Amazon launches Prime in China (AMZN)

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BI IntelligenceAmazon has brought its popular Prime membership program to China, reports Recode. The program costs Chinese shoppers $57 per year, which is far less than Amazon charges in the US and other international regions.

However, Prime in China doesn't come with all of the perks offered in other countries. This, coupled with Amazon's historical struggles to gain a foothold in China, could make the company's efforts to draw in more shoppers in the country fruitless.

Amazon Prime faces rough conditions in onboarding Chinese shoppers:

• The perks aren't the same in China: Amazon Prime in China does not offer any digital content for streaming, like video or music. This means that Amazon will not be able to use these portals to onboard users with regionalized, original content, like it did in India.
• Shipping options are not the same: One of the biggest drivers behind Amazon Prime signups is its free two-day shipping on eligible items without a minimum order size. However, Prime in China only offers free shipping on orders that total $29 or more with an estimated wait time of 5-9 days. Moreover, these wait times could go up when orders total over $295 due to customs regulations. This is because items are being shipped via Amazon's fulfillment centers in the US.

Amazon is banking on Prime to expand its footprint in China after failing to make a splash in the country. Amazon has faced a lot of barriers in China and only makes up about 1 to 3% of the country's total e-commerce market. This is due to heavy competition — major domestic players like Alibaba and JD.com dominate the industry, making up 47% and 20% of the e-commerce market, respectively, according to Business of Fashion.

Launching a scaled-back version of Prime is likely not the key to breaking into China as its e-commerce market is already heavily saturated, and the program is not offering any deals that could help it significantly stand out against competitors.

The company could look to other ventures in China in order to strengthen its presence there. Bringing Amazon's rapidly expanding on-demand meal delivery service, Amazon Restaurants, to China could help the company continue to diversify its revenue streams. Merchandise accounted for 68% of Amazon's total revenue in Q3, down from 79% a year earlier. 

This indicates that the company is taking on serious initiatives to diversify its business across the retail value chain. The meal delivery market in China is dominated by players like Baidu Takeout Delivery and Ele.me. However, considering the competition Amazon faces in the direct-to-consumer retail space, this market may be easier for the company to penetrate in China.

Furthermore, Amazon's early roots in driving up delivery speeds could position the company as a better option for meal delivery, given that it touts expected delivery windows of an hour or less.

To be sure, there are several expenses and complexities involved in delivering over this so-called "last mile," but companies such as UPS will grow e-commerce's customer base (as well as its share of retail dollars) and siphon off one of offline retail's last real competitive advantages if they are successful in this regard.

Cooper Smith, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on same-day delivery that takes an exhaustive look at this market and sizes the percentage of people who will purchase goods to be delivered the same day.

The report uncovers the demographics of same-day delivery customers, the markets where these services have the best chance of taking off, and assesses how each of the many new same-day delivery entrants compares to the others. It also looks at the technology that really could make getting a package delivered to your door hours after you order it a common phenomenon.

Here are some of the key points from the report:

• USE: BI Intelligence estimates that 2% of shoppers living in cities where same-day delivery is offered have used such services. In dollar terms, we estimate that roughly $100 million worth of merchandise will be delivered via same-day fulfillment this year in 20 US cities.
• CONSUMER EXPECTATIONS: Consumer interest in same-day delivery is already fairly high. Four in 10 US shoppers said they would use same-day delivery if they didn't have time to go to the store, and one in four shoppers said they would considering abandoning an online shopping cart if same-day delivery was not an option.
• DEMOGRAPHICS: The most common same-day delivery shopper fits a very specific profile — millennial, highly likely to be male, urban-dwelling, and young. The products people want delivered same-day are also fairly niche.
• BARRIERS: Despite all the competition in the same-day delivery market, it still won't be easy to get people to pay for these services. 92% of consumers say they are willing to wait four days or longer for their e-commerce packages to arrive.

In full, the report:

• Estimates the market for same-day delivery from 2013-2018, including the percentage of people who will use these services and the total sales volume
• Looks at the most likely same-day delivery customers and the cities where these individuals are concentrated
• Unpacks the kinds of goods people are likeliest to order for same-day delivery
• Lays out how the different same-day delivery services stack up against each other in terms of prices, location, and selection
• Considers the barriers that could keep same-day delivery from ever becoming a mainstream preference among consumers
• Identifies the technology that could make same-day delivery cost-effective and commonplace

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the shift toward same-day delivery.