Planning to start your online business, or are you an enthusiastic shopper looking for the right e-commerce platform. The most popular recommendations you must have received yet would definitely be including Alibaba.com as well as Amazon. Indeed, the Alibaba group and Amazon are the two largest and most popular global e-commerce giants existing today.
Now, both the leading e-commerce giants seem promising, but confused about what is the right platform for you? This article will answer all your queries by walking you through the major differences between the two platforms.
The group’s flagship site, Alibaba.com dominates the Chinese online retailing market. On the other hand, Amazon dominates the online retailing market in the US. Expanding their operations internationally, the two are now directly competing with each other to become the largest online retailing platform globally.
Firstly, let’s talk about the similarities that they share which mislead the people in believing that the two are similar.
What is common between the two?
Both Amazon and Alibaba.com tend to dominate, and to some extent have a monopoly over their home e-commerce markets (You can read more about Alibaba.com in our featured post). Moreover, both of these groups have their own payment services: Alipay and Amazon pay.
Also, both of these e-commerce businesses were established almost around the same time period. Amazon was started by Jeff Bezos in 1994, while Jack Ma laid the foundation of Alibaba in 1999.
What are the differences?
Regardless of the similarities they share, the two can’t be seen as the same since there are quite a few differences strong enough to set them apart.
Difference 1: Business Models
Alibaba.com has a primary business to business model. This doesn’t mean that the company doesn’t sell to consumers – it does that through Taobao – but the model for Alibaba.com specifically is B2B while Amazon has a B2C business model.
Moreover, the Amazon group operates as a single unit, while Alibaba has divided its services into 3 major sites: Alibaba.com, Taobao, Tmall. Each site focuses on a different audience group. This allows Alibaba to offer a greater and wider variety of products for different types of customers.
For businesses searching for suppliers and wholesale customers, Alibaba.com is the go-to website. On the other hand, Amazon and Taobao are perfect sites for customers seeking access to a wide variety of products for individual use.
Difference 2: Supply Chain
Amazon serves as a platform for retailers to advertise and sell their products. However, it also sells directly to its customers; it owns inventory kept in its large number of warehouses. Additionally, consumers can also visit the company’s warehouses where the products can be directly purchased. Moreover, Amazon due to the control over inventory can even offer same day delivery where distribution centers are near.
While Amazon can act both as the supplier and middleman, Alibaba.com simply acts as a middle man without its own transportation facilities or warehouses. It merely connects the buyer with the supplier and does not hold any inventory. Rather, Alibaba.com tracks the shipment and coordinates the delivery process between the buyer and the seller. This function is also performed by Amazon when acting as a middleman.
Hence, while you can buy goods directly from Amazon, Alibaba.com is not responsible for the product.
Difference 3: Revenue Sources
Amazon makes revenue from various streams. These include its retail services (both online and physical), subscription services, advertising, and other web services. Moreover, when selling through partner retailers, Amazon gets a commission which is a percentage of their sales price.
Amazon’s subscription-based model is brought to practice through the Amazon Prime service, where customers pay an annual fee. The selling of its e-reader, the Kindle, and the mobile application also draw revenue for the company.
Alibaba group on the other hand generates revenue from annual user fees, sales commission charged from retailers, funding innovation, and online marketing services. The online marketing services of Alibaba.com include the following:
- Pay for Performance:
Here sellers bid for keywords for their products. Thes keywords increase the possibility of their product to appear in the top preferences when searched for.
- Display Marketing:
Here sellers bid for positions in relevant market places.
- Placement Services:
Here sellers buy a promotional lot on the Juhuasuan market place for a limited period of time by paying the placement fees.
Difference 4: Revenue
As per the data of 2013, Amazon saw a profit of 0.8%, while Alibaba saw a much higher profit, as high as 44%. This pattern continues today as well where Alibaba makes a higher profit than Amazon.
However, despite the much higher profit that Alibaba makes, its revenue earning is much less than that of Amazon: in 2018, Alibaba’s revenue was only 21% of Amazon’s.
Difference 5: Strategy
Jeff Bezos has always wanted to establish Amazon as a customer centric company. Therefore, Amazon has directed its efforts towards getting consumers the best possible price. To achieve this purpose, Amazon in some instances has increased its costs greatly. In other instances, Amazon has been criticized for ignoring the supplier businesses’ viewpoint. This further leads to the criticism of Amazon making it difficult for small businesses to make a good profit online.
On the other hand, Jack Ma describes his company’s objective to “fight for the little guy,” by which he means helping small businesses.
“…we want to help small businesses grow by solving their problems through Internet technology. We fight for the little guy.” – Jack Ma of Alibaba
Holding true to these values, Alibaba recently launched a new set of e-commerce tools specifically designed to help the small businesses in the US struggling because of Covid-19.
The difference in the company’s philosophies and strategies result in them directing their efforts in different directions.
Hence, if you are a consumer, you should see Amazon as your facilitator, while Alibaba.com operates as a business-friendly site.
Difference 6: Geographic Focus
Almost 84% of Alibaba’s business comes from China, with the remaining 16% coming from overseas. On the other hand, Amazon has 60% of business operations coming from its home location in North America. Following this, a significant amount of 40% comes from their international market.
Therefore, currently, Amazon enjoys more international operational activity in comparison to Alibaba.
With both Alibaba and Amazon expanding their operations into new markets, the differences in their models and infrastructures are likely to affect their performances. This race between the two players will indeed be an interesting one to witness!
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