Singles Day soars
In first seven minutes of 11/11, shoppers spend $1.47 billion
This is an aggressive move on Amazon’s part in its quest to become the first truly global e-commerce platform” Michael Zakkour, Tompkins International
Amazon moves in on rival Alibaba’s big day
As Alibaba’s Singles Day shopping spree unfolded on Friday, the focus was on numbers: For consumers, it was the selling price. For analysts, it was how many orders did Alibaba process and what were the total sales.
And there was a major participant to watch: Amazon Inc, America’s biggest e-commerce company and a rival to Alibaba Group Holding Ltd, and how it fares in what has become the Chinese version of “Black Friday” — the huge sales day after Thanksgiving in the US.
To jumpstart its business in the mainland, late last month Amazon launched its Prime membership program that targets Alibaba and other rivals like JD.com. According to iResearch, Amazon has less than 1.5 percent of the market, and to reach the market, it launched a store on Alibaba’s Tmall last year.
The Prime program, which will cost about 188 yuan ($27.83) for the first year in a discounted introductory promotion, will offer Chinese consumers unlimited domestic shipping and free international shipping with a minimum purchase of 200 yuan. Alibaba and JD.com Inc offer free shipping but mainly for domestic transactions.
Michael Zakkour, vicepresident of the China and Asia practice at global consultants Tompkins International, said the introduction of Prime is not just focused on competing with Alibaba, JD and others for market share.
“This is an aggressive move on Amazon’s part in its quest to become the first truly global e-commerce platform. That is where the real competition between Alibaba and Amazon lies. They both want the global consumer. They both want 2 billion customers. Amazon wants to roll out Prime globally to provide the sell from anywhere-to-anywhere platform to achieve that goal,” he said in an email.
Although both are the biggest e-commerce companies in China and the US respectively, the similarities pretty much end there as they have different business models. Amazon focuses on selling merchandise directly via an online marketplace. The Seattle-based company receives about three-quarters of its revenue from merchandise sales and the rest from providing digital content.
Hangzhou-based Alibaba acts as a middleman between online buyers and sellers and facilitates sales between the two parties through a network of websites.
Amazon has struggled in China and is looking to Prime to help it take market share from Alibaba and the others in the mainland.
“Alibaba via TMall and then JD.com essentially control consumer e-commerce traffic in China. Even if a consumer doesn’t end up buying via one of those platforms, they still check them first so Amazon isn’t the first online storefront that a consumer thinks of,” noted Ben Cavender, senior analyst at the China Market Research Group in Shanghai in an email.
Pricing will be important for Amazon Prime in China, according to Nicole Peng, research director at Shanghai-based consultancy Canalys.
“Amazon’s existing relationship with overseas sellers is a key for Amazon to provide the products at a competitive price,” she said.
Cavender said Prime and Amazon’s fate in China will come down to how successfully they are able to tie it to products that Chinese consumers are interested in buying.
“Amazon has an opportunity to offer a range of brands or products that Alibaba can’t necessarily offer simply because of Amazon’s global supply chain and strong product selection in the US, but it’s going to have to work hard to figure out which of those brands and products are potentially valuable to Chinese consumers,” he said.
Jack Ma (right) applauds as a giant screen shows Alibaba’s sales passing 10 billion yuan ($1.47 billion) within seven minutes of the start of China’s Singles Day online sale on Nov 11.