Amazon.com Inc share price up, enters Shanghai’s free-trade zone to take on Chinese rivals

Seattle-based Web retailer Amazon.com said on Wednesday that it plans to set up operations in Shanghais new 28 km² free-trade zone, allowing it to import merchandise in China cheaper and to better compete with e-commerce rivals Alibaba and JD.com.

The company said on Wednesday it signed a deal with authorities in the free-trade zone to open its global platforms to Chinese consumers. This will allow them to import goods that are otherwise available for import only in other countries.

In a separate statement, Shanghai Municipal authorities said that Amazon will open a logistics warehouse to bolster outbound shipments from Chinese companies. This will improve the retailers ability to conduct cross-border payments and experiment with financial innovation, while lowering freight times and costs.

Diego Piacentini, vice-president of international consumer business at Amazon, said on Wednesday: “We’re going to have lower shipping charges, faster delivery coming into the free-trade zone, so there are going to be many benefits.”

Amazons decision to expand into Shanghais free-trade zone comes despite recent Chinese regulatory probes into foreign technology companies, such as Microsoft and Apple, and negative media coverage.

Nevertheless, Amazon is seeking to increase its presence in Chinas vast online shopping market, estimated at $300 billion in 2013. Amazon entered China in 2004 by acquiring Joyo.com, a shopping website which was renamed to Amazon.cn in 2007. The company now has 15 warehouses in the Asian country and delivers goods to around 3 000 cities and counties.

However, although a decade has passed, Amazons Chinese unit had a market share of only 2-3% in the second quarter, according the Beijing-based internet consultancy firms iResearch and Analysys International.

Online shopping began gaining popularity in China in the last ten years with Alibabas Taobao, which hosted small and medium-sized sellers, while market focus later shifted toward websites such as Alibabas Tmall, the closes equivalent to Amazon, and JD.com.

With e-commerce in China encompassing around 300 million online shoppers, online retailers have been looking for new ways to tap the huge growth potential of the Chinese online shopping market. Amazon bought an undisclosed minority stake in Shanghai-based оnline grocer Yummy77 in May for $20 million to expand its offerings to Chinese shoppers beyond durable goods.

Mr. Doug Gurr, the newly appointed president of Amazons Chinese division, said, cited by the Wall Street Journal: “We seek to be the most customer-obsessed online shopping platform with vast selections, competitive price and most convenience in China.”

Amazon.com Inc rose by 0.19% on Wednesday to close the trading session at $335.78 per share, marking a one-year change of +18.00%. The online retailer is valued at $155.14 billion. According to CNN Money, the 36 analysts offering 12-month price forecasts for Amazon.com Inc have a median target of $392.50, with a high estimate of $460.00 and a low estimate of$ 325.00. The median estimate represents a +16.89% increase from the last price of $335.78.