Online Trade: Alibaba and “The Amazon Effect”

There are three factors that determine the growth of the online trade sector:

  • The financial transactions are carried out more and more through the digital with the mobile phone;
  • The spending capacity is increasing;
  • You use more and more Internet to make purchases of any kind.

Having said that, there are two actors who are playing the screenplay: Jeff Bezos and Jack Ma.

Each with their own personal stories, from countries of origin and different cultures, however both very determined to grow their own “business idea”, even if, as we will see, with different strategies. We have already told their adventures, but now we will discover how their strategic visions translate into different corporate choices.

We are talking about two behemoths that together capitalize over a trillion dollars (about half of Italy’s gross domestic product). Amazon is present with its platform in North America, Europe, India and lately is making major investments in Australia and Singapore; In India and Australia we also find the presence of Alibaba, which has a predominant and undisputed position in China.

The first observation is that until now they have avoided competing with each other, concentrating on different geographic areas of interest. Will this also be the case for the future? It seems no, in fact, in the markets of Australia, Singapore and India are both presenting. We start from the region that has the largest growth rate, India. The Business Bank Morgan Stanley expects that online trade will grow from the current value of 15 billion dollars up to 200 billion dollars in 2026. The two multinationals have adopted different approaches to establish themselves in the Indian market: While Amazon focuses on the management of new brands and the strengthening of the Platform with Investment plan recently announced of 3 billion dollars, Alibaba Invested in payment systems through PAYTM, managing to diversify with other investments in the entertainment, media, food, logistics, games, Web services and on-demand delivery – all the markets represented in the WeChat app Tencentr. How this huge market will be divided we will find out in a few years.

Australia is particularly interesting because despite 88% of the population (25 million inhabitants) uses the Internet, but only 7% of the total of their purchases is made via online. There is still a lot of room for growth considering that this percentage in America is almost 10% and in China we are already at a value of 20%. Reaching a leading position in this part of the world means that every half-point earned is worth in terms of turnover an increase of 1.5 billion dollars.

Singapore, despite being a small region of 6 million inhabitants (just under Switzerland), has a per capita income among the highest in the world and 82% of the population uses the Internet. An interesting “laboratory” where the two giants of e-commerce are already challenging, from the latest data it would seem that Alibaba has the best at least in terms of page views.

Investors in the stock market are certainly not missing in this last year, as the chart testifies:

The economic news related to the two companies are increasingly frequent. The latest concerns the interest, which translated into the thought of Jeff Bezos means investment, in the banking sector: Amazon will issue credit cards, will offer payment services and will grant funding to small businesses.

This news is very worrying about the banks. This concern could be justified, given that the bank Goldman Sachs coined the competition created by the latter as an “Amazon effect” in the online trade sector, causing such an important price reduction to reduce the Inflation rate (excluding oil prices) of 0.25%. We’ll see if these online trade giants consider financial services merely a tool to maintain the trust of their customers and consequently to collect more advertising revenue, or to become a new way of “banking”.

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