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Amazon to close domestic marketplace business in China: sources

FILE PHOTO: Amazon.com's logo is seen at Amazon Japan's office building in Tokyo, Japan, August 8, 2016. REUTERS/Kim Kyung-Hoon/File Photo

SAN FRANCISCO/SHANGHAI (Reuters) - Amazon.com Inc plans to close its domestic marketplace business in China by mid-July, people familiar with the matter told Reuters on Wednesday, focusing efforts on its more lucrative businesses selling overseas goods and cloud services in the world's most populous nation.

Shoppers in China will no longer be able to buy goods from third-party merchants in the country, but they still will be able to order from the United States, United Kingdom, Denmark and Japan via Amazon's global store. Amazon expects to close fulfillment centers and wind down its support for domestic-selling merchants in China in the next 90 days, one of the people said.

The closure underscores how fierce competition by China's home-grown e-commerce rivals have made it difficult for Amazon's local marketplace to gain a foothold. Consumer insights firm iResearch Global said that Alibaba Group Holding Ltd's Tmall marketplace and JD.com Inc held 81.9 percent of the Chinese market last year.

"They're pulling out because it’s not profitable and not growing," said Michael Pachter, an analyst at Wedbush Securities. "The domestic Chinese online retailers just have huge advantages that Amazon can't compete with."

Amazon is still expanding aggressively in other countries, notably India, where it is contending with local player Flipkart to dominate that market. China, on the other hand, has appeared to factor less and less in the global aspirations of top U.S. tech firms Amazon, Netflix Inc, Facebook Inc and Alphabet Inc's Google, Pachter said.

Customers of Amazon in China will still be able to purchase its Kindle e-readers and online content, according to sources, who spoke on condition of anonymity. Amazon Web Services, the company's cloud unit that sells data storage and computing power to enterprises, will remain as well.

The world's largest online retailer bought local Chinese online shopping website Joyo.com in 2004 for $75 million. In 2011, it rebranded the business as Amazon China.

(Reporting by Jeffrey Dastin, Brenda Goh, Cate Cadell, Pei Li and Josh Horwitz; editing by Leslie Adler, Meredith Mazzilli and Susan Thomas)