How does the omni-channel strategy is going to change e-commerce ?
Amazon is the reference in the Western world when it comes to buy online and Alibaba is the giant Chinese of the e-commerce, totally unknown when you are not from China. When you know that Amazon’s revenues are 54.8 billion euros and Alibaba’s one are 6.2 billion euros, it’s not even close !
However, Alibaba has a different pattern. Amazon’s revenues come from the fact they have ownership of inventory. They stock in their distribution centers and fulfill the order. Alibaba is entirely different. They only connect buyers and sellers within a community on there e-commerce platform. So maybe Amazon’s revenues are way bigger but the total transaction of the site is far from reaching Alibaba’s one at 183 billion euros last year (2.5 bigger than Amazon’s). Which makes the Chinese hugely profitable and its IPO should be one of the biggest in history.
Amazon is specially good thanks to its omni-channel logistics. It has stolen market share to regular retailers thanks to that advantage and is becoming more powerful than ever in Western countries. It now competes perfectly against usual retailers. Just as Alibaba which is competing pretty well especially in big city. In second and third tiers cities, Chinese retail sector is way behind and e-commerce has a bright future.
To prevent from being overwhelmed, Alibaba bought equity stake last March in one of China’s leading department store operators, Intime, in order to develop a new « offline-to-online » (O2O). This 510 million euros transaction allowed them to have access to Intime’s store inventory, increase its international brands product’s offer and use their store as a hub for on-line orders. Alibaba usually delivers within 3 days but with this opportunity, they should be able to do it more quickly.
This is also a good way for partnership and allows customers to go directly to the store pick up what they have ordered. For example, last year, a Tawainese chain with 2,900 stores gave the ability to buyers to get their Alibaba’s purchase all over the country directly in their store. Moreover, they are also developing agreement to acquire navigation and location-based services company. This way, they will be able to facilitate customer’s life when they want to find a restaurant, a shop or pretty much anything else !
But why Alibaba would like to help customer to buy from other retailers ?
This is where Alibaba and Amazon are absolutely not the same. They don’t monetize the same way. The giant Chinese is not looking for on-line marketing services revenues. They want to be paid to bring traffic, visibility and opportunity to sellers.
Both companies wish to expand internationally. Amazon is already pretty well implanted worldwide, it is now time for Alibaba to seek the same. They recently bought a 10% stake in Singapore Post and especially in the POPStation (Pick Own Parcel Station) of the newspaper. This infrastructure offers to customers to pick up their purchases 24/7 in a special locker after receiving a code text message which is the key to open it. It is very convenient when we know that most of deliveries are made during the day when people are working or unavailable.
Omni-channel always have been related to brick and mortar but it is now something that could be use in the e-commerce sector. Alibaba and Amazon are well placed on the competition.
Stay tuned here for our next articles about e-commerce in China!
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