Wednesday, June 3, 2015


Alibaba Vs. Amazon: A Clash Of E-Commerce Titans

Mon, Jun 01 2015 00:00:00 EA08_SNAPSHOT
One week after being named the new chief executive of China's Internet giant Alibaba Group (NYSE:BABA) on May 7, Daniel Zhang put international markets at the top of the company's shopping list.
"We must absolutely globalize," Zhang said at a companywide meeting, as reported on Alibaba's news site "We will organize a global team and adopt global thinking to manage the business, and achieve the goal of global buy and global sell," he said.
Halfway around the world, Seattle-based e-commerce giant (NASDAQ:AMZN) laid out similar priorities. During an April 23 conference call after reporting first-quarter earnings, Brian Olsavsky, vice president of finance, was asked about Amazon's international business, especially in China.
Alibaba founder Jack Ma, fourth from right, along with his executive team, which includes newly appointed CEO Daniel Zhang, third from left, in front...
Alibaba founder Jack Ma, fourth from right, along with his executive team, which includes newly appointed CEO Daniel Zhang, third from left, in front... View Enlarged Image
"You're seeing a lot of invention from us in China right now," he said. "We're doubling down now with an Amazon Global Store on our own site, which gives Chinese customers access to over 1 million Amazon products globally."
In addition to its own online store in China, Amazon, in March, also opened an online storefront on Alibaba's business-to-consumer platform, Tmall.
"We continue to be selective in our investments there, but we're taking the long-term view, and we have hopes for the new initiatives with the Global Store and the Tmall flagship store," Olsavsky said.
Alibaba dominates e-commerce in China as Amazon does in the U.S. How much damage either might inflict on the other as they pursue global domination will play out over the next several years. The most likely winner: consumers.
Despite years of effort, Amazon has captured only a small market share in China.
Amazon, along with eBay (NASDAQ:EBAY), Google (NASDAQ:GOOGL), Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR), has struggled to break into China. Government restrictions are part of the challenge. Another is understanding the psyche of China's consumers and businesses and how best to reach them. Amazon's decision to use the Alibaba Tmall platform reflects how difficult it is to break into China without partnering with a Chinese company.
"The China e-commerce market is very complicated compared to the U.S.," said Wenbin Qiu, chief executive of China e-commerce company Baozun (NASDAQ:BZUN), in an interview with IBD following the company's initial public offering on May 21. Alibaba Group owns an 18% stake in Baozun.
"The China e-commerce market is growing very fast and you need to have a flexible strategy and be able to move very quickly," he said.
Qiu said he is not concerned about competitive threats from Amazon in China, as many foreign companies have lacked this flexibility and speed. In the first quarter at Amazon, international sales accounted for 36% of revenue, but just a sliver of that came from China.

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