Amazon against Alibaba

· 8 min read

All of you are aware of both the names Amazon and Alibaba. These two giants of the e-commerce industry have become arch rivals to each other. They are now giving each other a tough time and a worthy competition in the industry. These two names have become the top contenders for the number one place in the e-commerce industry. Amazon started its business as an online bookstore in 1995. It didn't even though of becoming the giant of the industry. The compatriot Alibaba started four years later than their competitor in 1999 with a humble yet significant beginning in the industry.

These two big online market places have taken almost all the bigger chunks in the e-commerce industry in their regions. Now both the companies are expanding their wings to soar higher and conquer the whole globe. They have come face to face with each other and now are looking to beat one another in the e-commerce industry.

Alibaba has miraculously raised the IPO value of $21.8 billion at the end of the fiscal year 2014. It has become the top-ranked and most significant e-commerce name in the global industry. Alibaba has shocked the tech giants by making more sale than on the very first day of inauguration than the compatriots' Amazon and eBay.

There are also some similarities in the operating procedures and revenue earning. Amazon gets the major chunk of revenue and sales from electrical products and online digital media streaming. Amazon Prime is an annual fee subscription option for the customers. The members get the option to watch different movies, listen to music and read books along with special discounts and someday free delivery.

On the other hand, Alibaba hosts several different selling websites to do business and make a share of the e-commerce market. Alibaba’s Taobao is the highest and most profitable site, and it provides more than 80% of total revenue, which Alibaba acquires in a year. One might think that both the giants work on the same principle, and they follow the same business philosophy. But the working process and procedures are entirely different at the basic level.

Alibaba: A Brief History

In the year of 1999, when the whole world was busy in the Y2K fashion. Eighteen students and friends got together under the leadership of Jack Ma came up with a new business plan. They founded, which was working on a business to business model and an electronic market place. This website has helped a great number of suppliers to sell their products on the global level. Every buyer in china has access to this website. Through this platform, they are going global, just after three years of its foundation as a business to business model electronic market this website awarded global reach to Chinese products. The website became the most profitable and fast-growing business in the global e-commerce market.

Jack Ma has left the chairmanship of Alibaba, but the insight and great foundation he gave to this business have made it a leader in the industry. Less than half-trillion dollars, the value is a big deal for such a humble startup.

Amazon: A Brief History

Jeff Bezos, a bit controversial name in the industry, is the founder of this e-commerce giant. Some people consider him a villain while others think of him as a hero. No matter what title you award him, but he has made Amazon one of the largest and most promising online marketplace in the e-commerce industry. He was a VP at a Wall Street firm, and he quit his job to start this venture. In the beginning, Amazon was started as an online bookstore, but in a very short time, it got listed almost all the product categories you can imagine to buy. Jeff Bezos didn't stop there; he purchased almost 40 subsidiaries and acquired Twitch and Wholefood to secure the combined revenue of $500 billion a year.

Similarities between Amazon and Alibaba:

These two mammoths in the e-commerce industry enjoy the privilege of only two contenders at the top place. They don't have more competitors in the market to compete in the global market. There also are some similarities in these giants. Amazon secured 39% of the online market in the US. At the same time, the Alibaba has 58.2% share of the retail industry in chine. These two e-commerce giants have secured the lion's share of the market in their respective countries. 

The proprietary payment process is the most loved feature of both the ventures. Amazon pay allows the Amazon users and member the liberty to purchase and order the products from other websites by using their Amazon account.

Alipay has the following of more than 700 million users. All of them use online payment processor the mobile payment system.

Apart from these similarities, there are also some differences in the process and system of Amazon and Alibaba.

Difference 1: Target Audience

The biggest difference between Amazon and Alibaba is the target market and targeted segment to do business. Alibaba plays the role of a middleman between the buyers and the suppliers of the products. Amazon, on the other hand, is an e-commerce store. It sells the products directly to the consumers, and these products lie in both used and new category.

No doubt Alibaba tris to capture the consumer market with the help of these two websites. AliExpress and Taobao. The later website is the biggest revenue-generating partner of Alibaba. Taobao is a free marketplace with no fee for buyers or the sellers at all. Seven million active seller add nearly one-third of the total revenue of Alibaba. The difference between Taobao and Amazon is that Amazon uses business to customer model, while Taobao uses business to the business model to sale the products and earn revenue.

Difference 2: Fees

It is a known fact that Amazon is a bit pricy and chargers various fee under different heads. If you want to list your product on Amazon, you must have to pay the price for your e-commerce store. The display on Amazon is not free, and it is not cheap either. The various heads under which Amazon collects money from sellers are seller plans, prime membership and Amazon seller fee.

Alibaba has a different philosophy on this matter. The Taobao is a completely free site for buyer and sellers. But there is a simple catch here. If you want to rank higher in the search area, you have to pay Taobao. Amazon doesn't charge anything to seller. If you want to rank higher on Amazon, you need to focus on customer satisfaction and quality services. The SEO and selling matrices are the key factors which increase your ratings and rank on Amazon.

Difference 3: Revenue Sources

The most important and significant difference between these two marketplaces is the revenue. The source of revenue and earning philosophy of both e-commerce markets are different from each other in a significant way.

Amazon provides you with the opportunity of online and offline stores. The revenue they receive comes from the bigger brands, third party sellers and subscription charges and advertisement expenses the seller makes. Amazon also charges various kinds of fee to the sellers. You have to pay for monthly selling plan, extended warehouse fee, prime member subscription and several different heads of fee and charges.

Alibaba funds innovation, which is quite a different earning model when you compare this option with Amazon and other e-commerce market place in the global industry. The other revenue heads involve core commerce. Where the buyers and sellers interact with each other and make the purchase and Alibaba gets the cut. Alibaba also hosts digital media entertainment. The entertainment sector is one of the best revenue-generating options in the market, and Alibaba earns its cut from there too.