In 2011, Jeff Bezos was the undisputed king of ecommerce. Nobody had heard of Chinese entrepreneur Jack Ma. If you’d Googled ‘Alibaba’ that year, you’d have got the page for a Middle Eastern restaurant in Dallas, a treatise on the story of the Forty Thieves and a mobile version of solitaire. Only three of the top ten results were about the Chinese e-commerce company.
Fast forward a few years and there isn't a falafel in sight. Indeed, when Alibaba floated in 2014, it was hailed as the world’s biggest ecommerce company, valued at over $280bn – 80% more than Amazon. The crown seemed to have slipped from Bezos’s fingers.
How things can change. Since then, Amazon’s nearly doubled in value, while Alibaba has languished below its listing price. But is that just because investors are jittery about the Chinese economy? Long-term, is Ma destined to reclaim the top spot?
China in your hand
First off, a few facts. Amazon is a lot bigger than Alibaba by revenues. In the year to the end of March 2016, the Chinese firm turned over RMB100bn ($15bn or £10.5bn). Amazon’s revenues for the same period were $114bn. Alibaba handles a greater volume of transactions than Bezos’s beast, but then so apparently does Sky Bet – that doesn’t really count for much.
What Alibaba has going for it is profit ($6.6bn last year – though there is some doubt about the figures) and growth – 39% in its last quarter, compared to 28% for Amazon. China’s ecommerce market is growing faster than in the west and it isn’t riddled with entrenched incumbents. For all Bezos’s success against the likes of Wal-mart, the Arkansas giant remains a fierce competitor – Ma has no such obstacles. Given how rapidly the Chinese are entering the mobile era (skipping the desktop era in the process), it is indeed likely the market there will eventually overshadow the American market.
Whatever you can do...
That’s all very well, except Amazon doesn’t merely operate in the US – or indeed only in retail. Bezos has brought his ecommerce empire to 12 countries and created a cloud computing company, AWS, that could well become bigger than the rest of Amazon put together.
Ma hasn’t taken this lying down, of course. Alibaba’s strategic priorities are ‘globalisation, rural expansion, building a world-class cloud computing business and creating a comprehensive media and entertainment platform’ – at least three of which look suspiciously Amazon-esque.
AliCloud may be sixty times smaller than AWS, but it’s growing at 175% a year and, crucially, it’s protected by the Great Firewall – China’s refusal to allow foreign firms to dominate its internet. The room for long-term growth there is clearly vast.
Ultimately, though, it is precisely the promise of China that will probably prevent Alibaba from beating Amazon. Ma may be interested in expanding abroad, conducting the IPO in New York and recently spending $1bn on a controlling stake in south-east Asian ecommerce platform Lazada. But the risks will always be greater abroad than in China, and the rewards less. While Ma has his hands full with China, Bezos will be free to expand beyond Amazon’s developed world core business into other emerging markets, India most prominent among them.
It’s far from guaranteed, of course – Amazon’s geographical reach is still surprisingly short in emerging markets, with no dedicated site for the Arab world, Africa, south-east Asia or Spanish Latin America, and no sign of imminent expansion. But the way things are going it’s hard to bet against Bezos.
Jack Ma quick facts
Net Worth: $22.5bn (Forbes, 2015)
Founded Alibaba: 1999
You may not know: he’s 5ft tall, was once kidnapped and taken to Las Vegas and is a big fan of karaoke
Jeff Bezos quick facts
Net Worth: $46.7bn (Forbes, 2015)
Founded Amazon: 1995