Categories Analysis, Retail, Technology

How Alibaba (BABA) and Amazon (AMZN) have created ecosystems for customers

In Q4 2020, AWS reported a 28% year-over-year growth in net sales to $12.7 billion

Amazon.com Inc. (NASDAQ: AMZN) and Alibaba Group Holding (NYSE: BABA) are two giants that can stand side by side. They are both market leaders with large customer bases in the US and China. They provide various kinds of services through their different segments which make them convenient one-stop destinations for their customers.  

They both also have their fair share of controversies. Amazon has been dealing with labor issues lately while Alibaba has just been handed a $2.8 billion antitrust fine by Chinese regulators. Despite all the roadblocks that come in front of them, analysts are optimistic that both companies are on their way to drive even more growth in the foreseeable future.

Amazon and Alibaba are leaders in ecommerce who allow customers to purchase all kinds of products through their platforms and get them delivered to their doorstep. Apart from this, they offer customers a host of services across various sectors thereby creating a kind of ecosystem within themselves. Let’s take a look at how this works:

Online shopping

Amazon and Alibaba partner with large and small sellers to offer a range of products through their platforms. Alibaba’s core commerce segment includes its retail commerce operations in Chinese and international markets along with its wholesale commerce operations. The company conducts retail commerce in China through its Taobao and Tmall marketplaces and through platforms such as Lazada and AliExpress in international markets. In December 2020, Alibaba’s China retail marketplaces had 902 million mobile monthly active users.

Grocery, food delivery and pharmacy

Amazon offers grocery services through its Whole Foods and Amazon Fresh stores. In the fourth quarter of 2020, Amazon Fresh grocery stores expanded into seven new communities in the US.

Alibaba operates a grocery retail chain named Freshippo and a delivery platform called Ele.me that allows customers to order food and groceries anytime. In the third quarter of 2021, Freshippo reported double-digit same-store sales growth and as of December 31, 2020, Alibaba self-operated 246 Freshippo stores in China.

Amazon also offers a delivery service for prescription medications through Amazon Pharmacy. In 2018, the company acquired digital pharmacy PillPack to build its capabilities in this business.  

Technology

Both Amazon and Alibaba are active in the cloud computing sector with their respective services Amazon Web Services (AWS) and Alibaba Cloud. In Q4 2020, AWS reported a 28% year-over-year growth in net sales to $12.7 billion. In Q3 2021, Alibaba’s cloud computing revenue rose 50% YoY to $2.4 billion and achieved a surprise profit as well.

Entertainment

Amazon offers its customers various entertainment options through its online streaming service Amazon Prime Video, its video game streaming platform Twitch as well as its e-reader platform Kindle. Twitch is the leader in video game streaming, hosting over 90% of content in this space. Alibaba does the same through its online video platform Youku and Alibaba Pictures. In the most recent quarter, Youku witnessed a YoY growth of around 30% in its average daily subscriber base.

Logistics and payment services

Alibaba operates Cainiao Network which provides domestic and international logistics services and supply chain management solutions. The company also provide digital payment solutions to its customers through Alipay. Amazon is also building its logistics business in order to reduce its dependence on delivery services such as FedEx (NYSE: FDX) and United Parcel Service (NYSE: UPS).  

Amazon and Alibaba hold a strong position in the market and their revenue diversification across various sectors positions them well for future growth.

Click here to access the latest earnings transcripts of Amazon and Alibaba

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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