Alibaba Vs. Amazon: Who Is Growing Faster In E-Commerce?

Amazon (NASDAQ:AMZN) and Alibaba (NYSE:BABA) have solidified their positions in the e-commerce industry over the last few years. While Amazon operates primarily in the retail segment globally, Alibaba has an online presence in both the retail and wholesale channels. Amazon has seen 18% annual growth in its net revenues (excluding Amazon Web Services) from 2013 through 2015, while Alibaba reported a compound annual growth rate of 35% in the same period. Alibaba’s revenue includes retail revenues in China, wholesale revenues in China and international revenues (which include both retail and wholesale).

Alibaba grew at a faster pace than Amazon, primarily due to the fact that it has a leadership position in the relatively nascent and faster-growing Chinese e-commerce market. It is also worth reiterating that Alibaba’s e-commerce revenues also include international retail and wholesale revenues, which are growing at a brisk pace. Alibaba’s higher growth rate is also aided by its significantly lower revenue base. In 2015, Alibaba generated about $14 billion in e-commerce revenue compared to Amazon’s $99 billion.

The other key difference between the two companies lies in how the e-commerce channels operate. Amazon acts as the marketplace for third party sellers that list products on the website, but it also has its own warehouses and purchases products that go in its inventory at the Amazon Fulfillment Centers. Amazon then sells those products as Amazon Verified Products, thereby becoming the seller. As a result, the products sold via this channel are less profitable for the company due to the higher storage and operating expenses. On the other hand, Alibaba operates solely as the aggregator among buyers and sellers for both retail and wholesale channels in China and internationally.Based on these metrics, Alibaba seems to have an edge over Amazon when it comes to growth in the e-commerce segment. However, the huge difference between the two companies’ EBITDA margins can be misleading owing to the difference in the selling strategies of both companies. This is explained in the second part of this article series, which talks about the relation between their Gross Merchandise Value (GMV) and EBITDA.

Have more questions about Amazon or Alibaba? See the links below:

• How Amazon Makes Higher Profits Than Alibaba’s High-Margin Retail Business
• Amazon Vs. Alibaba: GMV, Revenue & EBITDA
• Amazon Vs. Alibaba: Cloud Computing & Infrastructure Growth
• Amazon Vs. Alibaba: Revenue & EBITDA Growth

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