It may seem like Amazon is going to gobble up all the eCommerce any day now. Although the massive expansion of the booming retail market is quite significant, the industry is also embracing small retail and boutique shops. Some companies took this concept to a global platform.
Surely, a lot of small businesses offer their services and products through online means(either through shops on their websites or some third party websites), a few companies took the e-commerce thing to the next level.
When it comes to online retail, there are only a few companies that we can view as having a material global presence. The US-based Amazon and the Chinese Alibaba – both are dominating the online retail sphere and have been comparable for years now. However, it is remarkable that the Chinese company was started five years after Amazon.
Given that, the two companies have been juxtaposed as competitors always, their approach and roads to success have been extremely different till the very present day.
The European market
Alibaba has its European expansion called AliExpress, and recently it has had a considerable influx of smaller European retailers.
During the Global Shipping Festival AliExpress invited over 3,500 Key Online Influencers and bloggers from Russia, Spain, Italy, Brazil, Poland, Korea & Middle-East to promote sellers and products on their social media accounts. With the total number of KOLs' followers exceeding 100 million, AliExpress has potential access to over 10% of the population in these key markets. Furthermore, it has been quite evident and public that Alibaba intends to expand in the European market, and there have been noticeable efforts for scouting, research, and setting the field for expansion by the company.
According to the sources, Alibaba has already approached several brands with an offer to join its new platform. The brands cited by the sources are Mango, Benetton, and Spanish fashion group Tendam.
“With space to design their stores within the platform, brands can build their homepage, with pictures and video, to create the feel they want.”, head of AliExpress, Wang Mingqiang.
The company is initially targeting the Spanish and Italian markets. At the same time, they are also focusing on Euro-Asia gateway countries like Turkey and Russia. The retail giant Alibaba launched its first European store in Spain. The new store is a part of the AliExpress banner - the consumer shopping site of its business. It is planned to function like a showroom where shoppers can visit to browse and test the range of products available and then buy these online. The showroom will feature more than 1,000 products from 60 brands.
Alibaba’s move to get into brick and mortar in Europe could be anticipated as a global approach to grow its market share versus that of Amazon, whose annual revenue is more than four times the size of its own. Alibaba is estimated to occupy 56% of the market share in China with a growing user rate, which is 674 million customers who are active shoppers. But, it still has some way to go to keep up with Amazon internationally.
While the competition between Amazon and Alibaba isn’t direct, the situation seems to be different. With Alibaba entering a market that Amazon currently operates in, it is also aiming for some brands that Amazon already does business with. The results of their preliminary approach aren’t stellar according to sources.
Most large scale brands have declined the offer proposed by Alibaba’s representatives. Both Benetton and Tendam declined to comment officially if they were approached. Although, it is known that neither of the brands sells on AliExpress, interestingly, they do sell on Amazon. Whereas, Mango stated that it did not sell on AliExpress as well as on Amazon.
Amazon charges for monthly subscriptions for businesses, which amounts to $39. They also count on commissions that range between 7% and 15%, depending on the product that’s being sold. Alibaba, on the other hand, has waived the subscription fee for its sellers in Spain to attract its business. Though they have set commissions that range between 5% to 8%.
It is also in news that, Alibaba has decided to dismiss the commissions for the brands that they’re interested in seeing joining their new platform. This strong move from Alibaba is seen as a way to hegemonize Amazon in Europe. The European market isn’t necessarily too small for both of them, nor does Amazon have full coverage over Europe, but this move has definitely turned some heads.
Still, the goal for Alibaba in Europe is simple: Replicate the highly successful Virtual Mall model which has been implemented in Asia earlier. Factually, this model has managed to overtake 50% of online sales in Asia, which is no small feat. Alibaba sees its initial failure to capture the attention of stronger retail brands as the failure of brands to recognize the potential they offer and that, they will come around eventually. Meanwhile, they have been offering their continuous services to local sellers, and so far, it seems to be working.
The Amazon Side Of Things
On the other side of the shore, Amazon hasn’t commented on Alibaba’s recent moves. Although things may look ripe for the conflict, the Asian giant has a few things to worry about. It’s just an initial attempt to enter the European market, but Amazon is firmly set in most European prime markets. They currently hold Germany, Italy, Spain, and Britain as the primary online retailer, and it will take quite an effort from Alibaba to harm their current position.
However, it is yet to be seen if these two companies are at odds with each other in the European market, even if Alibaba manages to establish its presence. Subsequently, even though they offer similar services, their approaches are very different. Alibaba doesn’t deal with warehousing and is known as a primary seller of Chinese products.
For Alibaba, this seems like a bit of a branding issue. Most online shoppers have heard about Alibaba and it is known that this company is famous for being an online shopping hub for Chinese products. Alibaba utilizes its services to buy cheaper products, for example, trinkets. It will take some time and a clear rebranding strategy to breach this barrier.
Even though Amazon and Alibaba are competitors, the US company holds a market value of 922 billion USD while Alibaba at 594 billion USD stands a little more than half of that. This race is by no means close, but it might get interesting.
The biggest winners of this entire business conflict might end up being the shoppers. Because, in most situations, competition means businesses need to offer better services and lower prices to outshine. All in all, if Alibaba settles in Europe, the European consumers might see a greater variety of products and new services as the battle for global online retail continues…..