Monday, June 19, 2017

AMAZON AND ALIBABA--USING SAME MEANS TO DIFFFERENT ENDS

Using supply chain management and its logistics elements.


Amazon and Alibaba Use Same Means to Different Ends

In buying Whole Foods, Amazon is following a trail blazed by Alibaba


Created with Highcharts 5.0.10Bricks and ClicksOnline retail as a percentage of totalTHE WALL STREET JOURNALSource: Deloitte* includes China
Created with Highcharts 5.0.10%ChinaAsia-Pacific*GlobalWestern EuropeNorth America0246810121416Globalx8.6%
In retail, fashions are now moving from east to west. Online giant Amazon’s $13.7 billion deal to buy Whole Foods has shaken up the sector in the U.S. That isn’t unusual in China, where e-commerce behemoth Alibaba has already been snapping up brick-and-mortar stores for some time, spending some $5 billion on physical retail companies in recent years.
Still, the two companies’ strategies aren’t exactly alike.
Some of this is down to history. China lacks established retail giants like Wal-Mart or Costco that have mastered how to distribute goods from producers to supermarkets. Meanwhile, online shopping accounts for a much larger share of the retail market in China than the U.S.
Alibaba is a dominant force in China’s e-commerce market.
Alibaba is a dominant force in China’s e-commerce market. Photo: steven shi/Reuters
So while Amazon hopes to expand its already formidable distribution capabilities by buying Whole Foods , WFM +1.02% Alibaba has always relied on logistics company partners to deliver goods bought on its websites. Its model is to act as a platform for merchants and consumers to meet, taking a cut in between by offering services like advertising and payments.
For Alibaba, buying into physical retail companies isn’t about improving its distribution. Instead, it points to its ambitions to offer its services to anyone selling goods, online or offline. In recent years, it has bought a majority stake in department-store operator Intime, a 20% stake in electrical-appliance retailer Suning and minority stakes in a couple of supermarket chains.

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Alibaba hopes to help physical stores set up an online presence and market them to mobile shoppers; it also hopes to persuade retailers to process transactions using Alipay, a PayPal -like service that is owned by Alibaba’s affiliate Ant Financial. Buying stakes in physical retailers also helps Alibaba glean more data on consumer behavior.
Like Amazon in the U.S., Alibaba has already become the dominant force in China’s e-commerce market. But as both move down from the clouds into the real world, their aims contain crucial differences.
Write to Jacky Wong at JACKY.WONG@wsj.com