What are the similarities between Amazon and Alibaba? [Part 1 of 2]
Amazon and Alibaba truly are two disruptive and innovative companies. Check out the characteristics of each tech giant
Disclaimer: please note this article is a collection of personal thoughts and a few quotes from experts. All info is publicly available. The content hereby written does not reflect in any way the position of the company I work for.
With this article (first part, the second is here) about the similarities between Amazon and Alibaba, I highlight the key characteristics of each one. Knowing more how they play and operate could help you build a better business plan. I hope you enjoy the reading.
Things in common, for starters
Let’s start with the things in common first…
- Both are more than sales platforms, they are also media platforms and the first touchpoint for brands. Amazon and Alibaba are as valid as platforms for product discovery as Google and Facebook. As example, from 2015 to 2018, Amazon surpassed Google for product searches, according to a report from Jumpshot, growing from 46% to 54% while Google declining from 54% to 46%
- Both are eco-systems for products, services and media, comprising dozens of different business models. Also, Amazon has 49.1% eCommerce market share in the US, and the ambition to grow the business $400Bn in sales by 2020 (a +31% CAGR), making it the largest company worldwide. Alibaba instead has 58% market share in China B2C market and it’s heavily expanding outside China, targeting increasing non-Chinese revenue from 10% to 50% of its business by 2035, seeing itself serving 2Bn customers, effectively becoming the world’s fifth largest economy
- Both have visionary leaders: Jeff Bezos, the founder of Amazon, set the vision many years ago: The Everything Store; Jack Ma, founder of Alibaba, is a super talented guy who understood how to work with Chinese regulator to create the very first real economy Eastern empire. Surprisingly enough, he is going to move away from his company to put his effort into philanthropy and education, like Bill Gates did and he is doing for many years. Instead, Jeff recently communicated he is going to invest $2Bn of his fortune to helping homeless families and starting pre-schools for low-income communities
- Both have international geo expansion big ambitions: Amazon desperately wanted to crack China, but could not make it. Nevertheless, it is planning to expand to more than 100 markets by 2025 and heavily investing in India, which is a highly strategic market. The most recent news is that it opened its business in Turkey. Alibaba, on the other hand, is targeting Europe, after expanding into other Eastern territories through acquisitions and partnerships, and Africa. Recent developments in Africa has seen it focus on: (1) shoppers in South Africa: launching Alipay, which offers money transfer services and in-app payments for taxis and other services; (2) suppliers in Nigeria: a long-term potential, despite the challenges with scams and phishing; (3) businesses investment: the founder Jack Ma launched the creation of a US$10M African Young Entrepreneurs Fund. The investment will be used to support online businesses. Finally, he also recently lectured to African business people in China and plans to launch a partnership with African universities to teach e-commerce in the future
- Both have pretty strong logistics infrastructure: Amazon is improving, thanks to the recent acquisition of Whole Foods and the purchase of carriers like airplanes and drones. It has been also rumored that it is going to have soon its own fleet of vehicles for delivery on the road (DHL, FedEx, National Post Companies, pay attention). Alibaba is a master of distribution in China, capable of delivering within hours in more than 90% of the territory
- Both are interested in becoming less Pure Players and more Omnichannel, with stronger foothold into Brick & Mortar stores, a new strategy called Brick and Click: on one hand, Amazon is planning to open 3,000 cashierless stores by 2021 (the first three in Seattle, called Amazon Go, now also available in Chicago and with openings in San Francisco and New York areas as next stops). Let’s also not forget last year’s acquisition of US Whole Foods and its more than 460 stores, where Amazon has begun to sell its devices like Echo in stores and opened up lockers for delivery in certain Whole Foods locations. In some stores, there are now signs for special discounts for Amazon Prime members. Also, it has opened 13 bookstores since 2015 and finally, the most recent news, it opened a store, called 4-Star, in Soho (New York City), with only products customers have rated four stars and above, or top sellers, or new and trending items. Alibaba, on the other hand, when it comes to cashierless stores, it debuted in 2017 a pop-up cashier-less cafe called Tao Cafe. You scan your smartphone at the door, grab what you need, and after you step out, the bill will be automatically sent to your smartphone. The 200 square metre (2,152 square foot) Tao Cafe is the brainchild of Taobao, which is owned by the Chinese e-commerce giant. On top of this, it has allocated more than $1.3Bn for separate investments in two Chinese firms, one a home furnishings retailer and the other a company that help retailers with big data analysis, according to a TechCrunch post. These investments are the latest moves in Alibaba’s “New Retail” strategy, an effort to expand its business model to one that has footholds in both the e-commerce and brick-and-mortar sectors
An interesting parenthesis: DIGITAL INNOVATION at Albert Heijn
Amazon and Alibaba are not the only companies focusing on creating a seamless offline customer experience. An additional example comes from Dutch retailer Albert Heijn (AH): following a successful pilot, Albert Heijn has opened its first two checkout-free stores in the Amsterdam Medical Centre. Another store is due to launch at Amsterdam’s central station. The technology will now be rolled out to all 80 AH to go convenience stores. Customers pay at the shelf using a dedicated ‘tap to go’ card or by using an app on their Android phone. Future developments will include iOs and Windows functionality. After ten minutes, the purchase price of items is automatically deducted from the customer’s account
- Both have created groundbreaking sales global events: Amazon created Prime Day as an experiment and excuse to celebrate the 20th anniversary of Amazon’s founding and launched for the first time in July 2015, while Alibaba created the biggest shopping event worldwide: 11.11, also known as Singles’ Day, the shopping day for “singles”. What’s similar? According to an article by Business Insider (an extract follows): (1) Scale: each event is a large-scale shopping holiday built around high volume, deep discounts and thin margins; (2) Multi-market: Amazon has added Australia, the Netherlands and Singapore to its list of participating countries. Alibaba has further integrated its Lazada acquisition to add Thailand, Malaysia, Indonesia, Vietnam, Singapore and the Philippines; (3) O2O: Amazon brought its Whole Foods subsidiary into Prime Day, while Alibaba has integrated its Intime department stores and Hema shops, allowing both platforms to reach consumers who are more comfortable with offline than online; (4) Multimedia: both have offline events to bolster online sales. Tmall has been running a nationally televised gala in China for four years as a countdown activity to November 10, with up to 200M viewers. Amazon ran offline events in multiple cities for the first time
Find the second part of the article here!
 Source: https://www.retaildive.com/news/alibaba-throws-13b-into-brick-and-mortar-strategy/516937/. There is also an interesting article that explains the reasons why both companies have offline expansions plan. You can find it here: https://www.bloomberg.com/news/articles/2018-01-30/what-drew-amazon-and-alibaba-to-brick-and-mortar-quicktake-q-a