While Alibaba is
successfully entering the US, Amazon is making efforts to expand in the
profitable Chinese ecommerce market.
Both companies are
leaders in their home markets, offer a wide variety of products to be bought
online and have a big customer base and top level data infrastructure. However
there are some big differences between both companies:
-
Type of operation: Alibaba operates an “open marketplace” that connects buyers and sellers. It doesn’t sell
anything directly nor have any warehouses. Amazon operates a “managed marketplace”, selling most of
their products directly and owning distribution centers. It even manufactures
some of the products. In consequence, Alibaba
has much higher margins than Amazon (~40% vs. ~1%) but the latter has a
better reputation in customer service because it controls most of its
processes.
-
Competitive advantage: Alibaba’s competitive advantage in the Chinese
market is given by its understanding of
the Chinese consumer and its mastery of the “intricacies of Chinese regulations” and how to work
with governments. Amazon’s competitive advantage in Western markets is given
mainly mastering logistics and supply
chain management. Both would have a hard time trying to acquire the needed
capabilities in each other’s home markets.
-
Scale: In 2014 Alibaba has 24,000 employees while Amazon has 88,400 (almost 4
times more). In 2013 Alibaba’s revenue was $7.95 billion and Amazon’s was $7.95
billion -almost 10 times more. This is given in big part by their type of
operation.
Sources:
Business
Insider. http://www.businessinsider.com/alibaba-vs-amazon-2014-8
