E-commerce – Chinese kingdom.

There is only one king of e-commerce.

• Amazon may have a higher market capitalisation than Alibaba but when it comes to the amount of business transacted, it is dwarfed into insignificance by its Chinese rival.
• This is important because it means that Alibaba is gathering more data which could eventually make it capable of offering a better shopping experience than Amazon.
• Whether that makes Alibaba capable of challenging Amazon in the US remains to be seen but it does raise the possibility of Alibaba giving Amazon a real run for its money elsewhere.
• The difference in the numbers is quite staggering.
• 2018 is set to be a great year for US e-commerce on Black Friday with an estimated $3.5bn of sales on this day alone (Adobe).
• Total sales are expected to be around $5.9bn on Friday and $7.8bn on Cyber Monday (Adobe).
• Amazon will take approximately half of this meaning that it should see around $1.75bn in transactions today.
• By contrast, Alibaba saw $30.8bn in transactions over its websites and services on November 11^th 2018,
• To be fair the US spending spree is now increasingly spread out over 2 or even 3 days but even adding it all up, Amazon is transacting only a small fraction of the throughput that Alibaba is experiencing.
• Part of the reason for this is the woeful state of Chinese offline retail where basic requirements such as knowing what is in stock and pricing are often haphazard and unreliable.
• This is why the Chinese have flocked online explaining why Chinese e-commerce is much more pervasive than it is in the US which has a deep and well-developed offline retail sector.
• The last 2 years have also seen Alibaba really embrace the value of the data that it is generating and while it will be some time before its algorithms are mature, this is now clearly the intent.
• By contrast, Amazon’s algorithms remain basic at best and often show me advertisements and suggestions for products that I have already purchased.
• To be fair to Amazon, this is happening with a declining degree of frequency, but it does make me concerned about the quality of Amazon’s AI.
• The net result is that Alibaba may become better at e-commerce than Amazon in the long run giving it a better long-term growth perspective when considering overseas expansion.
• Hence, I would prefer to own Alibaba over Amazon any day of the week.