By Ellen Huber

Amazon.com will soon open a logistics warehouse and set up operations in China’s Shanghai Free Trade Zone (FTZ), according to an August 20 announcement reported by Reuters. The US e-commerce giant will also be allowed to ship products from its global platform directly to Chinese consumers, who could previously purchase items only from Amazon’s China site. In return, Amazon will help small and mid-sized Chinese enterprises export their products to international markets, according to a memorandum of understanding signed with zone authorities.

Amazon, which has had a presence in China for nearly ten years, controls just 2 percent of the country’s rapidly growing e-commerce market. Amazon hopes its latest move will challenge Chinese competitors JD.com, which controls 20 percent of the market and Alibaba, which controls almost 80 percent.

By using the warehouse to ship directly from the Shanghai FTZ to Chinese consumers, Amazon should avoid heavy duties on international shipping and lengthy processing times in customs. Amazon hopes that with reduced shipping costs, it will finally be able to challenge domestic sellers on price.

“We’re going to have lower shipping charges, faster delivery… so there are going to be many benefits,” Diego Piacentini, vice-president of Amazon’s international consumer business said in a Financial Times interview.

However, Amazon’s further expansion into China doesn’t come without difficulties. Amazon must navigate a string of antimonopoly laws and regulations that have recently led to inquiries at many foreign and domestic companies. Second, Amazon—which specializes in luxury and brand-name products—will likely face counterfeiting threats.

Posted by Ellen Huber