Amazon Ramps Up Its Far East Efforts (AMZN)

Seattle is bringing a version of its popular Prime membership service to the world's most populous nation.

Amazon AMZN China

E-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) announced on Friday that it is bringing its Prime membership program to the world’s second largest economy: China. With already over 65 million people paying for Prime subscriptions, the company wants to venture into the Chinese market. Indeed, China is too big of a market to ignore, being the most populous nation worldwide.

Services offered by Prime membership in China will include free international shipping from Amazon Global Store, and unlimited free domestic shipping, no minimum purchase required. The subscription will cost ¥388 yuan ($57.23 USD), a discounted rate for the first year, which is cheaper than the $99 USD Prime subscription in the United States. The year-long subscription will also include unlimited free cross-border shipping on orders over ¥200 yuan ($29.50 USD) on eligible overseas goods, and unlimited free shipping no minimum orders on over 9 million domestic items.

Apart from the cheap shipping price points and membership fees, Chinese consumers do not have the same benefits as Amazon Prime users in the United States. China’s version of Prime will not include video and music streaming. Further, the limitation of cross-border products is a concern for the company. For now, Amazon’s focus is at increasing its online presence in China by offering affordable and expedient ways of buying foreign products from the site.

Chinese Prime subscribers will be able to purchase from Amazon Global Store, and shop with about 30 product categories including clothing, accessories, shoes, toys, kitchen, beauty, and home. Launched in November 2014, the international store platform is Amazon’s storefront that showcases more than 4 million international products open to cross-border consumers.

Amazon will ship cross-border purchases from its fulfillment centers in the United States and the estimated delivery time is within 5-9 days in 82 cities in China. Considering cross-border logistical operations that international deliveries entail, transit time may take longer. In addition to that, single orders of more than ¥2,000 Yuan, or yearly total purchases of a Chinese citizen over ¥20,000 Yuan is required to go through Customs, which necessitates more processing time.

The launch of Amazon Prime in China is concurrent with its third Global Shopping Festival, with more than 70,000 international brands and Black Friday sale on the Amazon Global Store which will last until December 2 of this year. Amazon has even further marked down its Prime subscriptions in China for the first year from ¥388 yuan to ¥188 yuan, and a free 30-day trial is being offered as well.

Amazon has long struggled to break into China’s market. By offering shipping discounts and deals, the company is capitalizing on the increasing demand of foreign products among the rising Chinese middle class. Further, with the growing popularity of online shopping in China, 23% of Chinese shoppers are buying products from international retailers. The launch of Amazon Prime in China is the company’s plan of further challenging China-based e-commerce website Alibaba (NYSE:BABA), which has over 434 million active users.

Jack Ma, founder and CEO of Alibaba, known to speak his mind without hesitation, has yet to comment on the news.

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