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.

 

 

 

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