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Alibaba and Amazon’s International Marketplace

Alibaba and Amazon’s International Marketplace

If you live in the United States like me, you probably take commercial holidays for granted. And we sure do have a lot of them. Obviously, the heavyweight champ in this regard is Black Friday. According to CNBC, between Black Friday and Cyber Monday, a combined $14 billion was spent in physical stores and online retailers. Similarly, ecommerce giant Amazon has its own shopping holiday, Prime Day. In 2018, Prime Day’s sales totaled to a little over $4 billion.

While these numbers are impressive, let’s take a look at the numbers Chinese online retailer Alibaba was able to put up during China’s own commercial holiday, Singles’ Day. A little background on Singles’ Day: dreamt up by Chinese college students in the early 90s as an informal holiday celebrating the joys of being single, the holiday has since become the country’s premier commercial holiday. On 11/11, 2018 (Cleverly, Singles’ Day occurs every year on 11/11 for the date’s repeated use of the numeral 1 and its resemblance to the Chinese expression for “bare branches”), Alibaba brought in $30.8 billion in a 24-hour period. This amounts to roughly $20 million a minute.

So who is Alibaba? How are they making so much money? More importantly, how does that affect us as Amazon shoppers?

Founded on April 4th, 1999 by Chinese teacher Jack Ma, Alibaba is China’s number one online retailer. The website began as a business-to-business retailer, serving to facilitate transactions and sales between businesses and manufacturers. Since then, Alibaba has added other websites to its repertoire in order to create a more robust platform with wider appeal. These sites include Taobao, Tmal, AliExpress and 1688.

With their expanding family of websites and services, Alibaba ensured they had all bases of the ecommerce game covered. On top of business-to-business, websites like AliExpress allows manufacturers to sell directly to users and for users to sell directly to one another a la Ebay, or the modern Amazon Marketplace.

You can’t make it two steps into any research about the history of Amazon without hearing about its “humble beginnings” as an online book retailer (as if Bezos didn’t always have his sights set on anything less than absolute global domination). And as the story goes, Amazon began to grow, foregoing their books-only model in 1998 to become the world’s premier online retailer. For a while, Amazon was content to operate as something resembling a modern Sears catalog.

 

Amazon’s move to expand its inventory beyond books changed the ecommerce playing field forever. They would purchase items from manufacturers, store those items in their distribution centers, and then sell them to the consumer. This changed in 2006 when Amazon began their Fulfilled by Amazon program, allowing third-party sellers to sell their goods out of Amazon’s fulfillment centers.

Amazon remained the giant of online retail worldwide but its restrained policies left an opening for another online retailer to gain some serious ground. For all the progress that Amazon had made since its “humble beginnings” as an online book retailer, it still skirted around the issue of international shipping. Sellers on Amazon were restricted to conducting business within their country's borders.

Alibaba saw their opening. In 2010, they launched AliExpress, which allowed exporters and manufacturers in China to transact directly with customers from around the world. International AliBaba shoppers might have had to deal with shipping times a little longer than they were accustomed to from shopping on Amazon, but buying directly from manufacturers in China had the benefit of lower prices. Because Chinese business standards are a little looser than what we’ve come to expect in the States, prices are inherently lower, and with the option of buying directly from the manufacturer, AliExpress started to look like a really sweet deal.

With this momentum, Alibaba was able to raise $21.8 billion in its initial stock opening in 2014. Coincidentally (or not), Amazon began to allow sellers to ship internationally that same year. With AliExpress offering customers items at prices that were lower than Amazon could compete with within the constraints of their restrictive business model, Amazon opened their market to stay competitive. At least on paper, it looked like they couldn’t lose. And to an extent, they were right: since they opened up the market to international sellers, Amazon has continued to grow and be a major player in the global market.

However, there are numerous consequences to this shift in business philosophy. The international marketplace has changed the playing field for buyers and sellers on Amazon. You can read more about the differences that these changes have made here.

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