Amazon and Alibaba”s have been competing for the world’s e-commerce palm for years. After Amazon conceded defeat in China in the spring of 2019. It was clear that both companies had established a dominant brand presence in their home countries. And this means that the battle between retailers will unfold in markets that are foreign to them – especially in Europe. Since the New Silk Road, by which the Celestial Empire plans. To link itself with Europe, passes through Russia, the future of this confrontation also concerns our country.

From one test?

Despite the significant national differences between American. Because And Chinese consumers that define how Amazon and Alibaba”s work. Both companies share a number of common “species characteristics”, which will be discussed below.

1. More than just retailers

Amazon and Alibaba are more than just online stores.

First and foremost, both companies are tech giants. Because Amazon is opening hundreds of software development centers around the world. And Alibaba Cloud research centers and academies are not only conquering China. But also expanding beyond the country and opening in Asia and Europe. New technologies being developed. By the two companies are being tested and implemented in their retail operations, including robotic super-fast delivery, self-driving stores, etc.

In addition, Amazon, and Alibaba are not only trading, but also media platforms. Retailer sites are the first point of contact for brands. And users, perceive their sites as services for product search, replacing Google and Baidu (百度; Chinese search engine).

2. Strong logistics

Amazon and Alibaba have a fairly strong logistics infrastructure. Which is the key to the success of any large online retailer. Both companies guarantee delivery of almost all goods within 1-3 hours after placing an order.

Amazon Prime members are guaranteed, hourly delivery. And with its recent acquisition of Whole Foods. A health food chain with locations in major US cities, Amazon is building a fast food delivery system.

Alibaba promises to deliver any goods within a few hours. To more than 90% of China, including rural areas remote from cities. In the coming years, the company promises to increase this figure to 100%. In Chinese metropolitan areas, Alibaba guarantees hourly delivery using already tested ground and air drones.

3. Interest in offline retail

Seeing the increased demand for physical stores among American. And Chinese shoppers in recent years, Amazon and Alibaba have begun to develop concepts for combining physical retail and e-commerce.

Since new technologies are being implemented. In China much faster than in the West, interest in online stores fades much faster there. For this reason, Alibaba was the first to take care of the need to attract buyers with a new concept. In 2016, Ma Yun delivered a landmark speech at the Hangzhou conference on the mission of new retail:

“Five new trends await us in the future: new retail, new manufacturing. New money circulation, new technologies and new energy sources. The era of pure e-commerce has passed, in the next 10-20 years there will be no e-commerce. Only new retail, which is a merger of offline, online retail and logistics.”

physical stores and Amazon

After Ma Yun’s speech, in the past three years. Alibaba has opened many of its own physical stores: TaoCafe self-driving restaurant store. Home Times DIY chain, Hema Fresh ultra-fresh food store , etc.

Interested in opening physical stores and Amazon, which plans to open 3,000 unmanned stores by 2021. Currently, the company has 16 stores open in New York, Chicago and Seattle without cashiers and Amazon Go staff. Unlike its Chinese rival, Amazon has been more restrained in experimenting with physical retail, and aside from drones, the company has only opened a handful of bookstores, with no plans to expand globally yet.

Differences

Digging deeper into the business models and, philosophies of Amazon and Alibaba reveals many dramatic differences that shape the two retailers’ vision of the future of e-commerce.

1. Shop vs Platform

Amazon predominantly sells goods directly, which is why it would be more correct to call it an online store than a marketplace. All of the American company’s own goods are stored in an extensive network of warehouses, making it easier for Amazon to implement hourly delivery to customers.

In addition to direct sales, Amazon provides a platform for other retailers, but their products do not make up a significant percentage of the online store’s sales. In addition, the company charges a fee for the right to sell its products on the Amazon website. If a retailer registers as a “professional”, they pay a monthly subscription fee. If the seller registers as an individual, the company takes $0.99 from each purchase.

Alibaba, on the other hand, acts solely as an intermediary between buyers and sellers. Although, like Amazon, the Chinese retailer combines different business models, it is more of an online platform than an online store.

version of AliExpress

Taobao (淘宝), the China version of AliExpress, operates as a free marketplace where neither sellers nor buyers are subject to transaction fees. Merchants can pay the service to increase their rankings in the site’s search engine, thus generating advertising revenue for Taobao, which forms the basis of the company’s revenue.

Alibaba’s other platform, TMall, serves tens of thousands of well-known brands including Nike, Apple, Samsung, Lipton, and more, already earning $5,000-$10,000 in commissions annually. However, TMall also serves as an intermediary between brands and buyers, requiring a higher threshold for sellers to join the platform.

2. Definition of the client

Alibaba has a slightly different view on this issue. Speaking back in 2013 at Stanford, Ma Yun made a rather unusual statement for the audience when he refused to define Alibaba as a consumer-oriented company.

According to the founder of Alibaba, his company primarily cares about the best conditions for small and medium-sized businesses, because sellers are better aware of the needs of their customers than the platform itself. If Amazon’s customers are buyers, for Alibaba, a customer is a seller who has joined the marketplace.

3. Holiday discounts

The big ideological gap between Amazon and Alibaba is revealed when comparing the discount festivals of the two companies they have high hopes for.

In 2015, Amazon created a new tradition. Every year on July 15-16, all members of the loyalty program celebrate the Prime Day super sale and receive huge discounts not only on goods in the online store, but also in Whole Foods physical stores.

company providers

Although the company provides discounts on various products, among which electronics and home appliances prevail, in general, the biggest discounts are on Amazon private labels – Alexa Assistant, Fire Tablet, Amazon Echo, etc.

Last year, at the end of the holiday, Amazon reported a record 100 million items sold in 17 countries and the growth of Amazon Prime subscribers to 100 million users. Although the company does not release exact figures on the number of products sold and revenue received during the holiday sales, experts estimate that the retailer earned at least $4 billion in two days.

In China, things are quite different. Alibaba, like the entire Chinese retail market, organizes a discount festival on Singles Day (光棍节) – November 11 – one of the most successful sales holidays in China.

Alibaba kicks off its holiday of discounts with a large-scale gala concert broadcast live. During the day, Chinese pop stars and representatives of brands collaborating with the platform perform at the concert.

Artist performances are combined with fashion shows from the biggest Western and Chinese brands, tech companies showcase new products, and a huge screen above the stage displays second-by-second sales statistics from Alibaba.

So, on the holiday of “four units” (from the date of 11.11) 2018, Alibaba earned a record $ 30.8 billion in 24 hours – and this is a record not only for China, but for the whole world. In just the first minute and a half since the start of the live broadcast of the gala, Alibaba managed to earn a quarter of Amazon’s revenue for the entire Prime Day – $ 1 billion.

But the two holidays of discounts differ not so much in their scale and success, but in their approaches to customers.

all Alibaba,s users

On Singles Day, all Alibaba,s users can participate in the sale of goods. They are not required to have a membership to access discounted items, although Alibaba”s has its own loyalty program that gives certain privileges to its members, including during the discount holiday.

Brands partnering with the platform are using the day as an opportunity to connect with consumers and expand their business. In addition to the live reaction of the audience to the goods presented by the companies at the gala concert, sellers receive detailed sales information published on the Alibaba”s website in the public domain.

best selling categories

All Internet users can find out about the best selling categories and the most popular products in certain areas and cities in China.

The picture is reversed in the US, where everyone who wants to get discounts on Prime Day is required to become members of the Amazon loyalty program. For the US retailer, the discount festival is primarily a commercial event aimed at driving sales and generating income, while the discount festival for Alibaba”s is a brand celebration, allowing sellers to better understand their customers.

Meeting between Ma Yun and RDIF CEO Kirill Dmitriev

Struggle for markets and place in Russia

Amazon and Alibaba”s are actively fighting for markets. Both retailers are primarily interested in Europe, where the Chinese company is just beginning to “spread its nets”, investing heavily in the construction of the New Silk Road. Amazon, which has achieved significant success in the European market, is gradually penetrating into Southeast Asia and India, which both retailers see as the most promising sales markets.

Russia occupies a special place in the confrontation between the two companies, where, based on the socio-political agenda of recent years, only Alibaba”s has a future. Practice proves this: in early summer 2019, Alibaba”s MegaFon, Mail.ru Group and RDIF registered a joint venture called Aliexpress Russia. The share of Alibaba”s in the capital of “AliExpress Russia” will be 55.7%, “MegaFon” – 24.3%, RDIF – 5%, Mail.Ru – 15%.

Chinese media

The Chinese media have repeatedly expressed surprise why Amazon did not try to infiltrate the Russian market. So, on the news site of the Chinese technology giant Tencent (腾讯网), Alibaba”s prospects in Russia were analyzed in detail. Although the publication believes that the Russian e-commerce market is in its infancy, according to experts, 70% of Russians’ annual online shopping expenses come from AliExpress. Last year alone, Russia spent 316 billion rubles. ($5 billion) for goods from the Chinese platform.

The online edition also cites data from the Gaidar Institute, according to which, in 2018, out of 290 million parcels sent in Russia, 90% were delivered from China.

The author of the article confirms the mutual interest between Russian business and AliExpress with the words of Mail.ru CEO Boris Dobrodeev, who owns the VKontakte social network: “Imagine that you combine Tencent and Alibaba”s into one market. This is what is happening in Russia at the moment, this is not the case anywhere else. Like Facebook and Amazon, Tencent and Alibaba”s are separate companies, but we are putting it all together.”

According to B. Dobrodeev, 97 million VKontakte users will be able to make purchases on AliExpress every month using the social network application or the marketplace website.

Sergey Rybachuk, Retail

Retail has undergone tremendous changes over the past three years. This is due to a change in the behavior of buyers and rising expectations. Companies that “keep their finger on the pulse” remain successful. What trends you need to remember and what retailers are already integrating – in this material.

Alternative

Consumers are paying more and more attention to  just as health. also This is the main reason for the search for replacements for bread, red meat and cow’s milk products. The search for alternative proteins is driving up purchases of lentils, chickpeas, nuts and seeds. For the same reason, the demand for healthy snacks is growing. The average annual increase in  just as sales of “food on the go” is 10%. In the last 5 years, this category has become one of the most popular.

Many Russian retailers are now changing the concept, introducing and offering ready-made food, quick bites, cafes inside stores. For many regional chains, quality prepared food is one of the few ways to differentiate from the feds.

Among the most successful in this trend are AV Daily, SPAR Middle Volga,  just as HyperGlobus and Dobryanka.

nicer

So in the Perekrestok store opened in a new concept (Moscow, Tallinskaya, 7), the buyer immediately enters the fresh zone at the entrance , designed in an emotionally also for inspiring style with accent lighting, new high-quality graphics. And in the center of the trading floor there is a zone with cooking, ready meals and a cafe, which is very popular among the residents for of the area.

Faster

Time is becoming an increasingly valuable resource just as for people. Large retailers have begun to actively invest in fast delivery. Retailer 7-Eleven Japan for has launched a 2-hour guaranteed delivery app. The island of Hokkaido was chosen as a test region for the new system. In two years, the network has increased the number of points with delivery from 25 to 1,000, also where an assortment of 2,800 goods is brought.

American Walmart is betting on opening small points of sale in large cities and suburbs for those customers who want to pick up an online order on their own. Walmart plans to open 3,000 pick-up locations in 2019.

More Independent

Nearer

The lack of time, the frantic pace of life, the desire for to eat also right, the development of online commerce leads to the fact that in megacities, buyers prefer ready-made food in a cafe or restaurant, a good store near the house or alternative home delivery. for This significantly changes the retail landscape.

The “hypermarket” format is under serious blow, where buyers are no longer ready to go, as they were 10 years ago, spending half a day and a larger budget on a trip.

Ismael Germain

According to Ismael Germain, Sales Director of the Auchan chain, “customers no longer want to drive for hours to the hypermarket. It is important for a retailer to be close to everyone.” In Russia, Auchan plans to launch a new format of convenience stores, which includes the also sale of groceries and the issuance of orders from hypermarkets. The 130 sq. m. half of the premises will be occupied by a dark store (a place for collecting orders). The chain plans to provide for  customers with a choice of 10,000 SKUs at a price 5-10% lower than stores in, the immediate vicinity, and achieve an also average check of 3,000 rubles. Thus, Auchan is betting on the “neighborhood” format, predicting that the margin will cover the cost of rent.

Responding to these changes in consume, r behavior, grocery stores in Russia are changing and re-conceptualizing – offering healthy also food that can be eaten right in the store; strive to evoke pleasant emotions through design and service; deliver groceries at home or to the nearest store and, in general, become closer to the buyer.

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