Amazon has launched a new lending service in China dubbed Lending Referral Program, which is open to select merchants that sell products on its site.
According to a report in CNBC citing an Amazon sellers forum, through the program Amazon chooses and connects sellers with lenders in China so they can access short-term loans. The aim is to help sellers when they need capital to purchase inventory or are interested in expanding the business. "The Lending Referral Program is a new program by Amazon Lending," the post said, according to CNBC. "Under this program you may be extended offers to apply for loans provided by local Chinese lenders to grow your business on Amazon."
The loan referral program is viewed as a smart way for Amazon to grow its business in China. Many of Amazon's most successful merchants reside in China, accounting for a large share of marketplace sales on a worldwide basis. Marketplace Pulse, the research firm, said more than 40 percent of the top-performing sellers on Amazon are in China. The percentage has more than doubled in the past three years. Chinese sellers have an edge because they can price products lower than sellers located outside of China.
Providing working capital loans to merchants in China is a way to grow that part of its sales. In April Amazon announced it was closing its marketplace. It is now focusing on Chinese merchants who sell to Amazon customers outside of the country. An Amazon spokesperson told CNBC that Chinese sellers aren't its largest group of sellers. The spokesperson did confirm the new lending program. "We created Amazon Lending to make it simple for sellers to efficiently get a loan, because we know that capital can help put sellers on the path to success," Amazon said in an emailed statement.
In order for merchants to be invited into the program, they have to meet the criteria of the lender which can be different from one lender to the next. They also have to agree to provide data about their business including sales, return rate, negative feedback, and average inventory value, reported CNBC. The lender has the final say in whether the loan gets funded. Shanghai Fuyou Commercial Factoring is the first lender Amazon has partnered with, but the company will include more down the road.