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Amazon and Alibaba, the two big giants of the eCommerce industry, are competing against each other and all the other eCommerce companies to win the crown for best online retail business. In 1995, Amazon laid the cornerstone as an online bookstore, while in 1999, Alibaba started its venture. In this article, you shall learn a lot about these behemoths and how they have secured this position.
A brief history on Amazon:
There is no denying Jeff Bezos built up one of the largest and most successful eCommerce marketplaces in the whole world. He started after quitting his job as a V.P. at a Wall Street firm and then launching Amazon. Beginning as an online bookstore, Amazon rapidly expanded to include just about every category imaginable. With a value of more than $500 billion, all in all, Bezos didn’t stop there, also acquiring Twitch, Whole Foods and at least 40 other subsidiaries.
A brief history on Alibaba:
In 1999, while the whole world seemed to be in an uproar about Y2K, a group of 18 friends and students led by Jack Ma, ignored the hysteria, founding Alibaba.com instead. The company started as a China-based B2B marketplace that catered to small and big businesses exporting Chinese products, and it became profitable in just three years. Since then, Alibaba has steadily and widely grown even though Jack Ma stepped down as the chairman; he had built an excellent foundation, with Alibaba’s current market value at more than a quarter-trillion USD.
Philosophy:
There is much that sets these two companies apart, the starkest contrast can be seen in the philosophy each company has. The goal of Jeff Bezos is to build the world’s most customer-centric company, and there is nothing much to argue with the progress seen. In terms of pricing, delivery, even Amazon’s customer service is impressive when you factor in size. At almost any cost, Amazon is obsessed with the customer and getting them the best possible price. This is shown by the cutting-edge methods of delivery, including drone integration. They are notorious for alienating suppliers, content partners and publishers when it comes to obtaining your goals.
Alibaba’s goal is to help the small businesses in stark contrast to Amazon, which is often is criticized for making it challenging for small businesses to compete and stay relevant online. Jack Ma has repeatedly told about Alibaba’s priorities are its employees, customers, and shareholder. At the same time, Jeff Bezos is notorious on Wall Street for continually investing in future of his company at the expense of providing either short term returns or profits to stakeholders.
Business Models:
The B2B portal connects Chinese factories and businesses was taken control of by Alibaba. The Taobao division of Alibaba, where they make the vast majority of their money, is responsible for at least 80% of Alibaba’s sales. By connecting buyers and sellers, Alibaba can reduce overhead and sunk costs such as employee wages and warehouse rent.
By comparison, Amazon plays in both markets, and here you will find a plethora of products you can buy directly from third party businesses. The company is also in the business of stocking items and selling products now to consumers. They are competing directly with the same merchants who are using their platform to trade in several instances.
In the table below by Compare The Market Home Insurance, we can see that Amazon has a strong focus on consumer technology as opposed Alibaba’s approach to invest in cloud based technology.
Why will Amazon have a hard time in China?
China’s e-commerce trading is one of the most attractive foreign online companies due to its gigantic size. Compared to European markets, Alibaba’s B2B and B2C platforms account for at least 60% of China’s e-commerce market, where market shares are comparatively balanced despite Amazon’s dominance.
- Too little value added by Prime- Alibaba and JD.com – China’s second-largest e-commerce platform as paid benefits of Amazon Prime are most likely to convince only a few customers in China than in Europe and America. On the flip side, most of the video content on Prime is subject to censorship in China.
- Intense mobile competition- At least 60% of Chinese e-commerce revenue is generated by mobile devices as the established providers already align with the demands of their customers very well when it comes to shopping convenience and entertainment value.
- Quality brands from the U.S. and Europe are already available- No doubt, Amazon used to be a leader in providing both high-quality brands and products once upon a time. Still, Alibaba and JD.com now have an international product range, so customers choose these brands over anything else.
Conclusion:
Alibaba mostly has a stranglehold on the Chinese market. Amazon is the undisputed U.S. leader, and both the companies seem to have a massive head start over the field and an intimate understanding of both consumer and business needs. But time will only say how the race between Amazon and Alibaba will end. Both Alibaba and Amazon are global companies that are continuously expanding their reach across the globe. Amazon and Alibaba tend to feature enormous opportunity in the mid-to-short term, with significant parts of the world’s online retail untapped. Amazon and Alibaba are planning to continue to expand in high growth markets, including Australia and Singapore, and continue shoring up their market leadership in many countries. While Amazon seems to have utilized current technological advancements to the best effect, a transition to the USA market for Alibaba may improve revenue, business processes and technological adaptation.
