tend to be “more passive and complementary”, and would need external stimulus, such as social interactions, to instigate their reading. “Reading is only one of the many needs of e-book readers, and so a platform-based model makes it possible for the e-reading platform to keep innovating its service and product through collecting and analysing user data… Accordingly, a strategy that works better in China would be one that combines the free model with a subscription model. So you either make the device free, or provide free e-books after selling the device.”
Zhi Ge has been reading on a Kindle since 2011. He is also an active member of several online e-reader communities where he shares advice based on his experience of having used six different Kindle models and several other brands of e-readers. Zhi Ge told Pandaily that, in China, there are not that many people who are willing to pay for licensed e-books. “Chinese people prefer to pay for things that can be physically seen and touched, and they don’t tend to spend money on virtual goods like e-books”, observed Zhi Ge. In the case of China, e-reader ownership does not bring demand for the Kindle store’s e-books, and the reality is vice versa: it is the pirated books found online for free that generates the demand for e-readers. “Many would spend thousands on a flagship e-reader just to read the free stuff they downloaded online”, Zhi Ge added, recalling someone he met in the Baidu forum for Kindle, “that guy spent something like 5,000 yuan on an e-reader just to read all the free books on WeRead”.
WeRead is a reading app launched in 2015 by Tencent. With the slogan “Make reading no longer alone”, WeRead is designed to be used together with the ubiquitous social media app WeChat. WeRead’s multiple social features, such as displaying one’s e-bookshelf to WeChat contacts, teaming up with friends to read a book together, have set it apart from Amazon’s Kindle, which aims at providing an immersive reading experience without any disruption from, for example, socialising.
As Zhi Ge noticed, Chinese consumers are more price sensitive when it comes to virtual goods like e-books, and WeRead’s “unlimited card” feature that allows users to read books for free gives it a huge advantage over the Kindle store. Since its launch in 2015, WeRead has amassed over 210 million registered users and 5 million monthly active users, making it one of Kindle’s major competitors in China in terms of e-book distribution. In early 2020, WeRead even managed to find a way for its users to use the app on Kindle, which has since become one of the many tips to “make Kindle useful again” widely shared among the device’s users in China.
Yet, WeRead ranked only the sixth among the top 10 reading apps in 2021. Other popular apps from the list, such as ByteDance-backed Tomato Novel and Baidu-financed Qimao Free Novel, are all platforms providing what is known as “web novels” (wang wen), or “the literary equivalent of a popcorn movie” in China.
Different from the Kindle store that profits by selling formally published e-books, these web novel platforms represent the so-called “free model” in the Chinese digital reading market. These titles attract web traffic with popular indie novels (books without ISBNs) and make a profit mainly through advertising. The fact that 9 out of the top 10 most downloaded reading apps are all web novel providers is also proof enough to indicate the immense popularity of the genre in China. This analysis further suggests that the rapid growth of digital readers in recent years in China is largely attributed to the users of these apps, and the overlapping rate between traditional reading apps like Kindle, or the “subscription model”, and such novel-centered free apps, is lower than 3%, according to an iResearch report.
Amazon has assumed dominance in the US digital reading market both as an e-reader manufacturer and a publisher, but in the Chinese market, it cannot publish indie books because foreign companies are strictly prohibited from publishing in China. The Kindle store has little stock for web novels, but it has clearly spotted the potential – despite Jeff Bezos’ strategy to focus on “serious readers”.
In 2017, Kindle partnered with Migu Read, the web novel platform backed by Chinese telecommunication giant China Mobile, and launched a co-branded model called Kindle Migu X. The new device allowed users to access web novels through the partnership’s “Migu store”. It is hard to tell how successful this effort has been, but a report by China’s e-commerce platform JD.com shows that during the annual “618 shopping festival” in 2020, the two best sellers among all e-readers were the classic Kindle Paperwhite and the Kindle Oaisis 3. Meanwhile, Kindle’s official retail store on JD.com does not even list the co-branded Kindle Migu X.
While Kindle has failed to profit from its existing customers through the Kindle store, the web novel market has also been fiercely captured and divided up by its Chinese competitors through the “free model”, a territory hard for Amazon, as a U.S company, to enter.
As of the end of April 2021, the value of China’s digital reading market had reached 35.2 billion yuan ($5.4 billion), a 21.8% year-on-year growth. “We have always been interested in the Chinese digital reading market, but Kindle has never been our main focus,” said Zhang Yi, chief analyst of Chinese consulting company iiMedia.