Amazon.com Inc. is bringing its competition with Alibaba right to the Chinese e-commerce giant’s backyard.
Whether they live in Paris, Beijing or Sydney, consumers seeking better prices and products they can’t find at home are increasingly willing to buy from merchants abroad. Such cross-border transactions are growing faster than domestic e-commerce sales and by 2020 are expected to reach $900 billion, or 20 percent of the global market, according to a 2016 report from DHL Worldwide Express.
Cross-border selling is a major focus of Amazon’s logistics aspirations. Last year it hosted an event in New York to pitch 1,500 merchants on currency exchange services and language translation tools to help them sell to overseas customers. Amazon can use its size and reach to consolidate shipments with international freight companies to get volume discounts, using the savings to lure more merchants and goods to the platform.
More than 2 million independent merchants hawk goods on Amazon, paying a commission on each sale. Competition among them helps keep prices low and inventory fresh, which has helped Amazon attract more than 300 million global customers. E-commerce remains a mostly domestic business. But with shoppers increasingly willing to look abroad for goods, Amazon sees an opportunity to sell more services to online merchants. Revenue from such services surged 39 percent in the first quarter to $9.3 billion.
But Amazon’s effort could spell trouble for some of its merchant partners.
“As Amazon connects Chinese factories directly to end-consumers on its platform, these independent merchants will be forced to compete directly with their own suppliers,” says Ryan Petersen, the chief executive officer of Flexport Inc., an international freight-forwarding company that helps Amazon merchants import products from overseas. “This new competition will be tough for merchants that merely resell Chinese products, rather than creating original products.”