Alibaba Still Can’t Compete With Amazon
June 03, 2020
China’s eCommerce giant Alibaba is often referred to as the Amazon of China. At first glance, the comparison does not at all seem far-fetched. The two companies do indeed have similar growth trajectories and business models. Both started off as eCommerce players and evolved into huge tech companies with multiple revenue streams within a short period of time, today dominating their respective markets USA/Europe and China/Asia with a huge lead. Alibaba made headlines in the past years especially because of the overwhelming success of its Singles’ Day, which keeps breaking sales records and dwarfing comparable shopping events like Cyber Monday or Amazon’s Prime Day.
A comparison of the 2019 financial figures of the two eCommerce giants, however, reveals that in terms of company revenues, Alibaba still has a long way to go to become as big as Amazon:
In its latest financial report, the Alibaba Group announced a total revenue of US$72.0 billion for the 2019 fiscal year1. Although this corresponds to a substantial year-on-year growth of 35%, it also means that Alibaba is still far behind Amazon: With more than US$296 billion, Amazon recorded more than four times as much revenue in 2019 as its Chinese counterpart. This tendency also appears in the different revenue streams: Revenues in Alibaba’s core commerce amounted to US$61.6 billion, while Amazon recorded a core commerce revenue of US$223.0 billion. With a revenue of US$37.5 billion, Amazon’s cloud business was more than six times as strong as Alibaba’s, which came in at US$5.7 billion. The situation is very different in terms of profit, though. Given that Alibaba is a mere marketplace connecting buyers and sellers, the Chinese eCommerce giant saves a lot on logistic and staff costs compared to Amazon, which results in much greater margins. Thus, with a total of US$12.9 billion, Alibaba’s operating profit in 2019 was only US$1.2 billion below that of Amazon.
And Alibaba is still on a steep growth path. Despite – or maybe thanks to a COVID-19-affected first quarter, the “Chinese Amazon” passed the US$1 trillion threshold in gross merchandise value in the year ended March 31, a historic milestone in the company history, according to Alibaba Group’s CEO Daniel Zhang.
1: 12 months ended March 31, 2020
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