Where One Amazon Door Closes an Entire New Industry Opens

Check out what Amazon is doing to maintain influence in China.

By
Jennifer Haskell

After Amazon announced the merging of Souq to the Amazon platform, the e-commerce giant’s expansion in the east was going smoothly. Amazon then announced in April that it would be closing the Chinese marketplace by July 18th of this year. Though Amazon managed some success in China for a few years, the rise of China’s major e-commerce platform - Alibaba - is the undisputed regional preference. As Amazon disclosed the coming cessation, some have viewed this as a major setback for the Seattle-based juggernaut.

Amazon may be closing the doors on one opportunity in the eastern empire, but it is hard at work to open another. Demonstrating an acrobatic degree of flexibility, Amazon has decided to pivot from targeting Chinese shoppers to Chinese sellers. These merchants already make up an impressive portion of Amazon’s global platform, offering Amazon an entirely new opportunity if it adapts to the new structure. The Amazon Lending Program offers short-term loans to qualified applicants, allowing sellers to expand their businesses on the Amazon platform. The service is only open to sellers who are already doing business on the Amazon platform and have worked in other places. The terms are straightforward: Submitting applications takes only a few minutes, and approval takes about 24 hours. Amazon is now starting the Amazon Lending Referral Program as an extension of the lending program offered elsewhere, which allows Chinese merchants to apply for loans provided by Chinese lenders. Very similarly, Amazon created another extension in India called the Seller Lending Network to mitigate compatible issues.

According to Marketplace Pulse, 40% of the top Amazon sellers are already based in China. Considering China boasts the world’s largest industrial output, estimated upwards of $4 trillion - with a T - a year back in 2016 and continuing growth of 6% YoY into 2019, this strategy could yield massive dividends for the ecommerce platform. By extending Amazon’s lending program to China, the platform is promoting those merchants to do business on the platform for easier access to China’s huge industrial output. Since Chinese sellers have greater access to many products at lower prices, Chinese merchants can now offer those savings to U.S. consumers. The access to low-priced products prevents Amazon from offering anything previously unavailable to the eastern market.

Currently the Referral Program is invite only as Amazon is only working with one lending partner, Shanghai Fuyou Commercial Factoring, to help the U.S.-based company navigate China’s complicated government regulations. This could be an incredibly lucrative strategy for Amazon since it helps venders and as it expands the products on the platform while offering shoppers better prices.

It’s no wonder Amazon is motivated to expand in this region and is eager to pivot when their original strategy struggled. The gradual withdrawal from the Chinese marketplace speaks to the strategic adaptability which enabled Amazon’s growth at the beginning.

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