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Amazon to Boost Presence in China Via New Store on Pinduoduo

Zacks Equity Research

Amazon AMZN is leaving no stone unturned to bolster presence in the global e-commerce market on the back of strategic moves.

It has always been making efforts to look for ways to strengthen the Chinese business unit in order to make the most of the world’s second-largest economy. The company’s cross-border unit will soon open a pop-up store on the Chinese e-commerce platform, Pinduoduo Inc. PDD.

Pinduoduo is a four-year-old startup that offers customers with deep discounts and group-buying deals, making it China’s No. 3 online retailer after Alibaba Group Holding Ltd. BABA and JD.com Inc. JD.

The new store is expected to run until the end of December. Reportedly, it will offer a wide variety of about 1,000 products from overseas.

The new move is in line with the company’s strategy offocusingmore on selling goods from abroad to buyers in China.

Amazon.com, Inc. Price and Consensus

 

Amazon.com, Inc. Price and Consensus

Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote

China Holds Promise

Amazon’s strategic initiatives will aid it in capitalizing on China’s prospects. Notably, the online retail market of the country is witnessing a boom on account of increasing penetration of internet and mobile use.

Positive trends in the Chinese economy like mobile-first consumer behavior, rising social commerce adoption and growing digital payments are likely to continue bolstering e-commerce sales in the near term as well as in the long haul.

Per a report from Forrester, the country’s online retail market is anticipated to reach $1.8 trillion by 2022. Further, sales in this market are expected to witness a CAGR of 8.5% between 2018 and 2022.

Further, an eMarketer’s report shows that China is anticipated to contribute 56% to global online retail sales in 2019 and the figure is expected to cross 63% by 2022.

We believe, with the latest move, Amazon will be able to rapidly penetrate this potential market. This, in turn, will aid the company to drive the top line and profit generation in the future.

Bottom Line

Amazon continues to be the dominant player in the global e-commerce space on the back of robust retail strategies and distribution strength. However, its market hold is limited in China owing to the presence of Alibaba and JD.Com.

Both the Chinese e-commerce companies are strong players in the country’s online retail market. However, the latest move could help Amazon to compete better with rivals and expand cross-border sales in China.

Also, earlier this year, Amazon had plans to merge the China business with Kaola, which is considered to be the biggest Chinese shopping site. With these initiatives, the company’s exposure in China’s online retail space is likely to expand, which in turn will strengthen its market position.

Further, the company’s robust e-commerce platform, and expanding product collections and availability might intensify market competition.

Zacks Rank

Currently, Amazon has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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