The online marketplace is thriving, and the global e-commerce battle lines are drawn between Amazon and Alibaba. Amazon is often considered the world’s biggest online retailer, with a comprehensive umbrella of services including B2C direct sales (business-to-consumer), distribution and logistic support, media content streaming, Kindle and associated sales, cloud computing via Amazon Web Services (AWS), and a platform for retailers to sell to buyers.
Alibaba on the other hand, is primarily a B2B (business to business) platform, facilitating the sale of goods and services between businesses. However, the Alibaba Group comprises of affiliates such as Taobao Marketplace, a C2C (consumer-to-consumer) platform (similar to eBay), and Taobao Mall (or Tmall), a B2C platform (like Amazon) ranked 10th in the world by Alexa (which is ironically an Amazon company that ranks websites based on traffic), and Aliyun, its cloud computing service. Additionally, Alibaba has ventured into the smart car market, partnering with China’s largest car manufacturer SAIC Motor Corp. They provide technological support via YunOS – Alibaba’s Operating System, which is ranked 3rd in the world – and offer financial services via Alipay (e-payment platform) and micro-lending services.
The 2015 market share had Alibaba leading with 80 per cent of the Chinese online marketplace, while Amazon had 60 percent of the US online sales. Alibaba obviously has a larger consumer base with China’s 1.4 billion population, in comparison to Amazon’s access to 320 million. Not surprisingly, Alibaba’s initial public offering in 2014 had enthusiastic investors, making it the world’s biggest IPO (initial public offering).
Both Amazon and Alibaba want a share of the other’s pie. As Alibaba launched Aliyun in the US, Amazon launched Amazon Prime in China. With Amazon’s expanding presence in India against Alibaba-backed Paytm and Snapdeal, the battleground moves to Southeast Asia, with both companies vying for the attention of close to 600 million people. Alibaba is responding to Amazon’s expansion plans by acquiring southeastern companies such as Singapore’s M-Daq, Thailand’s Ascend Money, and southeastern online retail giant, Rocket Internet’s Lazada, which in turn bought online grocery provider Redmart.
In terms of returns in the last fiscal year, Alibaba’s revenues were USD 14.4 billion, with profits of USD 10.5 billion, while Amazon’s revenue of USD 113.4 billion generated a profit of USD 1.2 billion.
Alibaba founder, Jack Ma, doesn’t agree with the comparison between the two companies – “The difference between Amazon and us, is Amazon is more like an empire — everything they control themselves, buy and sell. Our philosophy is that we want to be an ecosystem. Our philosophy is to empower others to sell, empower others to service, making sure the other people are more powerful than us. With our technology, our innovation, our partners — 10 million small business sellers — they can compete with Microsoft and IBM. Our philosophy is, using internet technology we can make every company become Amazon.”
With both companies engaged in a fierce battle against counterfeit goods, with more counterfeit reports from Alibaba vendors, Alibaba has tied up with the Information Center of China’s Certification and Accreditation Administration to verify the China Compulsory Certificate for vendors. Although Amazon has avoided patent infringement, their copies of high selling products as part of ‘Amazon Basics’ is detrimental to sellers, since a comparable product is available at a cheaper price, reducing the sellers’ market share.
With a USD 119 billion market by 2020 forecasted by Morgan Stanley, and a USD 6.7 trillion global online B2B retail sales (27 per cent of the total revenues) forecasted by Frost & Sullivan, the Amazon & Alibaba e-commerce war is set to explode.