Their second largest competitor JD.com (according to that article) is only the 16th most popular in China. [1]
Tmall.com is 5th in China, so OK Amazon.cn isn't THE most popular ecommerce site in China. [2] But is that really failing and throwing in the towel?
What am I missing here? How has Amazon.cn failed in the Chinese market?
[0] http://www.alexa.com/siteinfo/amazon.cn
Another indication: chinadaily.com.cn (English) is #23, just after one of the most popular Chinese web portals (sogou.com).
Most popular US services/companies have Chinese-based (and Chinese-targeted) equivalents[0], and in most cases, the Chinese version is more successful in China than its US-based counterpart.
So the real question is: why do Chinese companies tend to outperform foreign ones in China?
I have a number of speculations as to why, but I'm not sure if the answer is really cut-and-dry[1].
[0] Some of these even predate the US version!
[1] Though the inability to (or difficulty with?) store Chinese user data outside China is probably a big part of it
A third possibility is that these foreign companies were not able to gain early traction in mainland China, due to government policies (the Great Firewall) and/or the company finding it hard to navigate the Chinese bureaucracy. Perhaps the companies at that earlier point in time (late '90s/early '00s) simply did not pay enough attention to the Chinese market and focused on expanding in the more developed parts of Asia with better Internet bandwidth and speeds, leaving room for native Chinese companies to grow and reap the first mover's advantage.
Isn't that obvious? Foreign companies are limited or just entirely prevented from doing business in China. China is basically a closed market: you can maybe play if you follow some strict rules your competitors can ignore, but rule #1 is that a foreign company can't in any way lead.
Look at the countries around China and things are quite different. Chinese internet companies in general do very poorly outside of China, even in adjacent countries or even open Chinese territories.