Amazon just inked a deal with Chinese authorities to allow the web retail king to set-up shop in Shanghai’s free-trade zone.

Amazon claims the deal is to intended to make it easier to sell its goods within China, but the strong foothold of Alibaba (basically China’s Amazon) makes that a major uphill–if not a losing–battle.

The more likely (and lucrative) play from Amazon here comes from another component of the deal, which is permission to set up a logistics warehouse for Chinese exports.

If Amazon is able to better able to accept international payments and ship goods out of China, then we could be on the verge of having access to some impressively cheap products.

Anyone that spends much time on eBay may be aware of some of the inexpensive Chinese products that are currently available directly from small manufacturers.  An Amazon logistics warehouse will enable more of these products to reach the market faster and with less shipping cost.

That’s not to say all sorts of counterfeit goods will be flooding the US market anytime soon.  Existing US trade restrictions will continue to protect intellectual property rights for copyrights and patents, but any legal imports will just be easier to procure from within the US.

The move does put Amazon in more of a head to head battle against Alibaba, but that clash is more likely to be an international one, since Alibaba has already locked up 80% of China’s 300 million online shoppers.  The one edge Amazon may have, is with its ability to turn more of China’s unconnected populace into new Amazon customers by leveraging some of its inexpensive Kindle products, which it started selling to around 3,000 Chinese cities late last year.

It may take a while for this change to significantly effect Amazon’s massive product catalog, but this move definitely builds some bridges that make the world a lot smaller.

Source: WSJ