Why US tech companies struggle in China but thrive in India

Amazon CEO Jeff Bezos in Bangalore, India. Photo credit: Manjunath Kiran AFP for Getty Images.

Some of the world’s most successful companies – Google, Facebook, Amazon, and Uber – have turned their backs on the Middle Kingdom and its 1.4 billion people, raising the question: Why have US tech companies consistently failed in China, yet enjoyed relative success in India? What will this mean for India’s startups?

There are three parties that have caused US tech companies to succeed in India whilst failing in China: the consumers (the guys the companies fight for), the local competition (the guys they fight against), the government (the guys that decide whether they get to fight at all).

1. Consumers: How much love can money buy?

As Yi Shi, CEO of Chinese startup Avazu, has said, “For a large market like China, you will need 100 percent localization to compete with local players.” Chinese consumers are so distinctly different from their American counterparts that localizing in China has either been too difficult or too costly for American companies.

For instance, when eBay and Amazon entered China, Chinese users, like American users, could only view seller reviews. The problem was that Chinese users wanted to talk to the seller, develop a relationship, and haggle – similar to an in-person shopping experience.

eBay and Amazon failed to meet this need, perhaps because they wanted consistency with their American product, while Alibaba understood the Chinese consumer and incorporated a chat feature in their product, Taobao marketplace.

Amazon’s failure in China and Alibaba’s success are rooted in their underlying philosophy.

Jeff Bezos has long claimed he wishes to build the most customer-centric company in the world. Jack Ma, instead, says “Our proposition is simple: we want to help small businesses grow by solving their problems through Internet technology. We fight for the little guy.” Amazon provides a great buyer experience via centralized control akin to the Chinese government. Alibaba provides a great seller experience and then lets the free market run as wild as the Wild West.

Amazon has only two million sellers worldwide. Alibaba has 8.5 million sellers.

As a result, seller competition is fierce on Taobao – with small businesses differentiating themselves by service quality, delivery speeds, price, etc. As anyone who has used Taobao will tell you, there is the usual risk of fakes and scams that one often won’t find on TMall or even Amazon Marketplace – but that’s the point: Price-sensitive Chinese consumers are willing to invest the time to find the right product in exchange for a wider range of potential consumer experiences.

Companies have less to do and less to spend to wow and woo the Indian consumer than the Chinese consumer.

The Chinese value for variety manifests itself in WeChat, China’s most popular message app with 570 million daily active users. The app is stuffed to the brim with ride-hailing features, personal QR codes, video messaging, voice messaging, payments, location reporting, finding nearby users, and much more.

If WeChat is feature-rich, WhatsApp is a feature-pauper. In truth, WhatsApp follows the American school of user interface design: a few, perfected features that meet the majority of user needs, over many, mediocre features that clutter the experience. Unfortunately, the American preference for interface simplicity is directly opposed to the Chinese preference for interface expressiveness.

Localization is easier and cheaper in India. At the outset, the prevalence of English in urban India means that often the American version of a company’s online product is already viable – which is not true for China.

2. Local competition: How much market share can your money buy?

3. Government: How much sacrifice does it take to appease the higher powers?

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