Alibaba Vs Amazon

What will be the next strategy of Amazon and how are they going to execute it? That was the discussion when Alibaba came up with its triumphant $21.8 billion initial public offer proclaiming themselves as the most valuable ecommerce company in the world. During the first day of trading Alibaba was much ahead of Amazon and eBay combined. Alibaba’s e-commerce business includes wholesale, retail, group buying, and payments. . In the last 6 months they have invested $8 billion in startup firms and even entering into the US and European markets.

Alibaba doesn’t have a warehouse; they don’t sell directly, they just give an open marketplace for the sellers. Sellers include small business owners and big brands where they sell their products through the site- in short Alibaba connect sellers and buyers. This method is totally against the traditional retailing, but has helped them to get more profit than Amazon with a margin of 40% with $2 billion of earnings in the first quarter.

Amazon follows traditional retailing that is like a managed market space with massive warehouses, direct selling where the biggest brands sell directly. They provide a direct service and have a good track of customer service. In order to provide good service Amazon is forced to manage immense investments in infrastructure and greater number of workforce for a less amount of profit.

Both giants are designed for their home markets so they still have an upper hand in their home turfs and entry to the different region may not be easy especially for Amazon. Alibaba has a good mastery over the Chinese regulations and they know the pulse of the Chinese market. However, they don’t have the vast network and delivery systems like Amazon. The trust Amazon gained through cloud infrastructure, logistics services are a strong base for them and Alibaba will have to find their own solution to compete with that.

Amazon will have more work in the Chinese market since the market is’nt fully tapped, and one in with a good chance only if they are in sync with the regulations. In order to build the brands they may require more presence in the market by local acquisitions. At the same time Alibaba may have to reduce their rate of acquisitions and concentrate on logistics, cloud services, and on the USP s of Amazon.