Amazon is headed for Shanghai, looking to expand its hold on the Chinese market with help from the city's free-trade zone.
The web retailer announced Wednesday that a deal has been signed with authorities from Shanghai's free-trade zone. This will allow Amazon to have a bigger presence in the country, giving it a stronger foothold to take on Chinese e-commerce companies like Alibaba and JD.com. Alibaba alone represents 80 percent of the $300 billion the Chinese spent on online purchases last year.
"We seek to be the most customer-obsessed on-line shopping platform with vast selections, competitive price and most convenience in China. Today's partnership announcement with FTZ and SII will help Amazon further realise our vision," said Amazon China president Doug Gurr in an emailed statement.
This isn't Amazon's first venture into the Chinese market though. The company has been quietly operating in China for 10 years now and already has 10 warehouses in the country. It also invested $20 million in May in Yummy77, an online grocer, to gain minority stake in the Chinese company. This investment allowed Amazon to expand its reach and basically offer everything Chinese shoppers are looking for, including packaged food, seafood and fresh fruit. Amazon also delivers to about 3,000 cities and counties in the country.
Shanghai's free-trade zone opened in 2013 and attracted a lot of attention from foreign companies looking to build a presence in the massive Chinese market. However, specific policies are lacking so many remain reluctant to set up shop. Some of the companies that have decided to venture into the free-trade zone include foreign banks HSBC Holdings and Citigroup.
Amazon's decision to invest in Shanghai's free-trade zone comes as the company is looking to diversify its sources of revenue. In part because of high costs associated with creating digital content like TV shows and computer games, Amazon posted losses in the second quarter of the year amounting to $126 million.
Aside from TV shows that cost $100 million to produce, Amazon is also focusing efforts to improve delivery services in the U.S., including offering deliveries on Sundays to 18 cities in the country.
Amazon is also keen on growing in other parts of Asia. It already has operations in India but the company announced last month that it will be investing $2 billion more to further boost growth in the Indian market. In 2013, e-commerce activity in India amounted to $13 billion.