When participating in the CCTV dialogue program in 2007, Bezos took a picture with Ma Yun.
Amazon and Alibaba are the world’s two largest home appliance giants, with a total market value of over US$1.1 trillion.
They dominate different regions of the world and basically avoid confrontation. However, as the two giants gradually expand their international reach, this is likely to change.
“We believe that globalization is the future,” said Ma Yun, co-founder and chairman of Alibaba.
Amazon is currently dominant in North America and Europe, but it is also actively deploying the Indian market and doing business in Australia and Singapore. Alibaba ruled the Chinese market and established a strategic cooperation and investment network in Southeast Asia. But like Amazon, Alibaba is also betting on India and entering Australia.
The two e-commerce giants are using three important trends:
·the global financial system is digitalized and mobile.
·growing global wealth.
·Internet penetration is increasing.
Alibaba and Amazon approached these new opportunities through different strategies - Amazon took the acquisition and Alibaba invested. Outside the United States and China, Alibaba.com has a small number of companies that have stakes in Amazon, and Amazon has acquired as many as five times as many companies as Alibaba.
Although the two companies are adopting different expansion strategies, their ultimate goal is to be consistent - to globalize their e-commerce and logistics expertise.
Amazon, which focuses on the globalization of its third-party seller platform Marketplace, will invest billions of dollars over the next decade to bring its low-cost, broad-choice, and fast-delivery model to the world.
Alibaba is expanding its logistics network globally and splicing its various subsidiaries to connect the global e-commerce market.
Why do you have international expansion now?
The two companies are seeking to diversify their income in different regions, especially Alibaba. They also know that if a retailer can establish a leading industry e-commerce business and bring a country into the online retail industry, it will be a great success.
Chart: Both Alibaba and Amazon's share prices have risen in the past year
With their stock prices rising in recent years - Amazon's market value reached 720 billion US dollars, Alibaba's market value has 483 billion US dollars - both companies have sufficient financial resources to actively invest in expansion.
With the help of CB Insights, we have carefully studied the global expansion of Amazon and Alibaba, and have a deep understanding of how these two giants have used M&A, investment, cooperation and R&D to expand internationally.
Alibaba and Amazon's number one international goals
In markets that are not yet open, competition between Amazon and Alibaba is heating up. Australia, Singapore and India will become the most explosive e-commerce market in the coming years.
Figure: Amazon has bet on the Indian market in recent years through investments and mergers and acquisitions
India is the region with the highest potential for growth. Because of this, both Amazon and Alibaba believe that it is crucial to its long-term strategy. Morgan Stanley’s research predicts that the country’s online retail market will soar from 15 billion U.S. dollars in 2016 to 200 billion U.S. dollars by 2026. Moreover, this will be achieved after achieving an exponential growth of 3.9 billion U.S. dollars in 2009. Currently, Flipkart is the market leader and Amazon and Snapdeals are ranked second and third.
Australia is a mature financial economy and 88% of its citizens are active Internet users. From September 2016 to September 2017, the online retail sales of these users reached US$18.38 billion. This still accounts for only 7% of total retail sales in the country, which is lower than the 9.12% in the United States and 19.6% in China. Even if the Australian e-commerce market only grows by 50 basis points, it is equivalent to an increase of approximately $1.5 billion.
The current retail market in the country is also very fragmented, and no retailer dominates, which gives these giants more opportunities to gain dominance.
Singapore is more modern than other Southeast Asian countries. It is Asia's top financial center and 82% of the population is active Internet users, so it has become the market that two major e-commerce giants are targeting. Alibaba and Amazon are already two major e-commerce players in the region, and as more retail spending turns online, they are fiercely competing to maintain their original advantages. In August 2017, Alibaba and its subsidiary company Lazada visited 988,000 pages, leading the industry. Amazon ranked second, and its page views were 698,000.
Figure: Alibaba's investments span the globe
Chart: Online spending in India from 2016Expect rapid growth from year to year
Millennials make up one-third of India's population. People agree that the large population and rapid increase in Internet penetration mean that the Indian e-commerce market has great potential.
Amazon and Alibaba have adopted different strategies to invest in India’s growing economy.
Amazon is investing billions of dollars in its third-party seller platform while investing in other complementary businesses. Alibaba chose to make major strategic investments in payment solutions and the original e-commerce business.
At present, the real competition for the dominance of India's e-commerce market is between Flipkart and Amazon. So far, Flipkart has raised nearly 7.5 billion U.S. dollars of equity financing, facing the mighty Amazon, without fear.
On the other hand, Alibaba’s strategy in India is more similar to WeChat’s “super application” strategy in China.
Amazon's third-party platform-first strategy
Amazon launched on 2013 on the Indian website amazon.in. soon after Jeff Bezos, CEO of Amazon, announced that Amazon plans to invest $2 billion in India to develop its ecommerce network and to invest in a growing entrepreneurial ecosystem. The number of equity deals in India increased by 270, from 543 in 2013 to 2019 in 2017.
At the beginning of the development of the Amazon Marketplace, about half of the customers were on delivery, which brought with them logistical challenges and also limited Amazon's potential in the region. Other shoppers use online wallets to pay for shopping. These wallets can be recharged through physical stores or prepaid cards.
To help improve payment options and drive more marketplace sales, Amazon invested QwikCilver Solutions, a gift card solutions company, in the fourth quarter of 2014. Amazon made subsequent investments in the company in 2016.
The gift card system has been integrated into the Amazon Marketplace, and gift cards can be emailed.
Amazon invested more in 2015 and has invested in two companies in different industries: BankBazaar (online financial product search tool) and HouseJoy (on-demand home service platform).
In early 2016, Amazon acquired EMVANTAGE Payments, an Indian-based startup, and the transaction amount was unknown. After the acquisition was completed, Amazon announced that the company’s employees will join Amazon’s payment team to develop its Indian e-commerce payment platform. The Marketplace now supports the use of credit cards issued by India.
In late 2016, Bezos doubled its investment in the Indian market and promised to invest another 3 billion U.S. dollars in this growing market.
A year later, Amazon injected $28 million into Shoppers Stop, the largest minority investment in the company. This e-commerce startup is one of India's leading fashion retailers, dedicated to connecting top brands and consumers. Its apps are downloaded between 1 million and 5 million on the Google Play app store.
Amazon ecosystem effect
In addition to the core Marketplace platform, Amazon also provides Amazon Prime and Amazon Now services in India.
Indian customers receive free express delivery service and Prime Video by purchasing Prime membership at 999 INR (US$15.32) per yearvideoservice. Amazon began to provide Prime member services in early 2017. Prime entered India in the first year with more members than any other country.
Although entering the market a year later than Netflix, Amazon Prime Video has subscribers that exceed this streaming service.
Amazon Now is Amazon's grocery fresh business, operating in Bangalore, Delhi, Mumbai and Hyderabad. All Amazon Now orders are promised to be delivered within two hours.
So far, Amazon has set up 56 India distribution centers in 13 different states in India, with 13.5 million cubic feet of warehouse space. These figures include the recently announced 15 warehouses created for the growing Amazon Now service.
During the year ending March 31, 2017, Amazon Marketplace’s revenue in India increased by 105%.
By analyzing Amazon’s quarterly earnings report, you will find that India is clearly a market that Amazon has preferred to develop. Between 2015 and 2017, the country was mentioned in financial reports 59 times.
Alibaba uses PatymCut into the Indian market
Two months after Amazon made its first foreign investment in India, Alibaba quickly followed suit. In January 2015, Alibaba and its subsidiary, Ant Financial, invested $200 million in Patel's parent company One97.
Paytm is India’s largest mobile payment company and has accumulated more than 200 million users since its launch in 2010. Eight months after the initial investment, Alibaba and Ant Financial injected another 680 million U.S. dollars into the rapidly growing company. Alibaba and Ant Financial currently hold a 40% stake in Paytm.
Between these two investments, Alibaba also invested in Snapdeal. Snapdeal is the third most popular e-commerce company in India, based on downloads.
After seeing the early success of Paytm, Alibaba has also acquired Paytm Group, an online retail subsidiary of Paytm Group. Paytm Mall’s gross merchandise trade (GMV) for the fiscal year ending in March is expected to reach US$3 billion, and its GMV target for the fiscal year ending in March 2019 is US$10 billion.
Just entered 2018, Alibaba and ant gold suits are frequently performed in India. On the second day of the new year, Alibaba invested $35 million in e-commerce logistics company Xpressbees. A month later, Alibaba participated in the E-round financing of BigBasket, an online grocery store. In February, Ant Financial acquired 18% of Zomato, an online food and lifestyle portal, for US$200 million.
Figure: India is a major battleground for e-commerce expansion
In addition to its investment in India, an Alibaba acquisition in China may also change the pattern of the Indian market. In 2014, Alibaba acquired UCWeb, a provider of mobile Internet software technology and application services.
At present, UCWeb's UC browser is India's most popular web browser, accounting for more than 40% of the market. In January 2018, the browser had 130 million monthly active users, and it was India's sixth largest application in terms of download volume.
By emphasizing personalized content for individual users, UC browsers can be distinguished from other similar products. The platform allows Alibaba to collect a large amount of data on the Indian population and apply its findings to other business units.
Alibaba also entered the digital entertainment field by acquiring a majority stake in Hong Kong lottery company AGTech Holdings in 2016.
The acquisition paves the way for AGTech and Paytm to create a joint venture named Gamepind. The company will become a mobile gaming and e-commerce platform.
According to AGTech and Paytm, Gamepind will allow users to purchase products and services at discounted prices by participating in various casual games and competitions. The platform will be offered as both a stand-alone application and Paytm in-app features, so Gamepind can reach 300 million users of Paytm.
Alibaba has stated that for businesses, Gamepind is an ideal marketing and promotion platform that interacts with mobile shoppers and casual players in a truly innovative way.
Comparison of the two strategies
Amazon's development plan in India is quite clear, that is, to expand the size of Amazon Now and Amazon Prime as much as possible. Alibaba’s strategy for pursuing growth is even more difficult to classify.
It seems that Alibaba may be in the early stages of building a "super-application" that can integrate its various assets. This application may be similar in designTencentWeChat application.
Figure: One-stop design of WeChat
Through the use of Paytm to control the mobile payment market, Alibaba has been able to diversify other investments, such as investments in entertainment, media, grocery, logistics, e-commerce, gaming, web services and on-demand services - all included in the WeChat application. market.
Regardless of the potential of the Indian e-commerce market, expanding market share will not be an easy task. In the fiscal year to March 2017, the market leader Flipkart’s revenue increased by 29% year-on-year, but the loss for the same period also increased by 68%.
Seizing market share and making profits in India will require huge scale and huge investment. However, by the time the market is truly mature, the winner is likely to earn enough money.
Alibaba and Amazon may have a disruptive impact on the Australian retail industry. However, the business plans for the two companies to enter the market are very different. It seems that they do not appear to have a direct confrontation.
Amazon is expanding the domestic reach of merchants, while Alibaba is primarily looking to bring Australian companies globally.
Amazon is creating a third-party seller platform that allows domestic third-party merchants to sell goods in the Oceania region. It is implementing its patent-protected Fulfillment By Amazon (FBA) solution that allows businesses to focus on business operations and Amazon helps them handle all B2C logistics work. This can be regarded as a particularly difficult challenge in a country with a large geographical area.
Alibaba is implementing two expansion strategies, both focusing on Chinese tourists’ enthusiasm for Australia. Alibaba is currently building for Alipaycloud serviceAt the same time, it cooperates with local companies in order to make Chinese tourists' travel experience in Australia seamless. Alibaba is also expanding its logistics network between Australia and China in order to better promote business-to-business trade.
In the words of Zhou Li, the managing director of Alibaba Group Australia and New Zealand, Alibaba’s goal in Australia is to “build the entire operational infrastructure required to support local companies globally through cloud computing, online payment and logistics. Expand within scope."
Amazon, on the other hand, is focused on pushing its customary low-cost, wide choice and fast delivery model to consumers across Australia.
Amazon wants to overcome the "distance barrier"
Amazon first entered Australia through AWS in 2012 and one year later launched the Kindle store on amazon.com.au.
In 2017, the U.S. e-commerce giant announced plans to open a market platform in Australia that will focus on Amazon Prime and various benefits. Last December, the company began expansion in Australia and set up a 24,000-square-meter distribution center in Dandenong South, Melbourne.
The Australian market has been proven satisfactory by Amazon. According to Morgan Stanley’s report, Amazon achieved a total of US$1 billion in sales in Australia through international distribution from foreign companies.
The operation of the Melbourne distribution center is similar to that of the United States. Since February 26th, Amazon has begun offering Fulfillment By Amazon (FBA) distribution services for third-party sellers, and may ship Amazon Essentials' own-brand products in the future.
Amazon also cooperated with Australia Post to launch the last mile delivery. The service said that in December last year, Amazon's first month of operation was its busiest month to date.
However, Amazon still faces various distribution challenges.
In the first month of FBA distribution, there were reports that Amazon had many orders that were not delivered on schedule. Although the responsibility may be partly related to Australia Post, if Amazon is over-committed to the customer's rapid delivery and ultimately fails to deliver the product to the customer as expected, its reputation will be compromised.
It is believed that in the vast country that coined the term “distance barrier”, Amazon will soon set up additional distribution centers in Sydney and Perth to help the company cover a large area. For this reason, Amazon may acquire companies in the logistics industry in the region.
Amazon has provided Australian consumers with Prime Video, Twitch Prime, and Alexa products.
Amazon is expected to provide Prime Shipping service sometime in 2018.
Alibaba is aiming at the upsurge of Chinese people visiting Australia
Alibaba cooperated with the Australian government and established its first headquarters in Australia in February 2017. Alibaba is seeking to make further use of the deep relationship between China and Australia. China is Australia’s largest trading partner and imported Australian goods worth more than A$55 billion in 2016.
Picture: 2016Annual share of Australia's exports to Australia (Data from the Standard International Trade Classification)
Alibaba has two major business opportunities in Australia:
·the upsurge of Chinese tourists to Australia
·demand for Australian products in China
Alibaba.com mainly pays for Bora in Australia.
According to the Australian Bureau of Statistics, in 2017, nearly 1.4 million tourists from mainland China traveled to Australia, a year-on-year increase of 13%. In 2020, the spending of Chinese tourists in Australia is expected to reach US$13 billion, including education costs.
Alipay has established a partnership with the Australian Tourism Export Council (ATEC) with the goal of expanding its mobile payment platform to the country’s tourism industry.
The partnership aims to educate local business owners and employees to prepare them for the benefit of Alipay users visiting the region. Alipay has 520 million active Chinese users.
At the end of 2016, Alibaba launched its cloud service and Alipay in Australia. Today, more than 8,000 merchants support Alipay payments.
Alibaba also entered into a partnership with Australian taxi company Cabcharge, which in February 2018 integrated Alipay into its 22,000 cars. The technology will help Chinese tourists cross language barriers and make payment easier.
Demand for Australian products in China
The Australian product market in China is quite broad. According to the latest report from the Australian-Chinese Chamber of Commerce, 86% of Chinese tourists said that they had purchased more Australian products after the trip. Almost all survey respondents said that they purchased Australian goods in China after the trip.
On the double 11th day of last year, the number of products sold by Alibaba.com's 63 Australian merchants on behalf of 252 brands in 24 hours of promotion ranked third among all countries (after the United States and Japan).
Australia’s double 11 performance in the past three years has steadily increased. From fifth highest sales in 2015 to fourth last year, it now climbs to third.
When the new headquarters was opened, Alibaba had 1300 Australian merchants and 400 New Zealand merchants selling products worldwide through Tmall and Tmall. As Alibaba continues to push Australian products to its online retail platform, these numbers should increase significantly.
In order to promote and maintain a strong business relationship, Alibaba will hold an e-commerce expo in Australia, connecting Australian and New Zealand brands and small businesses to China's growing market.
The date of the 2018 E-Commerce Expo has not yet been set, but it should continue to build on the impressive performance of last year. Last year, more than 5,100 buyers and sellers attended the event.
In order to accelerate the development of the Australian-Chinese trade market, Alibaba has established various partnerships.
Australia Post:In 2017, Alibaba announced its cooperation with Australia Post. The collaboration aims to simplify the logistics process between Australia and South East Asia by developing the first Australian market platform within the Lazada e-commerce network of Alibaba.com. (Lazada's platform operations cover six countries in Southeast Asia.)
In addition, Alipay has been integrated into the AlphaCommerceHub (ACH), a joint venture between Australian Post and FinTech Alpha Payments Cloud. By integrating all key business services into a single cloud platform, including payments through Alipay, the joint venture created a commercial platform for Australian retailers.
Chemist Warehouse:The Australian pharmacy chain company signed an exclusive cooperation agreement with Alibaba’s cross-border e-commerce website Tmall International. In exchange for exclusive rights, Alibaba will provide support for the pharmacy during major marketing events to help it better reach Chinese consumers.
Qantas):Alibaba also established cooperation with Australia’s largest airline, Qantas. This cooperation allows Chinese tourists to purchase Qantas airline tickets directly on Alibaba's website. Qantas will use this cooperation to further expand the scale of its China-Australia service, which currently provides 130 flights between the two countries each week.
Southeast Asian Market
Southeast Asia is Alibaba’s most important market outside of China. Amazon is completely focused on Singapore.
In Singapore, Alibaba and Amazon have direct competition in e-commerce and grocery distribution. This Southeast Asian country seems to be the only market in which the two giants face each other in such a positive way.
According to data from Google and Temasek, Southeast Asia has a population of 620 million people and it is expected that by 2025 its e-commerce market will reach $88 billion.
Lazada of AlibabaPromote revenue growth
In order to occupy a place in the e-commerce market in Southeast Asia, Alibaba acquired a majority stake in Lazada, a Singapore e-commerce platform, for US$1 billion in 2016, which was valued at US$1.5 billion. A year later, Alibaba.com raised its shareholding ratio to 83%, and injected another billion US dollars into Lazada at a valuation of US$3.15 billion.
Lazada operates platform businesses in six countries in Southeast Asia (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam).
The area is experiencing explosive growth. Between the two Alibaba investments, the number of merchants on the Lazada platform has grown to more than 100,000, and the number of SKUs (inventory units) provided to consumers exceeds 80 million.
In November 2016, Lazada took out $30 million to $40 million of those investments to acquire Singapore-based online grocery company Redmart, which will compete with Amazon’s Amazon Now.
Alibaba hopes that the acquisition of Lazada will become an important part of its plans for 50% of its revenue from outside the Chinese market.
According to Alibaba's quarterly earnings report as of December 31, 2017, its international commercial retail business revenue reached US$727 million, a year-on-year increase of 93%. Alibaba listed Lazada as one of the main reasons for this growth.
In order to continue to expand the e-commerce market in Southeast Asia, Alibaba has singled out Tokopedia’s $1.1 billion F-round financing. Tokopedia is an e-commerce company in Indonesia, the largest economy in Southeast Asia.
"We always thought Alibaba was our teacher and example," William Tanuwijaya, Tokopedia's chief executive and co-founder, said in a statement. "Today, we are excited to welcome them as our shareholders. We believe that our cooperation will further accelerate Tokopedia's mission of popularizing business through technology. "
Amazon is betting on Singapore
Amazon entered Singapore in July 2017 and immediately provided Prime Now services to consumers. This radical product provides consumers with a two-hour delivery service for thousands of items.
"this is the first time we've offered Prime Now to a whole country. Singapore has allowed us to roll out services to the nation at the same time, but look at. Singapore-it's a city, an excellent metropolis, and people know a lot about technology. It matches Prime Now's value proposition, "said Henry Lowley, director of Prime Now for Amazon Asia Pacific.
Last December, Amazon launched a complete Prime membership program in Singapore.
The entire Prime product includes free international delivery of orders over $30.20, Prime video services and Prime Twitch subscriptions.
In Singapore, the war between Alibaba and Amazon is heating up. Prior to Amazon’s launch of the full Prime service, Lazada formed an alliance with Netflix and Uber to launch a member program called LiveUp.
Amazon dominates the European e-commerce industry and its online retail business covers 5 different countries in the region.
The largest market outside the United States, Amazon's second and third largest markets are Germany and the United Kingdom.
Since 2010, Amazon has made three investments to strengthen its European market and logistics network.
In 2011, Amazon acquired a minority stake in Cicek Sepeti, a Turkish online florist and gift shop company. Three years later, Amazon strengthened its logistics network in Europe by investing in two logistics companies in the UK and France.
Since then, Amazon has established various partnerships to continue to control the market.
In 2016, Goodman, a leading global logistics real estate company, expanded its long-term cooperation with Amazon in Europe. Since 2006, Goodman has provided more than one million square meters of logistics space to Amazon throughout Europe. As part of the new project, Goodman will develop a 107,000 square meter logistics center in Amiens, a northern French city, and lease a 30,000 square meter property in Rowan Planck.
Last March, Amazon and German DHL Delivery Service Company established a partnership to launch air cargo operations of Amazon Fresh products in Germany.
In order to continue to expand its internal products, Amazon recently launched Twitch in Europe and expanded the scope of Prime Video's operations.
Amazon expects that the game-playing platform Twitch will attract a large audience in Europe and bring huge advertising revenue in the near future. In March of this year, Amazon confirmed the acquisition of GameSparks, the Irish gaming platform. The company is a “back-end-as-a-service” company dedicated to providing game developers with cloud-based platforms to build leaderboards and other features.
Amazon and Germany’s Discovery Communications have partnered to provide content through the sports network Eurosport. The cooperation agreement between the two parties also covers Austria. It will provide Amazon Prime members with premium HD content from Eurosports.
Amazon acquired Souq.com, a UAE-based company, for $580 million in 2017. The deal allowed Amazon to gain a foothold in a growing and highly competitive e-commerce market: Saudi Arabia, UAE and Egypt. At the time of the acquisition, Souq.com claimed to have more than 45 million monthly visits to users, offering 8.4 million products in 31 categories.
According to McKinsey, there are 50 million consumers in several countries in the Middle East. Currently, online retail sales account for only about 2% of total retail sales.
Amazon and Souq plan to integrate various products and services to expand the scale of business in the region and increase products.
Six months later, Amazon and Souq acquired Wing.ae. The start-up company is seeking to establish a logistics network for Prime's day delivery service on various e-commerce platforms, as well as other benefits such as music and video services.
Terms of the deal are not disclosed. Prior to the acquisition, Souq.com had been the company's sole investor.
Alibaba has become a major player in the Hong Kong market due to its geographical proximity and its entrepreneurial environment is also quite active. Since 2016, the company has made 13 investments in the following industries in Hong Kong:
:: medical facilities and services: 1
·Mobile commerce: 2
·Internet software and services: 2
Alibaba’s biggest bet in the region is the investment in WeLab at the end of 2017. WeLab is running a mobile application that assesses their credit by analyzing users' mobile usage habits. As Alibaba continues to enter underdeveloped markets around the world, the technology may be very important in providing credit to those who do not have a traditional credit score.
Since 2015, Alibaba has had six investments in the Israeli technology industry each year. Recently, Alibaba participated in Nexar's $30 million round B investment. The startup uses smartphones to create an AI-supported car-to-car network that aims to predict and prevent accidents.
At the end of 2017, Alibaba announced the establishment of a global leadership research institute focusing on innovation and technology cooperation. The Institute is known as the Damour Home (DAMO) and DAMO stands for "Discovery, Adventure, Trend and Prospect". In the next three years, Alibaba will invest US$15 billion to set up seven research laboratories around the world.
In February, Alibaba set up its first research laboratory with a local university in Singapore. The research organization will focus on artificial intelligence applications in the areas of healthcare, smart homes and urban transport.
“Alibaba Dharma will be at the forefront of developing next-generation technologies that drive the development of Alibaba and our partners,” Zhang Jianfeng, chief technology officer of Alibaba, said in a press release.
In addition to the United States and China, other research centers will be established in Moscow and Tel Aviv.
This is consistent with China's "One Belt and One Road" policy aimed at strengthening the connectivity between the Eurasian continent.
to sum up
Both Alibaba and Amazon are global forces that are constantly expanding their influence around the world. Given that a large part of the global online retail market has not yet been developed, Amazon and Alibaba have great opportunities in the short-to-medium term – at the same time, once they commit major mistakes, they will also suffer heavy losses.
Through mergers and acquisitions, investments, international expansion and cooperation, Amazon and Alibaba will continue to expand in high-growth markets such as India, Australia and Singapore, and continue to consolidate their market leadership in other countries.
With the large scale of the market that can be seized, the competition between the two sides will intensify. With the rise of Internet penetration in other regions, Latin America and Africa may become the next battlefield where these e-commerce dominators seek to expand their tentacles.