Alibaba and Amazon: The 2 new large retailers
Written by Alfonso Elizondo
Information and analytics are essential for both Alibaba and Amazon, although they are used in different ways: while Amazon uses their data to refine their product and service offerings based on consumer buying patterns, and helps to share data with sellers to help them list the right products, set competitive prices and manage inventory, Alibaba provides a comprehensive set of consumer behavior data that allows merchants to improve their Marketing ROI and increase the conversion rate in their digital storefronts.
Although data and analytics are crucial for both Amazon and Alibaba, they are used in very different ways. While Amazon uses them to refine their product and service offerings based on consumer buying patterns, Alibaba does not carry inventories or buy or sell merchandise, but operates as a virtual shopping mall, providing wholesalers and retailers with platforms that connect buyers and sellers. In this market model, ‘the brands’ own their relationship with customers and create appropriate ‘online’ experiences for their individual brands.
Alibaba offers tools and services to help brands and small businesses navigate the world of e-commerce and connect directly with consumers through games, news, videos, live talk shows, celebrity and online community events because consumers go to these sites for entertainment and to explore new trends as well as to shop. Alibaba combines its e-commerce markets, such as Taobao and Tmail, with digital marketing, payments and logistics services.
This is the case of Unilever China, which is an example of the great power of Alibaba that sellers can take advantage of, such as when the company used a live video broadcast to promote their shampoos and their soaps, as well as a technology that allows sellers to distinguish regular buyers from new ones, displaying customized shopping pages when consumers visit the company’s online stores. As a result, with the use of Alibaba technologies, Uniliver managed to increase by 26% the average time that buyers spent on their purchases of virtual goods.
For example, the data may reveal that a seller’s most valuable customers visit the website after regular work time, so a company may have a greater impact at night than during the day. Alibaba can provide these analytics due to the large amount of data it extracts from its enormous ecosystem. As consumers move easily through its various sites, Alibaba collects information on their buying habits, digital media consumption, logistics needs, payment and credit history, search preferences, social networks and internet interests in order to better understand their behavior and needs, in addition to the ID to link consumer data on different sites.
Based on the detailed data of nearly 500 million users per month, Alibaba has identified 8,000 different consumer profiles, so that sellers can focus on their main customers with extraordinary precision and can increase the effectiveness of their consumer engagement efforts.
Alibaba also uses this information to provide a fully customized shopping experience for the consumer to a degree that has not yet been seen in the West. So Amazon offers product suggestions based on consumer searches or purchase history, while Alibaba can suggest new brands, promotions or content that consumers did not even know existed. Neither in the US nor in Europe are there companies that have raised data analysis and artificial intelligence to the level of Alibaba.
Currently, retailers in China and the West face the same challenge of trying to find continuous and profitable economic growth, since many of the expensive stores with large cash holdings and department stores are losing customers and profits because of online ‘sales,’ and to achieve that growth they have to expand into offline, especially in urban areas.
The solution for Chinese and Western retailers has been to develop an integrated ‘omnichannel’ model that takes advantage of strengths both online and offline provides a perfect and compelling customer experience, in addition to increasing efficiency in inventory management, product selection and logistics. In this new reality, the distinction between online and offline commerce disappears and the focus becomes the way consumers think and behave in all channels. This will determine the way in which the new seller conducts his business.
The customer will be targeted through customized content, by developing capacities in ‘marketing’, innovation and logistics to adapt to the constantly evolving needs of customers, creating a new kind of retail trade.
Addendum: The incredible thing about this new and disconcerting digital market in China is that it has a great advantage over Western markets, and according to the current global scenario, that advantage is unbeatable.