McMillanDoolittle logo

Alibaba Enters Amazon Turf, But With A Different Point Of View

Alibaba, China’s e-commerce giant

When Amazon makes an announcement the retail universe stops and holds their breath. When Alibaba, the Chinese equivalent, made an announcement while Shoptalk 2019 was occurring there seemed to be only minor ripples. And that is surprising when you consider that companies based in China are driving some of the most innovative changes in global retail. Part of this muted response could possibly be attributed to the fact that most still don’t fully understand Alibaba Group. To put Alibaba quickly in perspective let’s look at a few quick stats:

  • Alibaba has approximately 550 million active buyers compared to Amazon’s 300 million
  • Alibaba accounts for 80% of online purchases in China versus 50% for Amazon in the US
  • 80% of the U.S. population are internet users while China only has a ~50% internet penetration thus showcasing that China and Alibaba have even more runway for growth.

So as a who’s who of retail executives met and discussed new product launches and innovations, Office Depot and Alibaba.com announced the formation of a strategic collaboration aimed at helping small businesses in the United States. The partnership combines Office Depot’s relationships and understanding of US businesses with Alibaba.com’s global network of over 150,000 suppliers, catalog of product listings and manufacturing capabilities, as well as a platform to provide small businesses with the tools and services to grow.

In the short term, the two companies will offer a co-branded online destination (“Office Depot on Alibaba.com”), enhanced customer support, and marketing efforts to help drive adoption. The future state is to provide faster fulfilment and distribution options as well as provide U.S. businesses with an additional sales channel to sell their goods. For small businesses, this could help reduce the barriers to growth and allow a more competitive retail environment.

As we review this announcement, it is tempting to make direct comparisons of Alibaba Group to Amazon, but that would be wrong. The two approach the e-commerce market in slightly different, but meaningful ways. Whereas Amazon famously doesn’t share data with brands or third parties, Alibaba does.

This subtle difference is important because it speaks to the authenticity of the company and its mission. Alibaba’s mission is to make it easy to do business anywhere and to enable businesses to improve how they market, sell, and operate.  Whereas when you think of an Amazon, it is the beast that you have to keep feeding but are constantly nervous will turn on you and develop a knock-off of your product.

This isn’t Alibaba’s first collaboration with U.S. Retailers, this is just the first one aimed specifically at the U.S. market (versus selling goods in China).  The strategic move to take the indirect path in the U.S. with a B2B approach will avoid direct competition with Amazon for now. But, as the Alibaba brand becomes more accepted and top of mind expect to see these two titans clash.

Co-Authored by Neil Stern and Brad Koszuta for Forbes

McMillanDoolittle

McMillanDoolittle

info@mdretail.com

McMillanDoolittle is a premier international retail consultancy bringing deep experience with world class clients. Our partners have extensive experience interpreting the retail marketplace and converting insights into successful strategies. We help clients develop innovative solutions in strategy development, the customer experience, new concepts, brand performance, retail performance improvement and retail intelligence services.

1 Comment
  • Avatar

    Willard Ander

    March 8, 2019at2:04 pm Reply

    Neil, Appreciated your positive comments on BABA. I have owned a significant amount of their stock for years now, mainly for some of the reasons you mentioned. I think this new move will significantly improve their brand recognition in the US and make the subsidized retail part of the Amazon bully start playing fairer. Keep up the great reporting. Will Ander

Post a Comment