Amazon.com Inc. launched its Prime membership program in mainland China on Friday, in an effort to capitalize on Chinese consumers' desire for overseas products.

The service, which offers unlimited free cross-border and domestic shipping, will cost 388 yuan ($57) for one year, with a promotional price of 188 yuan ($28) available through February. Prime will give Chinese consumers access to more than nine million domestic products with no minimum purchase, and among four million imports via Amazon's Global Store with unlimited free overseas shipping on orders of 200 yuan or more. Amazon estimates that most members will receive overseas packages in five to nine days.

The launch by the U.S. e-commerce behemoth comes as Chinese e-commerce players Alibaba Group Holding Ltd. and JD.com Inc. are ramping up their array of international products available to mainland shoppers. In recent months, Alibaba has opened up branded Target and Costco stores on its Tmall business-to-consumer platform, while JD.com recently opened a global Wal-Mart store on its world-wide platform.

Amazon Prime China is one of the first subscription-based e-commerce membership services to be rolled out for Chinese consumers. Earlier this year, JD.com launched a membership program called JD Members+ for 149 yuan a year that includes free access to e-books and five free deliveries a month. The company declined to disclose the number of members.

China's e-commerce market grew 21% in 2015, with gross merchandise volume of 16 trillion yuan, according to data from iResearch. Cross-border shoppers increased to nearly 23% of online shoppers last year, up from 14% in 2014.

Seattle-based Amazon has struggled in China in recent years to distinguish itself among China's domestic players, and Prime membership could be a way for Amazon to gain ground in the country. Chief Executive Jeff Bezos said at a conference last week that Amazon must adapt in China, where it considers JD.com its biggest competitor. "We cannot run our normal playbook in China," he said. That is in contrast to the company's business in India, where it has touted its winning strategy and pledged $5 billion in investments.

The service is also part of Amazon's push to look abroad for growth as it increasingly dominates the U.S. market. Counting China, Amazon has now launched Prime in 12 countries, including India, Germany and the U.K., and analysts estimate there are more than 50 million Prime members world-wide. Those members can be valuable: In the U.S., Prime members often spend double the amount of their non-Prime counterparts on the website, according to analysts.

However, Amazon often must spend heavily to earn Prime loyalists in new markets. On an earnings call Thursday, Amazon executives said spending to improve Prime benefits overseas, along with expansion in India, drove up costs that contributed to widening the loss in its international division to $541 million from $208 million a year ago. While Amazon can negotiate steep discounts with international delivery companies due to huge package volumes, shipping costs still add up quickly.

A person familiar with Amazon China's logistics said the company is still trying out options for cross-border shipping. "It's still a very early point in time for companies to explore what the value is for cross-border shipping and how much you can charge for it," the person said.

The Prime China price is well below the $99 a year for U.S. Prime membership, and the service is somewhat limited because of local Chinese restrictions. With media subject to censorship, books, for example, aren't offered on Amazon China's global store, nor are TV shows or movies.

The service also is limited to Chinese nationals, who must provide their national ID number for overseas purchases. New regulations released this spring placed a maximum of 2,000 yuan for each overseas transaction and a yearly limit of 20,000 yuan a person for cross-border e-commerce imports.

Another hurdle for Amazon in China is convincing Chinese consumers that paying for such a service is worth it. While in the U.S., savings on shipping is one of Prime's biggest draws, free shipping within China is the norm on Alibaba and JD.com's platforms. Analysts say China's growing middle class and citizens who have spent time abroad and hanker for specific overseas products will most likely be the key consumers for the service.

In some ways, though, Amazon may have a leg up over local competitors in that it already has a global network of vendors and logistics partners, with 123 fulfillment centers around the world.

Analysts say the Prime subscription could be a central play to Amazon China's overall strategy.

"The sentiment of people wanting to have premium memberships for a better experience is growing," says Nicole Peng, director of China research at market research firm Canalys in Hong Kong.

Write to Alyssa Abkowitz at alyssa.abkowitz@wsj.com and Laura Stevens at laura.stevens@wsj.com

 

(END) Dow Jones Newswires

October 28, 2016 06:05 ET (10:05 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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