Earlier this year, the Chinese e-commerce titan Alibaba announced its first collaboration with a U.S retailer, aimed specifically at the U.S market. In this strategic partnership with Office Depot, Alibaba is slowly tiptoeing into Amazon’s home turf. Even as the Chinese giant is slowly but steadily conquering new lands (and moving closer to a clash against Amazon), many today still don’t fully understand Alibaba and the scale of the retail giant’s potential.
The King of The East
In the fast-evolving Chinese e-commerce market, Alibaba is the undisputable king reigning over more than 567 million active users; more than the entire American population and almost double Amazon’s 300 million global users. Alibaba is dominating the online market in China, and while Amazon claims upwards of 40–50% of all American e-commerce sales, Alibaba claims a staggering 80% of all online purchases in China; interacting with almost every single Chinese online user. As if this wasn’t enough to convince even the most hardcore cynic that Alibaba is a force to be reckoned with, Alibaba is today positioned in a market where only 50% of the Chinese population are internet users (compared to over 80% in the United States); showcasing a miles-long runway for growth.
Same but Different
While commonly referred to as “the Amazon of China,” Alibaba has a differentiated business model from Amazon. Amazon runs everything as an umbrella cooperation, keeping every single operation under the same roof and brand. On the other hand, Alibaba Group is divided into three core businesses: Alibaba.com, Taobao, and Tmall. Though different, the three platforms all serve to live out the Alibaba Group’s common mission: to make it easy to do business anywhere. Through this, the platforms all serve as the middle men between a seller and a buyer, with a few distinct characteristics:
- Alibaba.com is a B2B wholesale and global marketplace. The website connects manufactures from countries such as China, India, Pakistan, the United States, and Thailand with a large range of international buyers.
- Taobao is a B2C platform, similar to eBay in its construction, enabling small business to open online stores. Taobao is the biggest e-commerce platform in China, and as the site does not charge transaction fees and is free to join, the platform has gained an enormous user base.
- Tmall is in many ways the most internationally known of the Alibaba Group’s popular platforms. Tmall is focused on larger and international companies like Nike and Apple, and appeals to the large and growing Chinese middle class. Back in 2009, Tmall launched “Singles Day,” which has now become the biggest global retail “holiday,” surpassing Black Friday by millions of dollars in sales.
Despite impressive numbers and big moves, many are still reluctant to recognize Alibaba as a worthy competitor to Amazon. A worldview anchored in the obsolete idea that the west is the leading force in retail is clouding up a horizon where new, eastern players are moving closer and gaining popularity and strength at a pace never seen before. With other Chinese players such JD.com setting up offices in Europe, it seems only a matter of time before the west will hear the retail roars from the east, and loudest among them, the Chinese retail dragon that is Alibaba. And when we do, the best served will be the ones that have looked further than just the threats of Amazon and prepared for everything Alibaba has to offer.