International

Amazon China Takes On Alibaba

Alibaba will have a record-breaking IPO next week, but it's Amazon that owns the future of China's $400 billion online shopping industry, argues Peter Fuhrman, CEO of investment bank China First Capital.

While Alibaba is now a $6 billion company and three-fourths all online shopping in China goes through Alibaba's hands, the company doesn't sell any merchandise of its own, but serves as a marketplace for an estimated 8 million small merchants, whose products can be of questionable quality and whose delivery and customer service are often shoddy at best, Fuhrman says.

In contrast, Amazon China has better customer service, delivery, product quality even price when compared to Alibaba's towering Taobao business. Amazon has quietly invested in warehouses in China, as well as its own next-day delivery service that lets customers pay COD and handles returns.

As Chinese customers become richer and more discriminating, they'll prefer the better service that Amazon China provides -- and, increasingly, lower prices too, thanks to Amazons ability to extract lower prices and better payment terms from its suppliers.

What does Taobao still do better than Amazon China? Its website seems a bit easier for Chinese to navigate than Amazon China's, which looks and acts a lot like the U.S. Amazon website. Amazon China is also probably not making money, while Alibaba had net income of $1.3 billion in the last quarter of 2013.

But Fuhrman points to the fact that the most successful traditional retailers in China are now mainly foreign-owned and managed. Zara, H&M and Sephora are all thriving by focusing on good customer service, no-questions-asked returns, competitive prices and great merchandising. That could be decisive for Amazon as well, Fuhrman suggests.

 

 

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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