Amazon vs Alibaba performance

1. CMS Individual Assignment 1
Astha Aggarwal
MSc. Marketing
21200195

2. Amazon Business Model:
1. Amazon is an American re-seller that owns the supply
chain of the products and sells the product directly to the
consumer. The products are more or less readily available
for purchase and shipping.
2. Amazon also provides a platform for the third party
sellers to sell their products directly to the consumer.
These products are generally on the expensive side or
low in demand due to which Amazon does not hold huge
inventories of such products.
3. It also provides a monthly or yearly subscription service
known as Amazon Prime. Through this service, customers
can receive majority of their orders either in one-day or
two days of placing the order and have access to
streaming media such as movies, music, TV shows etc.
4. Another portion of Amazon’s revenue stream comes
from the sale of its e-reader, the Kindle.
Alibaba Business Model
1. Alibaba is a marketplace, which leads the
Chinese Consumer Retail Sector. They do not
own any inventory of merchandise sold, it is a
platform wherein the buyers and sellers are
connected. It’s largest site, Taobao, provides a
platform for both buyers and sellers (small
merchants) to conduct purchases without any
fee.
2. It is focused more on trade between the
buyers.
3. Tmall is another retail platform where in the
buyers and large retailers are connected (such
as Nike, Apple).
4. Alibaba has made it’s presence in the Chinese
financial market as well and is giving tough
competition to dominant players.
Business Models:

3. Amazon Websites
(Products across various
categories sold by Amazon
and third party sellers)
Electronic Devices
(such as Kindle, Fire
Tablets, Fire TV Stick, Fire
TV and Echo)
Media Content
(An extensive range of
products and services,
including cloud-based
services)
Amazon Web Services
(AWB)
(Wide range of global
compute, storage,
database and other service
offerings)
Alibaba.com
(B2B sales platform)
Aliexpress
(online retail store)
Autonavi
(Navigation Maps)
Taobao
(C2C online shopping
platform)
Alipay
(Online payment
platform)
Alibaba Pictures
(Film Company)
Alisports and Ali
Health
(Sports events and
pharmaceutical
ecommerce platform)
Tmall
(Online retail platform-
authentic branded
products)
Mix of Products / Services

4. 60.43%
58.7%
57.50%
58.00%
58.50%
59.00%
59.50%
60.00%
60.50%
61.00%
COGS %
Costs % of Revenue for Amazon and Alibaba for 12
months ended 31st March,2021
Amazon Alibaba
386064
294034
45370
25207 21453
107593.35 93171.9
9018 4677.9 725.55
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
Total Revenue Core Commerce* Cloud Computing** Digital Media and
Entertainment***
Innovation
initiatives and
others
Segment
Revenue
(In
Mn
USD
Segment-wise Revenue Breakdown for Amazon and Alibaba for 12
months ended 31st March,2021
• Cost of producing goods for Amazon was comparatively
lower than that of Alibaba.
In Mn USD
Amazon Alibaba
Cost of Producing Goods 233307 63180.75
Total Revenue 386064 107593.35
Cost % of Revenue 60.43% 59%
• Total revenue of Amazon was more than three times
than that of Alibaba as Alibaba’s business model is
heavily depended on China’s market whereas
Amazon’s reach is more global.
Revenue Analysis
*Amazon core commerce includes Online & Offline stores, Third party seller services.
**Amazon Cloud Computing includes AWS
*** Amazon Digital Media and Entertainment includes Subscription Services.

5. Profit, Operating Expenses & Income
39.57%
5.93% 6%
41.28%
12.5%
19.98%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
Gross Profit % Operating Income % Net Income %
Gross Profit %, Operating Income % & Net
Income % of Revenue for Amazon and Alibaba
for 12 months ended 31st March,2021
Amazon Alibaba
• The gross profit % is almost same for both
the companies.
• Whereas the operating income % is more
than double for Alibaba as compared to
Amazon. This tells us that Amazon has very
high operating expenses which are leading
to relatively lower operating %.
• The difference in operating and non-
operating expenses of both the companies
further increases the gap between the net
profit % between them as can be witnessed
from the graph that Alibaba’s net income %
is almost thrice as much as Amazon’s.

6. The better Business Model?
Alibaba generates most of it’s revenue from it’s core commerce business such as it’s online marketplaces and brick-
and-mortar stores. The remaining revenue is generated from it’s cloud, digital media and new businesses. With such
a huge chunk of revenue generating from core commerce activities, they are able to invest in new business ideas and
expand their ecosystem.
On the other hand, Amazon also generates it’s revenue from it’s own online marketplaces but most of the revenue
comes from cloud-platform, Amazon Web Services (AWB). Since AWS is used worldwide, it operates at a much high
margins than Alibaba Cloud which is still a small player in the global cloud market.
Since Alibaba provides a platform for the buyers and sellers to connect and execute the purchase directly, it
eliminates the cost of inventory, warehousing and even delivery services. Alibaba doesn’t fulfil orders with a first-
party logistics unlike Amazon.
Instead, Alibaba's marketplaces mainly charge listing fees and commissions, which technically makes it an advertising
platform, while merchants fulfill their own orders directly. Amazon fulfills its own first-party orders, but many of its
third-party merchants ship their own products. As a result, Alibaba generates higher operating margins than Amazon.