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Euromonitor International is pleased to present an interview with Jim Tompkins, CEO, and Michael Zakkour, Vice President – China/APAC Practice, Global e-commerce Strategy Practice, of Tompkins International. The conversation focuses on Amazon, Alibaba and how the companies compare on an international stage.
Jim: They successfully follow the three mandates for today’s businesses—be fast, be customer centric, and be collaborative.
Michael: E-commerce is evolving into cross-border commerce. It is the basis of “Globalization 2.0”. If Globalization 2.0 had two babies, they would be named Jeff Bezos and Jack Ma. Ultimately, their businesses have taken on the task of supply chain sophistication and technological aggregation which has led them to dominate retail in their domestic markets and has set the foundation for their battle in emerging markets.
Michael: Both companies essentially have the same two goals. The first is to obtain two billion customers. The second is to completely transform the retail experience. Their approach, however, is different. Alibaba currently serves 450 million in China, but they want to add 400-500 million rural Chinese in the next 5-7 years and expand to the rest of Asia in the process. It trusts that China will be one of the major hubs for supply chain development, manufacturing and consumer spending for the foreseeable future. They can then serve countries that have poor manufacturing bases like they do for Russia with AliExpress. Amazon, on the other hand, uses a multi-domestic model, where it goes market by market and expands in a similar manner to which it did at home. You have seen it start in the US, and now it has regional headquarters in the UK, Germany, and Japan.
Jim: It’s important to realize that there are two stages of the eCommerce process. First, there is pre-click competition. This is most of the path to purchase from desire to transaction, and the bulk of competitive energy should be spent here. However, logistics as many know it now is post-click. It happens after you buy something online. This is the sending of the product to the buyer, and this should be more collaborative. The MonarchFx Alliance is an excellent illustration of such a collaborative model.
Michael: For both of them the supply chain is now a primary business driver, not just an enabler. They’ve digitized go-to-market strategies for any would be retailer by offering 3rd party marketplaces and are monetizing the process at international scale.
Jim: No, because that was part of the culture they were created in. They didn’t create Alipay because they wanted to. They did it because they needed to in order to run a successful online shop in a country that didn’t trust online payments. What you are looking for is efficiency. Let’s say there are four components to logistics buildings: a distribution centre, fulfillment centre, return centre, and a liquidation centre. The more of these you can collocate into the same building, the better. Doing all this with merchandize that you don’t own is even more efficient and therefore better!
Michael: I would say that Alibaba does stand in contrast to Amazon for being a pure marketplace. Amazon owns the data of its customers. This is why some brands like Nike will never sell on it. Because Alibaba doesn’t compete against its marketplace sellers with its own retail arm, it can act more legitimately as a partner and not a pure force of change.
Jim: So far, Amazon is safe in the US and Alibaba is safe in China. In the US Alibaba experimented with 11Main but for now, they are focused on helping US businesses sell globally. They will likely circle back to a US marketplace in the future.
Michael: On the other hand, while Amazon.cn is minimal, we have seen a massive increase in Chinese consumers buying on Amazon.com and Chinese companies selling on Amazon. They are buying health care, food and beverages, baby and child products, and quality fashion. These are items they want to feel safe about. Amazon is using private label in China similar to how it is in US, moving into high-interest areas. I went through websites and found category development that matched Tmall’s top selling items, so while it may be fighting an uphill battle, Amazon is still fighting.