Amazon Challenges Chinese Rivals on Their Home Turf

It's gonna be different, but there is no doubt that it's on.

Amazon understands that being a global competitor means not just operating globally, but being global.

Alibaba has already entered the US market and seems not the least bit intimidated by its more established rival. Amazon was probably going to respond anyway, but the thrown gauntlet may have sped up the process.

But it may well be that the biggest challenge Amazon faces is not from its commercial opponents but from the final arbiter of all things Chinese: the government.

McDonalds, Apple, Walmart and virtually every other major US consumer oriented business has found itself being investigated for violations of various ill-defined and sometimes utterly spurious rules and laws. All of which would be hilarious given China's own problems with safety and quality were it not for the fact that this sort of economic warfare clearly plays to the 'home teams' commercial advantage. It is almost certain that Amazon will face the same sort of treatment as soon as they begin to demonstrate any sort of success, while Alibaba and others attempting to penetrate the US market are safe from similar types of interference.

The Chinese counter that the refusal to let electronics manufacturer Huawei make strategic US acquisitions or the delisting of fraudulent companies from US securities exchanges amounts to the same thing. While Americans argue that they are very different - it is doubtful, for instance, that China would permit the acquisition of one of its electronics companies and fraud is, well, fraud - the differences in laws and cultural understanding about what constitutes to acceptable local behavior in a global economy is still a work in progress.

Amazon has handled its US rise to dominance with an almost uncanny degree of success. This next stage may prove a bit more challenging. JL

Charles Clover reports in the Financial Times:

Alibaba has moved on to Amazon’s home turf with several US-based projects, including a US ecommerce portal with low seller fees.
Amazon, the US ecommerce group, plans to ramp up its business in China by setting up operations in Shanghai’s new free-trade zone, allowing it to sell imports more cheaply to better compete in a market dominated by Alibaba and JD.com.

The retailer follows software company Microsoft and a string of banks into the 28 sq km free-trade zone, set up a year ago as a test bed for economic reforms.

The moves come even as foreign technology companies in China have recently become targets of regulatory probes and negative state media coverage. Government investigators raided Microsoft offices in four Chinese cities last month as part of an antitrust investigation.
For Amazon, the hope is that by opening a logistics warehouse within the area – and therefore enjoying lower shipping costs and freight times – it will boost its 2 per cent share of the online shopping market.

It also comes as international retailers are increasingly courting Chinese shoppers. Many, including Burberry, Zara and Asos, the UK online clothing retailer, sell via Alibaba’s Tmall site, while UK merchants Topshop and Miss Selfridge have joined Shangpin.com, a much smaller online retail site that aims to host luxury brands.

“We’re going to have lower shipping charges, faster delivery coming into the free-trade zone, so there are going to be many benefits,” said Diego Piacentini, vice-president of Amazon’s international consumer business, speaking to Chinese television on Wednesday.
Amazon originally entered China in 2004 by acquiring shopping website Joyo.com, which was renamed Amazon.cn in 2007. But sales totalled Rmb6bn ($1bn), or just 1.9 per cent of the overall market in the second quarter, according to iResearch, an internet consultancy in Beijing.
Analysys International, another Beijing internet research firm, put the numbers slightly higher, at Rmb10bn in sales. That is one-fortieth the Rmb400bn garnered by Tmall, the closest equivalent to Amazon.
Ecommerce in China took off early in the past decade with Alibaba’s Taobao, an eBay-like online market that hosts small and medium-sized sellers. More recently the market has gravitated towards sites such as JD.com and Tmall.
While foreign sellers are unable to compete on price with domestic manufacturers, they hope to woo higher-income Chinese consumers who seek branded merchandise and are concerned about supply-chain issues at Chinese retailers, analysts say.
Alibaba, meanwhile, has moved on to Amazon’s home turf with several US-based projects, including a US ecommerce portal with low seller fees. Last year Alibaba invested in 1stdibs, a luxury goods website.