Alibaba Vs Amazon

Alibaba vs Amazon

Alibaba and Amazon are both key Players in the e-commerce market. Alibaba is a Chinese based and also the biggest e-Commerce company in the world (Solon, 2014). This retailer giant was formed in 1999 by Jack Ma. Alibaba’s three lines of business are Alibaba.com, Taobao and Tmail (Solon, 2014). With Alibaba.com (B2B -buyer to buyer), Tmall (B2C-buyer to customer) and Taboao (C2C-customer to customer) Alibaba controls the China’s e-commerce market (Q.Zhu,2013). “Alibaba remains dominant in C2C, B2C, and B2B segments” (Cho, 2014). Also, Alibaba runs AliPay the China’s biggest payment company and Alibaba cloud (Cho, 2014).On the other hand Amazon is an American based multinational e-commerce company, found in 1995 by Jeff Bezos (D'Onfro, 2014). Before Amazon was an ebook store with time the company diversified into an online store that sells from books to almost anything (Investopedia, 2015). Amazon operates in b B2B and B2C business areas. The three main amazon businesses are, the online retail, internet services and kindle ecosystem (Noren, 2013).

Depend on factors such as size and the amount of the e buyers and the sellers, the entry and exit barriers, the market can be classified as Perfect competition, Monopoly, Monopolistic competition or Oligopoly (Lipczynski, Wilson & Goddard, 2013). The common market structure for the two above two companies are B2B and B2C.

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Figure1.1 China B2B e-commerce market revenue share in Q1 2015

CIW team, 2015, Retrieved December 10, 2015 from http://www.chinainternetwatch.com/13352/b2b-q1-2015/

According to the figure 1.1 even though, the B2B market in China has reduced (Team, 2015) and “Cross-channel collaborations have become new means for B2B e-commerce platforms to enhance the competitiveness” (Team, 2015). But still Alibaba is the key player in the B2B market with 44.13% market share (Team, 2015). The top three B2B

companies in the world are, Alibaba, manta and indiamart (Abedi, 2015).  Alibaba(B2B) provides services to venders from 240 nations and 18 billion purchasers (blurGroup, 2014). According to the three firms concentration ratio the B2B market structure in China is 53.68% that means its moving toward an Oligopoly market.

On the other hand, Amazon’s Vice CEO sates that the Amazon launched a new business called “Amazon Business” to compete in the B2B market (Shandrow, 2015). CEO of amazon state the new Amazon business will offer more products than their previous B2B business (Amazon Supply). The U.S B2B market worth $7.2 trillion (O'Connor, 2015).In the future Amazon might expand B2B market in other countries (Kramer, 2015). According to this Amazon B2B market is an oligopoly.

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Figure 1.2 China’s e-tailing marketplace, 2011,The Economist, Retrieved December 10,2015  http://www.economist.com/news/briefing/21573980-alibaba-trailblazing-chinese-internet-giant-will-soon-go-public-worlds-greatest-bazaar

The next business area that Alibaba operates is B2C (Tmall). As in the figure 1.2 Tmall owns 51% of shares in the China’s B2C market. Therefore, its the largest B2C Company in China with the highest market power.

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Figure 1.3 chineses online retailer’s sales as a percentage of total B2c retail e-commerce     sales,Q1 2014 Cho, A. (2014). Alibaba IPO to provide investors an opportunity for long term growth.. Amigobulls : Technology Stock Analysis. Retrieved 15 December 2015, from

http://amigobulls.com/articles/alibaba-will-outrun-amazon-e-commerce race?wl=true&utm_expid=70302929-4.UO8Y44i6TkegY3FTkrS5Mw.1&utm_referrer=https%3A%2F%2Fwww.google.co.uk

Figure 1.3 shows that Tmall has 10 major competitors (Cho, 2014). In this case the B2C market five firm concentration is around 82.5%. Within the Q3 2015 the B2C market in china was around US$78.58 billion and in Q3 2015 Tmall sales income was US$14.25 million(Wang, 2015).With following information it is clear that B2C business market structure in China  is  moving towards the Monopoly.

Figure 1.4 Online retailer sale of four major retailers in USA Gesenhues, A. (2014). Apple Beats Staples: Ranks No. 2 On Internet Retailer's List Of E-Commerce Sales Leaders. Marketing Land. Retrieved 11 December 2015, from http://marketingland.com/apple-takes-2-position-internet-retailers-list-e-commerce-sales-leaders-82991

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             Figure 1.5 online retailer shares %

Figure 1.4 shows the annual sales of retail firms in USA (B2B). Figure 1.5 shows the market share for the each competitor in online retailer market,with 91% concentration the B2B market is moving towards the monopoly.

Figure 1.6 shows in 2014 Amazon tablet market share was recorded as 2.3%, other competitors such as Apple 28.1%, Samsung 14.5% and Lenovo 4.8% (Cook, 2015). Which gives the four market concentration of 49.7% which is oligopoly.

Company              Market share[pic 5]

Apple                      28.1%[pic 6]

Samsung                14.5%

Lenovo                     4.8%

Amazon                    2.3%

Figure 1.6  tablet market in 2014

Q2 in 2015 the Amazon beat the Walmart by 20% increase in the revenue,£92 million of net income and 19% of share (Los Angeles times, 2015). In 2013 Amazon became the largest advertise spender on google (Peterson, 2014). This might create a barrier for other firms to enter and compete with amazon.

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