Amazon and Alibaba are both dominating the e-commerce market. Based on gross merchandise value or GMV, a metric used to compare online stores’ total value of all items sold, Alibaba ranks first with a GMV of $768 billion, while Amazon comes second with a GMV of $239 billion.
By definition, electronic commerce or e-commerce is the buying and selling of goods using the internet. People prefer shopping online because of the convenience and efficiency it provides. Therefore, e-commerce sales will continue to grow.
Amazon and Alibaba continue to expand and use innovation to grow their business.
Let’s take a look at their respective business model:
Amazon’s business model
Jeff Bezos’ Amazon sells products directly. Through Amazon’s online store, consumers are able to purchase products, which are offered with a small markup. The store’s inventory is kept in the company’s large warehouses.
Apart from selling directly, Amazon has a platform for other retailers to sell products to buyers. The company does not charge its partner retailers to list their items, but it takes a portion of the sales as commission.
Amazon also has a paid service called Amazon Prime. This gives Amazon shoppers a variety of perks such as fast and free delivery, exclusive deals and discounts, and access to Prime Video, Prime Music, and Prime Photos.
Alibaba business model
Alibaba serves as a middleman between buyers and sellers. The buying and selling happen through Alibaba’s networks of websites which include Taobao and Tmall. In addition to its e-commerce sites, Jack Ma’s Alibaba has also developed its own online payment platform known as Alipay. This PayPal-like payment platform protects buyers in the event sellers are unable or refuse to deliver goods sold.
Alibaba has also funded other leading e-commerce sites to expand its presence globally. In April 2016, the company has bought a controlling stake in Lazada to support its expansion in Southeast Asia. At present, Alibaba owns more than 90 percent of Lazada. It has also invested in India’s e-commerce payment system and digital wallet, Paytm.