Alibaba vs. Amazon, 7 Differences & Similarities
If you are thinking about who rules eCommerce then the name that first comes to mind likely differs based on where you live. If you live in the west you might say Amazon if you live in the east you might say Alibaba. The truth is both of these companies have had an outsized impact on the retail industry around the world. While Alibaba and Amazon are often compared to one another they have some similarities and many differences. If you are curious to learn about them then consider these seven areas that show how these two giants have paved their own way to the top of the eCommerce charts.
1. Websites. In the eCommerce space Amazon has its flagship website, Amazon.com with international versions while Alibaba is a collection of websites including Alibaba.com, Taobao.com and Tmall.com. Alibaba.com is a business-to-business wholesale website where manufacturers, trading companies and resellers trade goods in large quantities. Taobao.com is Alibaba’s largest website and it’s a platform where small businesses and individuals sell merchandise to consumers. Tmall.com sells more premium and international brands like Nike and Gap to Chinese consumers.
Alibaba has different websites to serve different markets including Lazada and AliExpress. Lazada serves South East Asia and AliExpress typically serves consumers from Russia, Brazil and the United States. Amazon operates as Amazon in international markets but with a unique url for each specific country it operates in.
2. Business model. Alibaba is a marketplace where it connects buyers to sellers. It doesn’t buy and then resell its own inventory or own a vast logistics network like Amazon. Alibaba’s eCommerce model is often compared to eBay’s. Amazon, on the other hand has invested billions of dollars to build its own logistics network.
Over time Amazon has shifted to generating more sales from third-party sellers, where similar to Alibaba, it doesn’t buy and then sell that inventory. Instead the third-party seller owns the inventory and sells it on Amazon’s platform. Last year 60% of Amazon’s retail sales came from third party sellers.
In 2017 Jack Ma, co-founder of Alibaba, was asked to compare Amazon’s business model to Alibaba’s and this is what he said: “the difference between Amazon and us. Amazon is more like an empire. Everything they should control themselves, by themselves. And our philosophy is that we want a bigger ecosystem. Our philosophy is to empower others to sell, empower others to service, empower, make sure the other people are more powerful than us…Remember one thing, today for ourselves, our last year [2016] is more than $550 billion. To have people deliver for us, we need five million people. So how can we have five million people deliver things for us, to deliver the things we sold? The only way we do is empower the service company, logistics companies, making sure they are efficient, making sure that they make the money, and making sure that they can hire more people.”
3. Fees. Alibaba does not charge merchants on Taobao listing or transactions fees. Instead merchants on Taobao pay a fee to rank higher in the site’s search engine results, similar to the way Google works. Merchants are charged a fee to list on Tmall as well as a sales commission and advertising fees. Amazon charges merchants a sales commission and they can also pay a fee for advertising on Amazon as well as a fee for logistic services.
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4. Domestic vs. international. Alibaba generates most of its revenues in China while Amazon generates most of its revenue in the United States, Germany, the United Kingdom and Japan.
5. Brick and mortar presence. Both retailers see the importance of brick and mortar retail. Amazon has hundreds of retail stores including its Whole Foods grocery chain (over 500 locations) and Amazon Fresh grocery chain (26 locations). Alibaba also has a grocery chain called Hema which has over 250 locations in China.
Alibaba has also made broader investments in other brick and mortar retail chains including buying a 20% stake in Suning, one of China’s largest electronics chains, in 2015. Then in 2017 Alibaba bought a $36.2% stake in Sun Art, China’s largest hypermart chain for $2.9 billion, before buying a controlling interest in Sun Art in 2020. Alibaba didn’t stop there. Alibaba also took Intime Retail, a leading department store chain in China, private in 2017 for $2.6 billion.
6. Profits. Alibaba makes all of its profits from its eCommerce business while losing money in its non-retail businesses including its cloud computing business. Amazon makes most of its profits from its cloud computing business.
7. Size. Alibaba is the largest eCommerce retailer in the world in terms of gross merchandise value. It generated GMV of $1.2 trillion in 2020 while Amazon generated $575 billion. But Amazon generates more revenues, bringing in $469.8 billion in 2021 in revenues (for the 12 month period ending December 31st, 2021). Alibaba brought in $127.9 billion (for the 12 month period ending September 30, 2021) in revenues.