Many have asked me that among all the Chinese e-commerce companies, who is more like the Amazon(NASDAQ:AMZN) of China? On top of my head, there are four candidates. Let’s take a look.
1. Alibaba Group——Looks in No Way Like Amazon
Background: Founded in 1999, Alibaba starting from cross-boarder B2B business. In 2003, it introduced C2C store Taobao and Alipay, a online payment tool like Paypal. In 2005, it merged with Yahoo China and entered online searching business. In 2008, it introduced Taobao Mall, a B2C online shop. One year later, Alibaba Cloud Computing Company was established. In 2011, Taobao.com was separated into three different companies, Taobao C2C, Taobao Mall and Etao. In the past 11 years, Alibaba Group has been in the e-commerce field and managed to construct a full e-commerce industry chain, which covers B2B, B2C, C2C, payment processing, cloud computing, group-purchasing and even finance.
As the biggest Chinese e-commerce giant, Alibaba looks in no way like Amazon. the company focuses on e-commerce and tries to become China’s most popular e-commerce service provider. Its ambition can be seen in the acquisition of Koubei, the launch of etao , the establishment of Alibaba Finance and its huge investment in establish warehousings.
In comparison, Amazon is an IT company that is client-oriented. Its did not limited its business within the e-commerce field. So it enter any markets as long as there is a user demand.
Similarities between Alibaba Group and Amazon are: Both have introduced B2C open platforms and third-party ISV (independent software vendor) platforms, and offered services in cloud computing, payment tools and group purchasing.
Their differences are: 1) Amazon sells products made by itself. But Alibaba only run the platform and does not sell products of its own. 2) Amazon has a super logistics system and IT cloud computing capability, whereas Alibaba is still planning on its logistics system and its cloud computing service is very limited. 3) Amazon has made impressive achievement in services like electronic reader (kindle), music shop and stream media, but Alibaba is still focusing on e-commerce.
2. Jingdong Mall-Most potential to Become the Amazon of China
Background: Jingdong Mall positions itself as B2C platform after entering the e-commerce field and has been focusing on 3C and home electric appliances. Since 2008, Jingdong gradually added household items to its shelves. In 2010, it started selling books on its websites. Unlike Alibaba, Jingdong spent huge amount of money building the logistics system from the very beginning. By the end of 2010, Jingdong Mall started to introduce a third-party open platform (a combined business model with B2C). By July 2011, there have been over 3,500 brands on Jingdong Mall’s brand open platform, with monthly sales revenue of RMB 150 million. Jingdong said it will separate its logistics business in January next year and let it run completely independently, meaning that Jingdong will open its logistics system. Earlier this month, the company was reported to plan the largest-ever IPO financing for an Internet firm, in which it hopes to raise US$4-5 billion.
If there has to be a China’s Amazon, Jingdong Mall will have the best chance to be selected. Making a comparison between the two, you will find that even though Jingdong Mall sold different things from Amazon did (one sold books and the other sold 3C products), it stepped on a very similar track to Amazon in the early stage—-continuously expanding its own product lines, investing in establishing logistics systems and opening its own platforms to third parties.
But investors also need to be aware that Jingdong Mall is much less in business scale than Amazon and is currently faced with severe challenges. It is still unclear whether it will follow Amazon’s track.
1) Jingdong Mall’s IT system faces severe challenges. It is reported that Jingdong’s information management system was developed by the company itself in 2008. The system’s handling capacity is capped at 100,000 orders every day. Now Jingdong Mall has a daily order record of 260,000. Its IT system is facing severe challenges. In addition, Jingdong Mall has no ability to provide cloud services.
2) Jingdong Mall’s logistics system needs upgrades. Although an initial nationwide layout is completed, the company’s warehousing and logistics are relatively poor, and are seriously impeding stable development of business and improvement consumers’ experience. Jingdong Mall needs large amount of cash and time to build an adequate logistics system.
3) Jingdong Mall’s business layout is uncertain. It is questionable that Jingdong Mall, like Amazon, will continuously expand its business and introduce electronic reader, digital shop, stream media and other services. It was reported that Jingdong Mall has plans to develop its own product. But it will not be hardware, but crops like rice (Jingdong Rice).
3. Dangdang-A Failed Copycat of Amazon.
Background: Established in 1997, Dangdang (NASDAQ: DANG) aimed to become “the largest online Chinese book store in the world.”Afterwards, it dived into the field of online books and competed with Joyo Amazon, a Chinese subsidiarily of Amazon. In 2005, it started to expand into other products categories. In 2006, the expansion sped up after the company completed financing from venture capitals. But it was not until 2008 that Dangdang expand to household items. In 2009, Dangdang initiated a plan on B2C platform to attract third-party businesses to sell products. In 2010, the company went public, after which it tried to increase sales volume by expanding its product lines into apparels and fashions.
Dangdang is among the earliest domestic e-commerce websites that wants to be the Amazon in China. It even introduced itself as the Amazon of China during its IPO in 2010. But I think that Dangdang can be regarded as a typical failed copycat of Amazon.
Book, for Amazon, is just a basic product. Starting with books, Amazon quickly started a series of expansio. But selling books online is the main business of Dangdang. By the second quarter of 2011, publications (books and audio products) still accounted for 75.8% of Dangdang’s total revenue.To improve user experience, Amazon invested a huge amount of money building logistics and IT systems. Dangdang currently leases warehouses in 6 cities.
Based on books and other publications, Amazon introduced mobile terminal Kindle, in an attempt to deliver digital contents to the hands of consumers as fast as possible. It, in the meantime, established an independent ecosystem around Kindle: a content platform, a publishing platform, an advertising platform and a product platform. But up till now, Dangdang has achieved nothing in the business of digital publications.
In sum, Dangdang has advantages in selling books online in China. Facing with fierce competition, Dangdang began to expand into other product categories to increase revenue. But the company does not have any advantage in logistics system and other services. As for the cloud computing, application platform, mobile terminal and other services that has brough major revenue for Amazon, Dangdang not even has a plan.
4. Joyo Amazon–A Fake Amazon of China
Background: In 2004, Amazon acquired Joyo, an Chinese e-commerce company. But in the next 7 years, Joyo Amazon was slow in growth, giving up the market share to the late comers such as Taobao Mall, Jingdong Mall and other competitors.
As the Chinese subsidinary, Joyo Amazon should in nature be the Amazon of China. But unforturally is is not the case.
Joyo Amazon’s slow growth was mainly due to the low priority that China lies in Amazon’s global strategy (In Amazon’s global strategy, North America ranks No. 1. Second is Europe. Asia is the third. Among Asian countries, the first is Japan and the second are India and China).
Slow expansion of product lines and stiff domestic marketing tactics are also parts of the reason. It is reported that even though Amazon acquired Joyo in 2004, it did not allow Joyo Amazon to use its IT system until 2009. In 2010, Joyo Amazon invested a lot of money in building a logistics system and, in July 2011, officially introduced services such as “I want to open a store” and “Amazon Logistics.” It is worth noting that Amazon introduced similar services in America as early as 2002.
Generally speaking, although Joyo Amazon is Amazon’s subsidiary, its development is way behind. Compared with that of other competitors, Joyo Amazon’s IT system and logistics have advantages. But in addition to this, it barely has any other advantage.
Also, it is still unknown when mature services of Amazon, like Kindle, music store and cloud computation, will enter the Chinese market and be offered through Joyo Amazon’s channel.
The story was first published at iMeigu.com in Chinese by Frank Jiang. Translated and edited by iChinastock.com
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