Business models: Amazon vs. Alibaba

The electronic commerce industry is noticeably gaining popularity over the years especially since majority of consumers highly prefer purchasing in the convenience of their homes with just a click away from their desired items. Both large and small companies are trying to venture into this field, fueled by the hopes of expansion and growth. In this sector, two of the most remarkable names are no doubt Amazon and Alibaba. While they have similarities with regards to the services they offer, each of them operates through widely different strategies.

For starters, Amazon is a huge retailer for used and new goods, and uses a technique of moving parts. It sells their products in a direct manner, as it displays a portion of them to for customers to choose from through their online storefront with a markup. Meanwhile, their inventory is stashed in a larger chain of storage places. Majority of consumers visit this site with the idea that items are more affordable and are made ready for purchase and delivery.

Moreover, commodities sold by other retailers are less common with a higher cost. This style is utilized by the company to avoid a hamper of operations that may impact earnings. Although it does not charge fees for its partners to list goods for sale, it keeps part of the price as commission.

Subscription is also a theme for this web shopping market, with their Amazon Prime service which allows covered clients who pay annually to guarantee a free two day shipping plus access to streaming media.

Alibaba, on the other hand, is well known in its home country, China. It functions with various types of models, but mostly resembles eBay’s strategy. It serves as an intermediary between buyers and sellers on the internet, overseeing their transaction through a network of websites. For example, it’s biggest site Taobao conducts its business without any payment for negotiations of a customer and dealer. Rather, sellers pay to level up their ranks in the site’s search engine. It also mostly caters to smaller merchants. For large ones, it has its Tmall site which offers famous brands such as Nike and Gap.

Another special feature of this firm is their online payment services, qualifying it as a competitor in the financial system. It provides interested users with Alipay to put an end to their worries over security and validity of their dealings. In addition, it now has a micro lending arm which mainly brings assistance to individual borrowers.