With more than $70 billion in net income and having the biggest IPO in history ($231 billion), Alibaba (Chinese online market founded by Jack Ma) has become one of the most important players in the world. Alibaba based its model on the core of China’s expansion by connecting Chinese manufacturers with overseas buyers in 1999. Since then Alibaba has grown exponentially expanding from its basic B2B business model to C2C and B2C. Now Alibaba has surpassed can be compared to Walmart and is thought to surpass it in the near future.
But where does Alibaba’s power come from?
Some people might say that it took advantage of China’s unethical and unsustainable economic model of cheap and highly polluting production but the reality is far from that. Although China’s growth was a great catalyst for the company’s expansion its core competitive advantage comes from the fact that high levels of demand growth can be matched with low levels of investment since Alibaba has nothing to do with actual manufacturing. As Jack Ma puts it; “For Walmart to grow they need to build a new warehouse, a new store, buy new trucks to transport goods, etc. If we want to grow all we have to do is put a bigger server.”
Alibaba is one of the best examples of the exponential power of the internet. Although until now they have still most of their business based in China they are looking out to new markets such as India in which they are aggressively competing against Amazon for. They have launched numerous new platforms and initiatives since then but their objective is still focused on online markets such as their $500 million acquisition of Lazada Group (“Amazon” of South East Asia) in 2016.
Will Alibaba ever be bigger than Walmart? Will it be the only one?
In my personal opinion it will and faster than we expect but it will not do it alone. Other such online markets will participate in the development of new less penetrated markets. The world still has loads of space for this type of companies to develop, nothing is set in stone yet.
Sources:
Two Years After Its Blockbuster IPO, Alibaba Ready To Take On World
http://www.alibabagroup.com/en/ir/earnings
Dear Sergio, thank you for your interesting blogpost! While I believe Alibaba could outperform Amazon, it highly depends on the strategies used by both companies and the acceptance by their customers. Next to that, I agree with you that I doubt Alibaba will be the only one. There are many opportunities in the online market, it is easy to start an online business and it is easy to replicate existing online business models. After reading your blog, I searched whether AliBaba could outperform Amazon, and some interesting articles appeared. One article describes 10 reasons why AliBaba could outperform Amazon & Ebay: http://www.forbes.com/sites/walterloeb/2014/04/11/10-reasons-why-alibaba-is-a-worldwide-leader-in-e-commerce/#273e4dd23931
How Alibaba plans to take on Amazon in India: http://www.forbes.com/sites/greatspeculations/2016/02/17/heres-how-alibaba-plans-to-take-on-amazon-in-india/#7624f58a421b
And Whether Alibaba can beat Amazon: http://www.csmonitor.com/Business/2015/0729/Alibaba-to-invest-1-billion-in-cloud-computing-Can-it-beat-Amazon
As technology keeps improving and new strategies appear, it will be interesting to see where Alibaba and Amazon will be in 1 or 2 years.