When it comes to dominating e-commerce, Amazon instantly pops into mind. Alibaba is not far behind as they dominate China. Alibaba vs. Amazon, who wins? In 2014 when Alibaba went public, they had a net worth of $230 billion. Amazon had approximately $150 Billion. Alibaba may have been beating out Amazon, but in 2015 they fell behind because of counterfeit claims. Two years later, there market shares are surging with a net worth of $420 Billion, slightly trailing Amazon’s $465 Billion. Can Alibaba take over Amazon as the world’s MVP of online retailing?
History of Alibaba Group
The Alibaba Group was founded by Jack Ma in 1999 from Hangzhou China. It is a conglomerate many entities including: Alibaba.com, Toaboa, Tmall. Toaboa, founded in 2008 and becoming an independent platform by 2011 is China’s largest shopping marketplace for consumers in China. By 2014, Tmall Global was created to enable international brands to offer products directly to consumers in China.
Alibaba.com was the mastermind of Jack Ma as the first English language global wholesale marketplace. Customers use Alibaba to shop online, sell unwanted goods and make online payments. This model is very similar to that of EBay. Compared to Amazon they are far from a mirror image. The two-e-commerce site have recently been neck and neck to claim domination in the e-commerce industry.
In 2015, Alibaba’s stock took a downward spiral due to concerns about the proliferation of counterfeit goods on Alibaba sites. It was the first incident Alibaba took legal action against its sellers. Many people criticize the company’s alleged inability to resolve counterfeits. In response, Alibaba formed a coalition that will leverage the power of big data to identify the seller of fake items, whose value in 2015 exceeded $1.7 trillion.
The company took action to deal with the fake items. It recruited 2,000 permanent staff and 5,000 volunteers to help identify counterfeit items. Alibaba used data and artificial intelligence to crack down fake items. Alibaba stated data would scan images and logos and find mismatches between the text of a listing and the accompanying photo of the item. For example, a name brand bag might be listed for one price, but the image might show a lower or higher rate. In 2015, Alibaba said it spent 150 million yuan to test-buy suspected counterfeit goods from vendors on its shopping sites, as another way to find fake goods.
The U.S. rival Amazon is also experiencing issues with counterfeit items. One instance in particular was Amazon being sued by the founder of the hip-hop group RUN-DMC for infringement. Like Alibaba, Amazon has taken action and took their counterfeiters to court. Overall, this is an ongoing process that will have to be closely monitored to maintain the reputation of the respective brands.
Alibaba a Threat to Amazon?
While both e-commerce giants have dominated their respective regions, Alibaba has an edge on Amazon that many may not notice. In China, Alibaba takes up 47% of China’s online retail market share. They take over JD Holding Inc. that takes up 20%. There’s still a mere 33% where Amazon can squeeze in, but they’re not having much luck. The Prime membership that has become a staple in the U.S. is not garnering the same traction in China. For example, one of the benefits of Prime membership in the U.S. is Prime Video. That feature is restricted in China due to government censorship.
It has been nearly a year since the launch in China, but many have reservations about the service. One of those being previous issues with scammer subscriptions. The Prime membership in the U.S. offers fast and free delivery on top of the low prices. That is something that draws the attention of American citizen. The case is not the same in China. They do not feel the same about the speed of delivery. China has already been exposed to low overseas shipping costs; some even free. Alibaba already offers fast delivery and competitive prices. Why should China look elsewhere for what they’re already receiving locally?
The interface is also an issue that does not have any appeal. Compared to the competition, the Prime membership app is bland. Competition uses vibrant colors making the site more festive. The Amazon app is very neutral and straight to the point. With the entirely different landscape in China, Amazon will have to implement something to make the Prime membership work.
Race to $500 Billion
Time will tell who will reach $500 billion first, but Amazon will first need to find their niche in China. Amazon can continuously dominate here in the U.S., but they are still far from an international sensation. It has been nearly a year since the Amazon Prime was introduced and it will be interesting to see how Amazon reshapes plans in China. Will they have to put an entirely new service in its place to cater to this new demographic? Will changing the entire interface make a difference? What can they offer that separates them from the competition? As for Alibaba, they are treading closer to global domination.