by Franklin Chu
2017 November; Smartbrief
As Amazon’s RFP for a second North American headquarters dominates global headlines, it’s important to remember the e-commerce giant wants to win beyond North America. Amazon’s global competitors include Chinese powerhouses Alibaba and JD.com, and comparing these three e-commerce giants can give retail companies a glimpse of the future of retail.
Amazon, the retail disruptor
By upending such markets as books, apparel and electronics, U.S. e-commerce leader Amazon has earned a position as a retail disruptor with a market value exceeding $450 billion (vs. $230 billion for Walmart) and $136 billion in revenue in 2016.
Amazon’s superior cost control and supply chain efficiency save shoppers time and money. A data goldmine, Amazon knows precisely what consumers buy, browse and return, and applies those insights to offer irresistible pricing and assortment. Amazon acquired millennial-friendly grocery and apparel brands Whole Foods Market and Zappos, and its loyalty program, Amazon Prime, led to 2017 Prime Day sales exceeding its 2016 Black Friday and Cyber Monday sales combined.
Its weaknesses include a limited brick and mortar presence, slim margins and slow growth in China’s booming market, where it needs a patient, localized strategy.
Looking ahead, the retailer’s priorities include grocery, given its acquisition of Whole Foods, checkout-free Amazon Go stores and private label foods. Amazon seeks international growth in Australia and Latin America, and may buy Indian e-grocery company BigBasket.
Alibaba, the marketing master
Alibaba is China’s leading e-commerce company and its billionaire owner, Jack Ma, is a charismatic retail visionary with marketing prowess. The company earned $24 billion US in 2016 with its consumer-to-consumer online marketplace, Taobao (similar to eBay), and its business-to-consumer marketplace, Tmall.
This March, Alibaba had a market valuation of $309 billion US and Tmall controls 49% of China’s B2C e-commerce market. Last year, Alibaba’s annual e-commerce festival 11.11 (Singles Day) broke records, earning nearly $18 billion in sales.
Alibaba’s alliance with leading electronics retailer Suning Commerce Group represents 454 million online customers and 3500 physical stores Customers can visit Suning’s outlets as omnichannel showrooms to try products before buying them on their smartphone. Alibaba excels at early market entry, applying data to predict consumer trends and offering seamless mobile payment through Alipay.
Weaknesses include sales of counterfeit products and crowded online marketplaces, which make it harder for sellers to stand out.
While global companies like Burberry, Zara and Disney excel on Tmall, others have left the marketplace, including Sainsbury’s (UK), Zozotown (Japan), Asos (UK) and Coach (US). Their exit indicates marketplaces are only one channel to enter China, as some companies create their own Chinese e-commerce websites.
Looking ahead, Alibaba seeks to expand beyond China, and now hosts conferences to educate U.S. and Canadian businesses on how to sell to Chinese consumers using its platforms.
JD.com, the powerful challenger
In China, JD.com enjoys strong brand recognition, product quality and assortment variety, which have created momentum, as JD.com has grown to nearly 34% market share. This March, Beijing-based JD.com had a market valuation of $309 billion US and its 2016 revenue totaled $39 billion. Last year it had 226 million users -- half the number for Alibaba, yet growing.
JD.com partnered with Tencent, a mammoth Chinese internet company, with over 900 million users combined in popular social media platforms QQ and WeChat. To reach new customers, JD.com also teamed up with Walmart and global luxury fashion site Farfetch.
For convenience and innovation, JD.com integrates mobile payment methods JD Pay and WeChat Pay, and it uses drones to deliver orders to shoppers in rural China.
However, JD.com faces challenges with fast deliveries to rural customers. That’s why JD.com is investing in its own logistics network, including warehouses and delivery, to get products to customers faster.
Overall, Amazon, Alibaba and JD.com have conditioned consumers to expect seamless, personalized online shopping, extensive assortments and fast delivery. Their customer-centric technologies and strategic partnerships have reinvented global omnichannel retail. Now sellers must deeply understand their audience and adapt their strategy to align with these online marketplaces, especially for successful holiday sales.
Franklin Chu is the executive director of Azoya USA.