Can Amazon Compete with AliExpress in China?

In the modern era, we look for convenience in everything that we do. Given this and the fact that access to the internet is almost constantly at our fingertips, it makes sense that online shopping has become as popular as it has. After all, why would you take the time to go to the store when you can get the same products online without ever leaving the comfort of your home?

It is this mindset and convenience that has led to a rise in online retailers. Some of these retailers are just the online arms of traditional brick-and-mortar stores like a clothing store using their website to enable online shopping.

However, there are also those companies whose online presence is their bread and butter. For many of us, this comes in the form of Amazon. In China, though, Amazon isn’t the biggest name in online retail. Rather, that honor goes to a service known as AliExpress. As we know, though, Amazon isn’t giving up on its dreams of expansion anytime soon.

The real question becomes, though, is can Amazon compete in the Chinese market? Do they stand a chance against the already established AliExpress? Well, those are exactly the questions we are looking to answer here and in this article, we plan to look at Amazon and AliExpress and see if Amazon can hold up in a market where AliExpress has already made its name.

This might seem pointless as most people have at least a passing experience with Amazon at this point, to get real insight into the market, we need to take a deeper look at who Amazon is and what they offer.

Amazon is actually a bit older than most of us give it credit for. In fact, Jeff Bezos started Amazon in July of 1994 when the internet was far less prevalent than it is today. The name Amazon, though, wasn’t adopted until 1995 – the site was known as Cadabra for its first year.  When it started, Amazon’s products and services weren’t as encyclopedic as they are today. Instead, the company focused itself solely as an online book retailer for the first bit of its existence. Later, though, it diversified to sell more products on its website. Lately, we have even seen the store dip outside of its online retail model and make specific home products – like the Amazon Echo.

In all fairness, though, Amazon is no longer a strictly online operation. In 2017, the company extended its reach by buying Whole Foods, increasing its influence in the traditional, brick-and-mortar sphere.

It was before that, in 2015, though, that Amazon really set itself apart in the United States and surpassed Walmart as the most valuable retailer (when measured by market capitalization). Globally, Amazon remains the third most valuable public company surpassed only by Apple and Alphabet – Google’s parent company.

An important thing to note about Amazon is that while they have third-party sellers, they also sell some of their own products. This means that there is a part of Amazon’s business model includes warehouses made for holding and shipping out products that they, as a company, sell to their customers. In fact, selling as a company was Amazon’s original business plan when they started selling books. It was upon their expansion over the last two decades that they grew to include third-party sellers.

AliExpress is a much newer service than Amazon as it was created in 2010, giving it only 8 years of experience compared to Amazon’s 24.

One crucial thing to notice is that AliExpress – unlike Amazon – is not an independent company. Rather, it is a service created by the company Alibaba, which was founded in 1999. The company is based in China and is actually one of the biggest internet companies in the world. In fact, Alibaba and AliExpress have recently started to put themselves into direct competition with companies like Amazon. As a result, AliExpress has established itself as the most visited site for e-commerce in Russia as well as being the 10th most popular site in Brazil.

The company, though, doesn’t operate in the same way that Amazon does. It started as a business-to-business ecommerce site and then expanded into business-to-consumer and consumer-to-consumer selling.

The main difference to note here is that where Amazon actually sells products, AliExpress is more accurately described as a platform for sales. It is a service that a consumer or business can use to sell an item or buy an item from another consumer or business. While Amazon does have third-party sellers, they also personally sell some of their stock – this is where the main difference in Amazon and AliExpress’ business models is highlighted. As such, it is more often directly compared to a site like Ebay in which buyers aren’t buying from the site itself but rather other users on the site.

One of the main differences that can be noted in what they sell and their prices. Of course, it should be noted, that due to the nature of these ecommerce sites, not all of their products are equally good or poor. So, we will be discussing the general nature of what they sell rather than discussing specific products and their features. After all, no matter how good the quality of the sites’ quality control is, there is bound to be something that slips through the cracks.

That being said, most users have come to expect from Amazon a certain level of quality with their products. However, as expected, better and branded products cost more than their more generic counterparts.

AliExpress, on the other hand, is more prone to sales of items that are off-brand. This is, though, a double-edged sword. On the positive side, these off-brand products are much less expensive than their branded counterparts. However, it worries some users – especially new users – about the quality of the products they are buying.

Much like Amazon, though, AliExpress has a rating system that allows consumers to praise products and sellers they like or, alternatively, warn other consumers of bad products. In addition, AliExpress offers buyer protection to their users. On each product, they hold the promise that “Returns accepted if product not as described, seller pays return shipping; or keep the product & agree refund with seller.” This protection also includes a full refund if you don’t receive your order at all.

Another thing to consider, though, is that we are specifically discussing Amazon vs AliExpress in China. As such, it needs to be taken into consideration that in China, AliExpress has an established customer base. So, the arguments that most new customers would have – such as trusting AliExpress’ services – aren’t as big an issue for the company. In fact, it is important to remember that it would be Amazon that would be more likely to try to convert customers from AliExpress to their service.

A general note, though, is that both websites are rather safe to use if you do your research. If the products have numerous good reviews, they are usually a safe bet. If the product has little to no review or poor reviews and seems a little too good to be true, it probably is. To keep you safe, though, both websites offer protection services that serve the customer well.

Being branded or not isn’t the only reason that AliExpress might be able to offer less expensive products, though. Since AliExpress offers a direct platform for business-to-consumer and business-to-business selling, it allows manufacturers to sell directly and take out the middleman that usually sells their products. As such, they can offer their products at a greatly reduced price.

One marketing tactic that many businesses use is some sort of loyalty program. These programs, as the name suggests, are used to reward customers who frequently work with a company.

For many online companies, this comes in the form of subscription services. One example of a subscription service is paying Netflix or Hulu a monthly fee and, in return, you get access to the movies and TV shows that they offer for streaming.

Amazon also uses this technique with Amazon Prime. This subscription service offers its holders a variety of benefits. Some of these benefits are listed below.

•     Free shipping
•     Access to Amazon’s streaming service
•     Access to free ebooks and audio books
•     Cash back (when using a Prime Visa Card)

Amazon even furthers the availability of their subscription service by offering such promotions as free and discounted Prime subscriptions to college students.

The choice of Amazon Prime has helped to add to Amazon’s mass appeal. After all, for frequent shoppers, the promise of free shipping and short delivery times is fantastic. While their video subscription service hasn’t reached the popularity of Netflix or even Hulu, it does offer users a wide selection of movies and even original content.

By direct comparison, this seems to give Amazon an advantage in the Chinese market. After all, AliExpress doesn’t have a subscription option at all – meaning there is no way to access even generic features of a subscription service like free shipping, much less content like video streaming and ebook content.

To be fair, though, AliExpress’ parent company, Alibaba, has released a streaming service just not under the AliExpress branch of the company. The service works with Tmall Box Office (TBO) and it is for Chinese Smart TV owners. It is made to be a Netflix equivalent for China and it offers access to both a selection of movies and TV shows as well as original content.

However, Amazon might have the edge with their Prime Video service. This is because while Alibaba’s TBO service is for Smart TVs, Prime Video isn’t limited to use on a TV. Instead, you can use it on a TV, a computer, or even on a mobile device with their app. This versatility holds an appeal in the modern world. As we discussed earlier, convenience is key in the modern age and being able to use an app on your phone or laptop is much more convenient than only having the option of sitting in front of your TV.

It is important to note, though, that TBO is a rather novel extension of Alibaba. That being said, it has the potential to grow as time goes on. For now, though, Amazon has the advantage over AliExpress with Prime services and Alibaba with an established and versatile video streaming service.

One thing that can be a huge hamper on the convenience of online shopping is how long what you buy takes to get to you. While it isn’t crucial to have a short shipping wait time for a ecommerce retailer’s consumers, it certainly helps to retain customers if they know they can buy from you and receive their package within a few days.

Amazon is rather good about this fact. As a rule of thumb, Amazon says their standard shipping is shipped out at the beginning of the next business day if the item is ordered before their daily order processing. If it isn’t, then the item may go out the day after.

The shipping for most items is the standard postal service but if the item is particularly large or heavy, it may be sent out via UPS. For most items, this will take between 2 to 5 business days with most items getting to their destination within 2 or 3 days.

With Amazon Prime, though, the shipping can be guaranteed at 2 days for free. For certain orders, you can also choose same-day delivery. With Amazon Prime Now as well as in certain zip codes, 2-hour delivery is available but this option is rather limited right now.

AliExpress, on the other hand, isn’t known for its quick shipping times. A big part of the shipping time with AliExpress is based on the method of shipping you choose when buying from them. This branch of Alibaba comes with a surprising number of options, even though some of them are limited by the country the consumer is ordering from. The options are listed on the website as follows.

•     UPS
•     FedEx
•     DHL
•     TNT
•     EMS
•     TOLL
•     E-EMS
•     EPacket
•     China Post Registered Air Mail
•     China Post Air Parcel
•     China Post Ordinary Small Packet Plus
•     HongKong Post Air Mail
•     HongKong Post Air Parcel
•     Singapore Post
•     Swiss Post
•     Sweden Post
•     Russian Air
•     Special Line-YW
•     DHL Global Mail
•     S.F. Express

Each of these choices will depict a variation in price and delivery time. The lowest delivery time that most promise, though, is 5 days with some choices promising a delivery time as late as 26 days or more if it’s the holiday seasons. Most customers, though, report having to wait anywhere from 15 to 45 days for their deliveries from AliExpress. This puts them at a much slower pace than most other online retailers.

This difference gives Amazon a slight edge on their Chinese competition. If they can promise quality products on a quick timeline, they might find more customers in the Chinese market. After all, if you have the choice to order something and get it in 5 days or 45 days, odds are you are going to choose the quicker option.

On the same strain of thought, Amazon also has the advantage that they have free shipping options. If they were to carry that opportunity over to China, they would have a definitive leg up on their competition since AliExpress offers no form of free shipping for their customers.

When taking an in-depth look into AliExpress and Amazon, we have to consider every aspect that they hold as a business. As such, it would be criminal to ignore the fact that these companies cater not only to buyers but to sellers as well.

First, let’s take a look at AliExpress. It is important to preface this section with a reminder that AliExpress’ business model depends on sellers using their service. As such, it is crucial that they offer fair and easy practices to welcome potential sellers.

The first thing to know about AliExpress is that to be a seller – whether you are a business or individual – you have to be located on mainland China. For a company that already has international holdings, this is a major drawback. It severely limits their ratio of buyers to sellers and alienates foreign sellers. However, since we are talking about the competition between Amazon and AliExpress in China specifically, this is something that is less consequential than it could be. It still, though, holds the major drawback that the products that buyers can access on AliExpress are limited.

To be fair to AliExpress, the restriction on seller’s location could potentially be lifted in the future – allowing for global sellers on a global market. For now, though, the opportunities for outside sellers is closed off. This does, on the other hand, though, offer less competition to the Chinese sellers on the market. As such, for the Chinese market, this might be seen as an advantage even if it potentially stalls AliExpress’ international expansion.

One distinct feature that AliExpress has is their aid for their sellers. They offer online training events as well as access to their learning center that offers sellers tips on gaining momentum on and getting the most out of their platform.

AliExpress also offers different membership tiers for their sellers. For a free membership, sellers are given a lower priority ranking and limited (50) product listings. However, for a fee, sellers can apply for Gold Supplier Memberships that range from a Basic Package to a Standard Package to a Premium Package.

Not only do these Gold Supplier Memberships offer extensions such as unlimited product listings and increasing priority rankings as you increase your tier level but they add certain features as well. For example, they each offer a unique number of product showcases, a verified icon, a customized website, and the highest tier – the Premium Package – even offers personalized customer service.

Selling on AliExpress isn’t entirely free, though. To start or change a store on the platform, they can charge a fee of $1500 or more. Then, for each sale, they charge a commission. This ranges depending on the sale but usually sits at around 5% to 8% of the transaction. This might seem superfluous at first but this is how AliExpress makes their profit rather than selling products themselves.

Amazon, though, is much less focused on finding sellers as much of their sales come from selling their own products. In fact, by their own accord, Amazon states that around 40% of their sales come from third-party sellers. While this is distinctly less than AliExpress, it is enough that their policies toward their sellers is important to note.

The first thing to note is that Amazon doesn’t treat all sellers the same. You have the option right off the bat to register as an individual seller or a professional seller. The differences are rather simple and laid out as a choice on their services page.

An individual seller is someone who sells fewer than 40 items a month. Individual sellers can add new products to the Amazon catalog and have Amazon handle features such as customer service, shipping, and fulfillment. This plan gives you access to more than 20 categories on Amazon and only costs the seller $0.99 a month and other selling fees.

As a professional seller, you sell more than 40 items a month. You would get all the features of an individual seller plus the addition of the following.

•     10 additional selling categories
•     Access to sell in US, Canada, and Mexico or the choice not to sell in some of these countries
•     Access to bulk listing and reporting tools from Amazon Marketplace Web Service
•     Customizable shipping rates
•     Offer special promotions and gift wrap options for products (certain exclusion apply – you cannot offer this for books, music, video, DVDs, software, or video games)
•     Eligible for top placement on product detail pages

The extra benefits for selling as a professional on Amazon does come with an extra cost. The $0.99 a month fee for individuals raises to a $39.99 a month fee for professionals plus other selling fees. The term “other selling fees” is described by Amazon as referral fees and variable closing fees. For individual sellers, this also includes a $0.99 fee per item but no such charge applies to professional sellers. Unlike AliExpress, though, sellers on Amazon tend to be charged flat, monthly fees rather than a percent commission on sales.

With this in mind, it is fair to say that both companies are rather friendly to their third-party sellers. Sellers on Amazon, though, might have a bit of an advantage as they don’t have to worry about a large fee when they open a seller’s account on the website. This is mainly because Amazon doesn’t depend solely on their third-party sellers for their profit. By nature of their business model, though, AliExpress needs to charge a commission and opening fee to their sellers so that they can turn a profit.

To get an accurate insight as to how a company might do when they expand overseas, it is interesting to see how they do in their home country. For the assessment in this article, we will be using statistics for each company from 2016. For Amazon, these statistics are from the United States. It is also important to note that these statistics are for Alibaba’s services in general rather than AliExpress specifically.

In 2016, Amazon made up 3% of both online and traditional retail in the United States. Alibaba impressively topped this, though, and made up 11.18% of retail in China that year. However, to justify this number, it is important to note another statistic.

That is that in the United States, the ecommerce market made up $119 billion as of 2017. China, though, had an ecommerce market that reached a whopping $1.149 trillion as of 2017. This means that Alibaba’s impressive sales were aided by a significantly larger ecommerce market than that of the United States. That fact just goes to show that Amazon is looking at an extremely large potential Chinese market but one that Alibaba has already caught the attention of.

Next, let’s look at the gross merchandize volume for each company. Alibaba made a 22% increase from $485 billion in 2015 to $547 billion in 2016. However, Amazon dwarfed this with a 31.3% growth between 2015 and 2016. In a dollar value, this was a rise from 2015’s $112 billion to $147 billion. Even though Amazon’s percentage rose faster, though, it is still well-worth noting that with the actual dollar values, Alibaba’s gross merchandize volume was hundreds of billions of dollars ahead.

When it came to total retail values in 2016, though, the companies were neck in neck. Amazon made an impressive $4846 billion in the United States while Alibaba was just barely ahead with $4890 for the year.

There is, of course, the idea that these numbers have to be taken with a grain of salt as the two markets are vastly different but these numbers do teach us one important thing. For an American who doesn’t have a lot of experiences with Alibaba, it can be easy to consider it a minor player in a field that companies like Amazon and Ebay dominate.

For those who have been watching the growing struggle for power between Alibaba and Amazon, though, it is easy to see that Alibaba and AliExpress can be a threat to Amazon, especially on the account of their rapid growth. As they grow, though, they will pose more of a threat to Amazon in the global market and they will definitely strengthen their hold on the Chinese market as Amazon tries to compete.

When it comes down to it, both companies have an international following. At this point, though, the vast majority of AliExpress users are made up of the Chinese population. However, it is only fair to note, that the population of China numbers in the billions. That being said, a following that is primarily created of the Chinese market is nothing to scoff at. So, how much of a following is AliExpress actually bringing to the table when it comes to competition against Amazon?

In a recent statistic, Alibaba was shown to have about 515 million shoppers. This is an amazing feat, especially when compared to a competitor’s rates. Namely, one of Amazon’s most recent reports stated that they had 310 million active users worldwide. While this number isn’t anything to ignore, it says a lot about Alibaba and AliExpress’ potential that they carry a larger following than Amazon.

This statistic doesn’t seal the deal for either company. However, it does once again highlight the challenge that Amazon has in the Chinese market. After all, as we have stated before in this article, Amazon’s strategy will have to take on a different marketing technique than they have in their growth in the United States. Specifically, rather than providing a service to potential customers that wasn’t there before – like they did in 1994 – they will have to convince customers of another company that they are a better choice and worth a shot.

At this point, we have evaluated almost every aspect of both Amazon and AliExpress and how they compare to one another. So, it brings us back to the original question; when it comes to the Chinese market, does Amazon stand a chance?

In short, yes, Amazon does have a chance at the Chinese market. This doesn’t mean, though, that the fight to the top will be an easy one. To even hope to compete with the already established network, AliExpress, Amazon will need to adapt to win over customers. As we have discussed throughout this article, it will be important for Amazon to not only match the offers of AliExpress but to go above and beyond to prove to the Chinese market that they are worth a chance.

At this point, we have evaluated almost every aspect of both Amazon and AliExpress and how they compare to one another. So, it brings us back to the original question; when it comes to the Chinese market, does Amazon stand a chance?

In short, yes, Amazon does have a chance at the Chinese market. This doesn’t mean, though, that the fight to the top will be an easy one. To even hope to compete with the already established network, AliExpress, Amazon will need to adapt to win over customers. As we have discussed throughout this article, it will be important for Amazon to not only match the offers of AliExpress but to go above and beyond to prove to the Chinese market that they are worth a chance.