Amazon Starts Prime Service in China. Competition For Alibaba?

Amazon.com have now started offering their prime free-shipping service in China, ratcheting up their attempts to compete with Alibaba Group Holding Ltd. for the increasing number of shoppers desiring overseas products.

Chinese Prime subscribers will now be eligible for free shipping on orders exceeding 200 yuan ($29.50) on millions of overseas products, the company said in an e-mailed statement. Domestic goods will also be delivered free with membership costing 388 yuan a year, lower than the U.S. fee of $99.

This is a strong move and incentive by Amazon China for Chinese consumers. It is indicative of the demand for western products online in the Middle Kingdom, the market is so lucrative that Amazon can still find room to compete with the e-commerce behemoth that is Alibaba.

Amazon, which has so far made little headway against Alibaba, is focusing on the demands of a growing middle-class whom are seeking better high quality goods from abroad. Amazon as an American digital platform are well placed to emphasize the authenticity and quality of the products from outside of China’s borders, this will help them stand out in a market flooded with counterfeit, fake products. The target market for Amazon is the more discerning, wealthy Chinese consumer.

Amazon’s global logistics network will manage shipping and final delivery to Chinese customers. Packages are estimated to arrive within five to nine days in 82 cities across the country, with single orders of more than 2,000 yuan requiring additional time, the company added.

Amazon must utilize the extensive and increasingly developed infrastructure across China for delivery whilst focusing predominantly  on the east coast where the most developed cities (Guangzhou, Beijing and Shanghai) and the majority of the population live. Large 2nd and 3rd tier cities are also important as the road networks continue to improve for e-commerce delivery.

Amazon will have a fight on their hands to build up a significant presence and compete with the domestic Alibaba, they have to understand the market and different behaviour patterns of Chinese consumers in order to tailor and attract them to their e-commerce platform. It will be interesting to track their development in the future.

 

Benji is an e-commerce specialist based in Shanghai, China. For more information see his blog here.

 

 

 

Amazon and Walmart Face-off

It looks like the big two in retail, Amazon and Walmart, are going to collide both online and offline. Following the Jet.com acquisition, Walmart are talking up future ecommerce initiatives and their impact on the stores business.

Likewise now Amazon plans to more aggressively get into physical retail as noted by WSJ.

With curbside pickup, Amazon will have to contend with Wal-Mart, which plans to bring the service to nearly a quarter of its roughly 4,600 U.S. stores by the end of next year, executives said on a conference call last week .

So will Walmart’s physical competency beat Amazon’s digital expertise? Time will tell but if you were to bet on anyone you’d be hard to bet against Amazon. The digital pie is growing and the market already says Amazon’s future earnings will continue to rise. The same can’t be said about Walmart, especially when you consider the customer base that was built on the middle to lower class is stagnating.

Should be fun to watch.

Cross border E-commerce set to reach 25% of the Chinese population by 2020

China, is the world leader in e-commerce:

In modern China a significant level of growth of China is fueled by e-commerce. It has  become the largest e-commerce market in the world and with the rise of Alibaba at the forefront of online shopping developments in terms of both user experience and technological advances.

Foreign goods remain popular with Chinese consumers compared to brands from home. They are often seen as a byword for quality. By 2020 forecasts suggest that a quarter of the total population of China is expected to order items through cross-border e-commerce. That is a projection of 291.8 million online buyers.

E-commerce Infrastructure:

The main reason for this continued growth is an improving delivery infrastructure. Alibaba now have the most extensive delivery network in the world, with all 1st, 2nd and third tier cities in China being catered for. They are also expanding out to more rural area’s. Third tier city populations becoming more connected online to e-commerce services will be a key growth area in the next five years.

It is also a case of ease, congested Chinese cities and pollution has been dissuading shoppers and encouraging them to go online, in hectic modern China the digital environment dominates and consumers are looking towards online shopping in order to utilize their time more effectively.

Chinese trust foreign brands:

There is a greater confidence in the quality of foreign products than Chinese brands, especially regarding luxury items and food products such as powdered baby milk. Both Alibaba and JD.com (the two largest platforms) are attracting many foreign brands. 82.8 % of Chinese e-commerce market is dominated by two local players : Tmall (Alibaba) and JD.com. Foreign brands therefore must enter the market through these domestic platforms in order to gain visibility.

Tmall Global :

Tmall global was specifically designed by Alibaba to host ‘stores’ for international brands, it is the largest online outlet for western products in China. JD.com are also launching a similar foreign section service. The guarantee of authenticity in a market full of counterfeit products is the reason for the growth and appeal in this western branded sector.

Changes in policy:

Recently, the Chinese government introduced  new tax policy to effectively raise the price of goods over 2,000 RMB (USD 308) from abroad. This new policy of value added tax (VAT) imposed on the import will particularly impact on e-retailers that sell luxury goods as only goods under the value of 2.000 RMB (USD $308) will be subject to tax relief.

This new tax is not however surprising and will largely effect luxury brands whom can afford higher taxes due to the high cost and return on their investment in China in terms of sales. For the vast majority of imported products this new tax will have little effect.

A host of Chinese E-commerce channels:

It is important to familiarise yourself with the variety of e-commerce channels. Alibaba and JD.com dominate the market but there is growth in smaller, niche stores that are attracting consumers looking to differentiate themselves from the mainstream. Many fashion brands now set up their own stores online.

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Growth of the micro store on WeChat:

Micro stores within the WeChat (the largest social media platform in China) are growing phenomenon. Users link their WeChat accounts up to their banking and can now browse e-stores within the application making it easy to purchase goods in this manner.

This is an example of how China is at the forefront of combining social media and e-commerce in one integrated service. This means quality content promoting your goods on social media can lead directly to sales within the same platform. You can also utilize ‘apps within the app’ on WeChat where you fully customize your own page, offer customer services, present your product range and then allow purchases too.

 

Benji is a digital marketing and e-commerce specialist based in Shanghai, China. For more information see his blog and website here.