Amazon plans direct sales of foreign merchandise

AS early as next month, Amazon.com, the biggest e-commerce site in the United States, will begin offering direct services to China's mainland, allowing customers in the world's largest Internet market to buy foreign products in yuan.

Amazon has been in China for 10 years, in name more than services. In 2004, it bought a Chinese website called Joyo, which sells 25 million mostly domestic products to consumers in yuan.

In the past, people who wanted to buy foreign products from Amazon's international sites had to pay in dollars and foot overseas shipping costs.

That's about to change as Amazon.com takes advantage of relaxed trade policies in the new China (Shanghai) Pilot Free Trade Zone, allowing it to sell products from abroad to Chinese consumers paying yuan. Foreign-sourced goods will be shipped to the zone and stockpiled in Amazon warehouse facilities there.

Amazon's new service has attracted widespread attention on cross-border e-commerce.

"It's still in its infancy in China," said Tian Zheng, a researcher at Beijing-based IT consulting firm Analysys International, "but it possesses great market potential and opportunities."

China has almost 300 million online shoppers, and the figure continues to expand, especially amid the rising popularity of using mobile phones to make purchases.

In 2013, online commerce was valued at 2.7 trillion yuan (US$440 billion), up almost 29 percent from a year earlier. The majority of that volume came from Chinese e-commerce exporters, according to Analysys.

In the second quarter of this year, China's business-to-consumer e-market totaled 320 billion yuan, up 72 percent from a year earlier.

"China's e-commerce market is one of the most dynamic in the world," said Diego Piacentini, senior vice president of Amazon International. "It is still Day 1 for us, particularly in the area of cross-border e-commerce."

With its presence in the free trade zone, Amazon is aiming to ratchet up the competition with domestic online retail rivals in a market dominated by Alibaba's Tmall and JD.com, analysts said.

Amazon China has about 7.85 million users, trailing Tmall's 98 million users, JD.com's 41 million and Dangdang.com's 9.2 million, said Analysys.

Though no official timetable has been announced for the start of the new Amazon direct service, it will begin in the fourth quarter, according to sources familiar with the issue.

In August, Amazon signed agreements with the Shanghai Free Trade Zone and Shanghai Information Investment Ltd to develop its first cross-border e-commerce trade on the mainland.

The arrangement will give consumers access to all products available through all Amazon sites and also will offer Chinese sellers access to the company's global customer base.

Amazon is looking forward to working with its Shanghai partners to develop this "incredible" opportunity and will offer the "best cross-border shopping experience," Diego said.

Chinese consumers, especially in major cities, often prefer to buy products such as milk powder, baby-care items and luxury watches from overseas to skirt domestic food-safety scandals and unreasonably high prices for foreign products in the domestic market. The new service will establish Shanghai as a recognized international cross-border e-commerce center and a hub for international trade and commerce.

"We seek to be the most customer-obsessed online shopping platform in China, with a vast selection, competitive pricing and the most convenient service," said Doug Gurr, Amazon China president.

After acquiring Joyo, Amazon invested in 13 distribution centers, enabling the site to deliver to around 3,000 cities and counties across China. In 146 cities, deliveries were promised one or two days after an order was placed.

Logistics center

Amazon is planning to establish a logistics and warehouse center in the free trade zone, where goods can be brought in from Amazon's overseas sites and vendors can enter China through a special platform.

Under the new deal, consumers will get access to a world of products, which are expected to be delivered in seven to 10 days, according to Shanghai Information Investment. Industry insiders said delivery times may be as short as to one or three days, depending on stocks and logistics.

As a prelude to its new direct service, Amazon has been gradually reducing shipping fees for Chinese consumers since August.

"They dropped by half or more in the past month," said Tracy Fan, a Shanghai worker who often buys cosmetics from Amazon.com.

It's a competitive market even for a global name like Amazon.

"Amazon's entry will influence the domestic e-commerce market but in a limited range," said Tian, adding that Amazon and its partners will have to solve problems related to logistics, pricing and services.

Amazon has been in talks with local logistics company SF Express to improve the new service, Chinese media reported.

Still, the company's services and logistics model in China isn't nearly as developed as that of rivals like Tmall and JD.com, industry insiders said.

The new free trade zone channel will allow products from small and medium-sized companies in China to be exported to Amazon customers across the globe.

In 2013, the number of cross-border Chinese sellers jumped 196 percent from a year earlier, covering sectors such as apparel and consumer electronics. Amazon has established special teams in Shanghai, Beijing and Guangzhou to help Chinese mainland exporters.