Amazon has long been understood as the hegemon in the e-commerce world – it holds 49.1% of the U.S. e-commerce market share, boasts 300 million active users, and billions of online profits earned per year shows the proof in the pudding. With its increased focuses on international markets and operations, it seems almost certain Amazon is bound to sweep the world and become the global e-commerce giant. However, across the sea, in Beijing, the e-commerce giant Alibaba has already dominated the Chinese e-commerce scenes, and its co-founder, Jack Ma, has plans to win the crown for the leader of the global ecommerce market. “We believe that globalization is the future,” Ma has said.
If you’re a U.S. resident, there’s a good chance you haven’t heard of Alibaba. While it has yet to gain traction in the United States, Alibaba essentially controls e-commerce trade in China and has constructed a vast web of strategic partnerships and investments dominating Southeast Asia. The Alibaba Group controls a number of ecommerce sites, such as Taobao, one of its most lucrative marketplaces, responsible for about 80% of Alibaba’s total sales. An online shopping website, it is currently the world’s largest e-commerce website, and the eight most visited website in the world, boasting 617 million active users. (If you’ll remember the Amazon’s active user headcount, that’s nearly double!)
The Alibaba Group also controls Taobao’s spin-off, Taobao Mall (Tmall.com), which specializes in selling branded groups to its more affluent customers.
Its international retail service, AliExpress.com is a marketplace platform hosting third-party retailers, who can sell everything from blenders to stationery to counterfeit handbags. AliExpress’ prices are almost ridiculously low, due to the fact that many of the items on sale on the website come directly from the manufacturer. Lax intellectual property rights and low production costs in China allow for the site to provide unbeatable prices and knock-off luxury goods. It’s also insanely popular in Russia – it is the most visited e-commerce website in the country.
Alibaba v. Amazon: Strategies
Unlike Amazon, Alibaba does not hold its own warehouses, or engage in direct sales – the company is much more geared to help small businesses and branded manufacturers reach consumer bases through their marketplace platforms.
Amazon’s sphere of domination currently is in North America and Europe, while Alibaba’s turf is China and strongholds in Southeast Asia through partnerships and investments.
The main difference in their strategies is Amazon acquires, while Alibaba invests. Amazon has acquired five times the amount of companies as Alibaba, while the Chinese tech giant has invested in minority stakes in twice as many companies as Amazon. The Alibaba strategy most resembles Ebay’s approach – allowing for small retailers to open stores on their marketplaces to sell new products. The collective entrepreneurship model of Alibaba by allowing small business owners to turn profits through their platform, oftentimes lifting them out of poverty, and even allowing for them to strike rich.
This business model stressing openness and allowing for Alibaba to pose merely as the provider of a platform for businesses to operate may be their key to success in achieving global domination. In fact, the company’s name, ‘Alibaba’ arose from the magic password in the story of “Ali Baba and the Forty Thieves”– ‘open sesame.’ This embracing of openness and free trade my provide Alibaba with an upperhand in easily investing businesses to achieve international prominence, rather than the more cumbersome Amazon strategy of acquisition.
Alibaba v. Amazon: Innovation
Alibaba’s success and potential to prove as a worthy opponent to Amazon lies in its impressive innovation capacity. Currently, the company holds the world’s fastest cloud-based streaming processing platform, something Amazon has not yet innovated.
During its 2016 Singles Day sale, Alibaba’s platform was able to process 175,000 transactions per second, or roughly 10 million orders per minute. Its servers were able to store 1,000 petabytes of data, securely and safely – leveraging this data collected on its customers in order to personalize their customer service and create an unparalleled user experience. It also has developed sophisticated AI chatbots enabled by intuitive AI learning.
Retailers can also take advantage of Alibaba’s unique “digital shelf price tag” which wirelessly connects to the physical store’s data system, allowing for merchants to adjust prices according to supply and demand, as well as access to sales trends.
‘The New Retail’ Alibaba Strategy
The Alibaba Group has recognized that seamless control of both online and offline retail is the pathway to success in the future. The chinese grocery store Hema, launched in 2015 is an unparalleled retail experience that perfectly encapsulates Alibaba’s astounding potential for innovation. The entire store is digitalized, allowing customers to fulfill online deliveries, make in-store purchases, and in-store consumption – customers can place orders online through Alibaba and scan any product in the brick and mortar store to pull up information about it.
Alibaba utilizes data collected on consumers, including purchasing history, store visits, and the like to build a personalized user experience. This retail platform’s beauty lies in its integration with Alibaba’s services (Tmall, Taobao, Alipay, Cainiao) to make the experience a fully-integrated digital and offline experience. Its retail platform is free of charge, and allows independent retailers like Hema to use their digital inventory system to adjust prices to maximize sales and profits based off demand data collected from consumers.
Alibaba v. Amazon: Growth
Both companies have been experiencing rapid, steady growth that is shattering records in the realm of e-commerce. In light of the recent trade war, Amazon has experienced a double in stock price, while Alibaba has remained stagnant, allowing Amazon to dominate the market and reach the market cap of over 1 trillion. Amazon stock has done better than Alibaba in this department, winning a 150% return at the start of 2016 versus a 90% return for Alibaba.
However, Alibaba has been steadily growing as well, at nearly 60 percent with margins in the double digits. In fact, many analysts have stated Alibaba poses as a better stock investment than Amazon. “When you look at BABA, they’re growing faster than Amazon, and they’re priced at one-third the multiple,” said Mark Tepper, the Chief Executive Officer (CEO) and president at Strategic Wealth Partners, in an interview with CNBC’s Trading Nation on Thursday.
So Who’s the Winner?
As of now, Amazon remains comfortable in its spot as the dominant e-commerce tech giant. In terms of the Cloud, Amazon Web Services, its cloud computing service, takes the cake. Additionally, in international domination, Amazon has the upperhand in terms of international reach. However, the steady growth of the Alibaba Group, intuitive innovation, and out-of-the-box approaches to e-commerce such as its AI developments and New Retail innovations prove it a worthy opponent, and only time will tell which e-commerce giant will win in the long-run.