Amazon and Alibaba are two giants stores that are conquering the world. On the one hand, Amazon is already a global phenomenon. On the other side, Alibaba is expanding globally. It is interesting to compare the two business models from three standpoints:
- monetization strategy
- international expansion
- net margins
Amazon vs. Alibaba: monetization strategy
Both Amazon and Alibaba are born as online stores. In fact, an essential part of the business is still based on the revenues coming from the online store. Indeed, Alibaba makes as much as 85% of its revenues from the core commerce, while Amazon makes almost 61% of the online stores.
It is important to notice how Amazon has been decreasing the dependence on the online stores’ revenues while increasing the revenues from AWS and Amazon Prime services. In a way, it seems like Amazon is switching to a subscription-based business model (as of now the process might still take a long time).
Alibaba’s revenues also come from services like Cloud and digital media and entertainment.
Amazon vs. Alibaba: international expansion
As pointed out on Forbes in 2017 its founder Jack Ma “has spent more than 800 hours flying to dozens of countries, meeting business leaders and head of states to introduce his grand vision: small businesses from all corners of the world trading freely and securely on Alibaba’s platform.“
Both Amazon and Alibaba are investing considerable resources in going global. In fact, as reported on The Economist Amazon has spent over $5bn in India, while not long after Alibaba invested $500m into an Indian digital-payments company.
The reason I focused on this metric is that it’s interesting to see the difference in margin between Alibaba and Amazon. As we’ve seen in the Amazon cash conversion cycle, the company can grow aggressively even by keeping a tight margin.
Amazon vs. Alibaba Business Model
Data for Alibaba geographical breakdown of revenues: https://www.statista.com/statistics/226793/e-commerce-revenue-of-alibabacom
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