Difference Between Amazon & Alibaba’s Business Models

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Difference Between Amazon & Alibaba's Business Models 1

Ecommerce is a booming industry that people use every day to conveniently purchase goods online. As a result,   many businesses are now shifting online to take advantage of the internet and reach more customers.

When it comes to the electronic commerce market, the first thing that comes to mind is Amazon. Last year, it generated 232 billion dollars in revenue, making it the biggest eCommerce platform in the market – but others are emerging. Alibaba, for example, is a platform that dominates the Chinese market. Though Alibaba only generates almost half  the revenues of Amazon, it is still a strong competitor.

Amazon and Alibaba are two e-commerce giants that are ruling the world right now. They are competing against each other to become the global leader. Amazon was founded by Jeff Bezos in 1994, whereas Alibaba was founded in 1999 by Jack Ma.

Both have their own ecosystem or business model that provides great service to customers or merchants. However, they both operate in different environments. In this article, we are going to highlight the differences and similarities between Amazon vs Alibaba.

Table of Content

 

What is Amazon’s Business Model

 

Amazon is without a doubt the world’s biggest eCommerce company. One of the company’s main mottos and the secret to its monumental success is that it emphasizes more on consumer satisfaction rather than on competitors.

Though Amazon has different domain websites for different countries, it still allows buyers and sellers to order and ship products internationally. To understand Amazon’s business model, here are a few points:

  • Amazon sells products directly to its consumers.
  • Amazon provides Amazon Marketplace, a service to third-party sellers to list their products and sell them. More than 50% of all Amazon sales come from third-party sellers.
  • It allows third-party sellers two fulfillment options: Amazon FBM- to fulfill the purchases made by consumers by themselves. Amazon FBA- purchases are fulfilled by Amazon along with other services including, customer service, returns, etc.
  • It provides Amazon Prime service to its customers allowing them the same day shipping or two days delivery of products. It conducts Amazon Prime day every year that gives special offers to all the subscribers. Amazon Prime members have access to streaming media such as movies, music, TV shows, etc. In 2019, the number of Amazon prime users was 103 million.

 

What is Alibaba’s Business Model

 

Alibaba is one of the largest eCommerce retailers in the world and dominates the Chinese market. It is currently operating in more than 200 countries, making it one of the largest online business platforms. Alibaba dominates 80% of online purchases in China.

With eCommerce, Alibaba has other products which are online money transfer, online auction hosting, and mobile commerce. Alibaba also has extensive online platforms that connect various types of buyers and sellers acting as middlemen such as Alibaba, Taobao, and Tmall.

Alibaba also provides Business to business (B2B) service, connecting manufacturers to buyers from different parts of the world. For example, merchants from countries like India, Pakistan, China, the United States, and Thailand can list their products free on the platform. There is also an option to get better exposure on the platform by paying a fee.

Taobao provides business to consumer (B2C) and consumer to consumer (C2C) services like Amazon and eBay. The platform emerged as the largest eCommerce platform in China with the 10th most visited website in the world. Taobao has allowed many small businesses to bloom by using their platform.

The site has a unique rating system that helps buyers to choose from various merchants. Buyers can connect with manufacturers through Alibaba Group’s messenger software and it provides advertising options for manufacturers to make their products visible on the site.

Small offers a wide variety of branded products to the middle-class section of China. It is focused on larger brands like Nike and Apple, and merchants have to pay an annual fee and commissions on each transaction. It also provides analytics tools to the sellers that give insights to metrics like the number of page views, number of visitors, and customer ratings.

Difference Between Amazon & Alibaba's Business Models 2

Similarities between Amazon and Alibaba

 

  • Both Amazon and Alibaba are eCommerce platforms and are operating a business on a large scale.
  • Both have emerged as global leaders in the eCommerce industry.
  • Amazon and Alibaba allow third-party sellers to sell their products on the platforms. There is some fee that sellers have to pay for these platforms.

 

Differences between Amazon and Alibaba

 

  • Amazon ranks 9th for the most visited website in the world and Alibaba’s Taobao ranks 10th most visited website.
  • Amazon provides streaming media services to its prime subscribers like music, movies, and TV series. Alibaba does not provide any services like that to its customers.
  • Amazon provides business to consumer (B2C) service. Alibaba provides business to consumer (B2C), business to business (B2B), and consumer to consumer (C2C) services.
  • Amazon offers merchants FBA, fulfillment by Amazon service through which merchants send their products to Amazon inventory and store them in their warehouse. Whenever an order is made, Amazon packs and ships the products that provide customer service and returns. But, Alibaba does not provide such services.
  • Amazon is housed under one platform while Alibaba operates through three main businesses: Alibaba, Taobao, and Tmall.
  • Amazon’s business model is such that the company sells products directly to customers. Third-Party sellers list their items on the website paying fee for the service. Customers buy products from the platform. Whereas Alibaba has different platforms that sell products and acts as a middleman between buyers and manufacturers.
  • Amazon offers PPC advertising to sellers to advertise their products. Alibaba charges fees for the products to rank higher on its search results.

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