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Amazon and Alibaba - two corporate giants that lead the e-commerce market. But is this really the case? We dare to compare the two and examine the extent to which the two platforms can be compared and how they differ.

The founding fathers

Amazon - and its founder Jeff Bezos

Amazon is a household name for many, if not all, people these days: they shop there for both physical and digital products, watch films and series via Prime Video and listen to music via Prime Music. However, this large corporation began back in 1993 when a certain Jeff Bezos decided to set up an online bookshop. Born in 1964 and with a degree in electrical engineering and computer science, he had previously worked in various areas of the financial sector on Wall Street. In 1994, he launched his online store "Cadabra". At that time, websites were still listed alphabetically, so he renamed his store "Amazon", after the Amazon river, in order to appear right at the top with his store. The foundation stone for today's Amazon was laid.

As early as 1998, online sales of music and videos were added, followed by other products at the end of the same year. In the course of the following 23 years the product range was expanded to include services such as Amazon Web Services, Amazon Kindle and Amazon Rekognition.

In addition to Amazon, Bezos founded other companies and projects, such as Blue Origin (space program) or its venture capital Bezos Expeditions. Amazon has also acquired more than 40 companies, including the online streaming platform Twitch and the Whole Foods retail chain, with a total value of more than 500 billion US dollars.

In February 2021, Bezos announced his Resignation as CEO for the 3rd quarter of 2021 to become Chairman of the Executive Board.

Alibaba - and its founder Jack Ma

Alibaba and the forty thieves" - a fairy tale that people all over the world know and whose name is widely recognized. Jack Ma, an English teacher from Hangzhou, China, also had this thought in mind when he launched the website alibaba.com as a B2B online marketplace with his wife Zhang Ying and 16 other friends in 1999. Before that, Ma had already founded two other companies: the Hangzhou Hope Translation Agency, which employed retired English teachers, and his first Internet company, China Pages. Armed with this experience, Alibaba got off to a flying start and won a total investment of 25 million US dollars from investors Goldman Sachs and Softbank in 1999-2000. The Alibaba Group founded various subsidiaries in the following years, including AliExpress, Taobao and Tmall.

Until 2013, Jack Ma was Chairman of the Executive Board of Alibaba Groupbut then withdrew more and more from the public eye and temporarily disappeared altogether in the fall of 2020. Ma had previously strongly criticized the Chinese banking system in public.

Amazon vs. Alibaba company focus

Both Amazon and Alibaba have their roots in the early days of the Internet and have therefore been around for a very long time. Both began as Internet platforms for online trading and have developed considerably since then. However, while Amazon's focus is very much on the B2C relationship, Alibaba is definitely more broadly positioned. Alibaba's focus has shifted in recent years from alibaba.com to Taobao its own C2C online auction house. This is Alibaba's most profitable online platform and recently generated approx. 80% of total sales from

A comparison of the companies

Logistics and shipping

As mentioned above, the Alibaba Group founded several subsidiaries as umbrella companies, including the aforementioned platforms Alibaba, AliExpress, Taobao and Tmall. It also has its own online payment system Alipay, the smart logistics network Cainiao and the fast-growing e-commerce platform Lazada, to name just a few of the companies.

Particularly noteworthy is Cainiao Network: 2013 as a logistics company for Alibaba Group  was founded to realize the vision of delivery within China in 24 to 72 hours. Cainiao is currently working with over 270 logistics companies worldwide to pursue this plan and has also started to build its own fleet.

Amazon takes a slightly different approach with its own logistics company Amazon Logistics. Amazon has invested several billion US dollars in its own fleet of more than 40,000 articulated trucks and 75 cargo planes. While Alibaba relies on a network of transport companies, Amazon prefers to trust itself and retains full control over the transport routes and means.

One of the biggest challenges for both companies is the so-called "last mile": in the transport chain, this refers to the direct route to the customer's front door, e.g. via DHL, UPS or Fedex, or - in Amazon's case - via its own warehouse. Logistics company. This "last mile" accounts for around fifty percent of total transportation costs. Both Alibaba and Amazon are currently testing automated processes using moving robots or drones to reduce transportation costs at this point.

While Amazon is already several hundred warehouses owns, Alibaba had little to no warehouses of its own due to its structure: the merchants, who are on sites like AliExpress sell their goods directly to their customers. This has enabled the company to operate very cost-effectively to date. However, Alibaba has also realized that central warehouses on site are a great advantage. Cainiao operates several warehouses, including the largest Fully automated warehouse of the world in Wuxi, China. According to the company, it works twice as efficiently as a conventional warehouse as the processes are automated and standardized. Here, too, Alibaba saves enormous costs compared to Amazon, as significantly fewer employees are needed and processes run faster. Amazon itself has already made considerable progress and is also using robots from Amazon Robotics together with employees to increase efficiency and speed up transportation. For one Fully automated warehouse as in Wuxi, however, still requires a great deal of investment and Innovation.

Amazon's shipping advantage

However, one of the big advantages Amazon has over Alibaba is the delivery time and the cost of shipping. Prime, Amazon's subscription model, allows customers to receive their products free of charge and usually within 24 hours, sometimes even on the same day (so-called "same day" deliveries). This service is currently available in 21 countries and is not exactly cheap: you currently pay 69 euros for an annual subscription, or 7.99 euros per month (as of April 2021). In addition to free shipping for most products, Amazon Prime also offers access to its video-on-demand service Prime Video or its music streaming service Prime Music, for example.

If you compare this with Alibaba, the Chinese internet company The shipping costs incurred depend on the retailer, the location of the retailer and local parcel services. Alibaba is currently planning a 3 US dollar subscription for customers in China, similar to Amazon Prime.

For many products from China, however, European customers incur customs costs in addition to shipping. Depending on the type of product, it can also happen that the goods get stuck at customs completely and you have to accept additional costs. In the worst case scenario, the goods are not only held up, but also destroyed by customs after inspection.

This is due to the numerous forgeriesespecially luxury branded goods that circulate on the Chinese market and find their way to end customers via platforms such as AliExpress. Alibaba is working hard to change this negative image and in 2016 founded its own Anti-counterfeiting alliancewhich now houses around 121 brands, including well-known luxury brands such as Louis Vuitton, Michael Kors and Prada, as well as brands such as Disney, Apple and Starbucks.

But also Amazon is not immune to counterfeit products: just recently, Amazon, together with GoPro files suitbecause counterfeit GoPro camera accessories were to be offered in the Amazon store. Like Alibaba, Amazon has now also launched a Separate department for counterfeiting crime (Counterfeit Crimes Unit) to fight against counterfeit products to be better protected.

Marketing strategies and target groups

Many eCommerce platforms failed in the past because they managed to attract customers' attention, but not their loyalty - Amazon managed to do both. According to Amazon's own statement, the platform's success lies in the fact that it offers simple and intuitive functionality, very good customer service, as well as safe and secure shopping. trustworthy payment methods. (It should be mentioned here that Amazon has already had its own payment service, Amazon Pay, for some time). Amazon's website also offers a variety of functions designed to make the shopping experience easier for customers. These include a well-functioning search function that sorts products using an algorithm and corresponding keywords, a "look inside the book" function and wish lists. Amazon's marketing strategy is strongly geared towards customers and is therefore a model example of an eCommerce platform with a B2C focus.

If we compare this consumer orientation with Alibaba's focus, it quickly becomes clear that these two companies are in no way comparable. While Amazon mainly brings products directly to consumers, Alibaba's focus is on retailers. In an interview, Jack Ma stated that his company wants to enable small retailers to reach as many people as a large global corporation. A major challenge that Alibaba is mastering with flying colors. The group is considered a so-called "smart business", as many decisions and strategies are based on AI analyses. It combines the functionality of platforms such as Amazon, eBay, PayPal, Google and FedEx. Alibaba achieves this by combining thousands of small Chinese businesses, creating a faster, smarter and much more efficient corporate structure than traditional ones.

Alibaba is a fast-growing, modern company that has picked up speed to conquer markets outside China. Amazon could have problems with its established but cumbersome system if it wants to keep up.

Interim conclusion: Both Alibaba and Amazon are working hard to expand their networks, both in terms of transportation and retailers. Both sides are working hard to operate cost-efficiently and respond to the needs of customers in order to stay ahead in eCommerce. So who comes out on top in this race? The best way to find out is to look at sales in recent years and market shares at home and abroad.

Numbers do not lie

If one compares only the Equity capital of companies, Alibaba is clearly ahead. With  164,071 billion US dollarsIn 2021, the company slipped well ahead of Amazon, whose equity amounted to USD 93,404 billion in 2020. However, Alibaba's total assets in 2021 amounted to 257,978 billion US dollarswhereas Amazon already had assets of 321.2 billion US dollars in 2020.

With a view to the Annual reports However, based on the past few years and the corresponding share prices, it is safe to say that both Alibaba (NYSE: BABA) and Amazon (NASDAQ: AMZN) have grown strongly. Even if Amazon's share price has just exceeded the is worth four times as much as Alibaba'sit is clear to see how much potential Alibaba has as a company: in the period between 2017 and 2019 alone, Alibaba's share price rose by 144%, whereas Amazon "only" had 58% growth to show for itself. If you put this into context with the 2017 sales figures, a clear picture emerges of who is currently experiencing the greater growth. While the raw figures still show Amazon as the winner (with sales of USD 177.87 billion compared to Alibaba's USD 39.9 billion), the growth rates are clear: Amazon's turnover increased by 31% compared to the previous year, while Alibaba generated a strong 46,91%. In 2019 alone, Alibaba accounted for 55.9% of all Online retail sales in China. In comparison, Amazon only achieved 37.3% in the USA.

Market shares and foray into new markets

These figures are strongly linked to the respective market shares of the companies.  While Amazon dominates large parts of the western eCommerce market, the companies' market shares in Germany are nevertheless balanced. Amazon's market share in Germany is between 6,5% (pet products) and 24% (Electronics & Computers) in the second half of 2019. In China, on the other hand, Alibaba is holding its own with a market share of a proud 60% in the eCommerce segment.

Both companies are also striving to penetrate each other's markets. But can this even succeed?

One of Alibaba's first major ventures was with its company Cainiao: in July 2021, Cainiao began hiring new employees for a new warehouse that is set to play a central role in conquering the European market. The so-called smart-logistics hub is located at Liège Airport, Belgium, and is part of a larger planned warehouse. Alibaba already operates two of its own warehouses in Germany. They are intended in particular to serve the German and Scandinavian market cover. So the question of logistics has been answered, but the question remains as to how willing consumers are to buy from Alibaba. According to a survey conducted by market research company Statista in 2021, only 33% would shop on Alibaba and around 47% would not. The Distrust compared to a Chinese eCommerce platform seems to persist, fueled among other things by possible counterfeits and the prejudice of poor product quality.

In addition, the B2C platform AliExpress in particular has a positive effect on many Western customers. dubiousLots of animations, lots of bright pictures, garish colors. A culture shock, especially for older generations. The German website in particular does not make a good impression due to its texts and product descriptions, as a lot of retailer texts from Chinese were simply chased through Google Translator once, which in some places led to funny word creations leads.

Example of a translation on Aliexpress

aliexpress

(Screenshot AliExpress.com, 22.08.2021)

And Amazon? Amazon dared to venture into the Chinese market back in 2004, when it launched the Chinese eCommerce platform Joyo.com and it was renamed "Amazon China". Due to strong competition, including Alibaba, Amazon China completely stopped selling local goods in 2019. Currently, the amazon.cn site only offers imported products for B2C sales, including from countries such as the USA, UK, Germany and Japan. Conversely, sellers from China can sell their products to overseas customers via Amazon. It is estimated that 200,000 Chinese traders are currently active on Amazon, with most sales going to the USA. The sheer Alibaba's superiority has brought Amazon China to its knees and created a niche from which Amazon can still emerge victorious if it capitalizes on this particular type of eCommerce.

Another major challenge for Amazon is the downright uselessness of the Prime offer on the Chinese market. Alibaba already ships within China free shippingand a lot of Prime Video content is censored there. Conversely Alibaba it is much easier to expand into the western market. While China has strict regulations, such as the censorship of film material, the western market is much more open when it comes to cultural issues.

If Amazon wants to continue to expand in China, the eCommerce via mobile devices should not be lost sight of: Around 60% of the Chinese online trade are processed via mobile apps.

Conclusion - Amazon vs. Alibaba

Both groups are emerging as strong, still growing eCommerce company stand out. With their corresponding B2C platforms, both Alibaba and Amazon offer a wide range of products that can be delivered to customers in around 24 to 72 hours. Plenty of work is being done on the means of transportation, although it remains to be seen whether Amazon's own fleet or Alibaba's "logistics network" Cainiao is the better way forward.

Time will tell which of the both companies has the better eCommerce strategies.

Who is worth more - Amazon or Alibaba?

Amazon's company valuation (as of Sep. 2021) is four times higher than that of Alibaba.

Who makes more sales - Amazon or Alibaba?

If you put this into context with the 2017 sales figures, a clear picture emerges of who is currently experiencing the greater growth. The raw figures still show Amazon as the winner (with sales of USD 177.87 billion compared to Alibaba's USD 39.9 billion).

Tobias Dziuba

My name is Tobias and I am the founder and managing director of the Amazon agency Adsmasters GmbH based in Düsseldorf.

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