Amazon vs. Alibaba: The race to be the biggest online retailer in the world
Have you ever purchased anything from Alibaba? Personally, I haven’t, but many have – after all, they’re dominating the Chinese and Southeast Asian market (Read Alibaba’s Southeast Asia arm Lazada hits 130M annual consumers | TechCrunch )
This raises one question: Is Amazon safe from competing with Alibaba or vice versa? Will the two of them inevitably have to go head to head, or are they even already doing it? The answer is: yes, and competition between them is stronger than ever. Let’s have a look at the numbers.
At first glance,? Amazon is ahead, but is it?
Alibaba’s investment in technology development and research output can easily outcompete Amazon. For instance, according to MIT, Alibaba already has a better voice assistant than Google’s , and its digital assistants are designed to handle a massive number of customer recordings and sophisticated conversations like questions about products.
Also, looking at the stats in the table above, the significant difference in the number of employees suggests both business giants follow different business models:
Amazon uses an? 'Asset-Heavy' model
They sell goods directly and are a platform for other retailers, which explains their large network of warehouses. In general,Amazon controls its own entire ecosystem, from direct products to logistics (warehouses and delivery services) and customer support.
Amazon also offers a subscription-based model, Amazon Prime, and, like myself, I’m sure many of you are subscribers, along with 46.4% of German households in 3/2021 .
Part of Amazon’s model is the fact that it sells keywords ads to its sellers.
Amazon doesn't collect any fees from buyers, and their profit comes from the commission of the sales price (see table below).
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Alibaba, on the other hand, uses an ”Asset-light” model, with a core business that resembles that of eBay
They connect buyers and sellers and facilitate the sale of goods solely.
Everything else such as terms of sales, delivery, or warehouses is done by the sellers themselves.
Along with this, Alibaba doesn’t collect any fees from sellers and buyers, including commission.?
In order to have a higher ranking on the site’s search engine, sellers have to pay.
What do you think about these business models? Being sandwiched between these two global giants, I’m interested in seeing how the European market responds to Amazon and its continuous market domination, and how Alibaba will surprise us with its increasing growth rate!
Despite their different models, there’s something they both share, however: they both use dynamic pricing as a competitive advantage to maximize profits. Dynamic pricing, in general, is the most obvious, fastest, and easiest way to boost revenue – and not just for e-commerce.??
How do I know this? Because at 7Learnings, we can achieve a +10% increase in profit for our clients.
I’m Felix Hoffman, co-founder, and CEO at 7Learnings. I’m passionate about pricing – especially predictive and machine learning-based pricing. If you’d like to know more about the topic, feel free to connect.
Below, here are some other resources we’ve done around the topic:
CTO | Quema | Building scalable and secure IT infrastructures and allocating dedicated DevOps engineers from our team
1 年Felix, thanks for sharing!