2. The Ecommerce Cold War – Jack and Jeff
Alibaba and Amazon are shaping up for a global battle.
In 2015, Amazon opened a storefront on Tmall, a website owned by Alibaba. But the powerful lure of the growing Chinese middle-class, as well as the fact that a full 6% of Chinese ecommerce purchases were cross border (a number expected to increase to 25% by 2020), was a compelling enough factor for Amazon to launch Amazon Prime services in China this year. Global expansion is a key priority for Amazon, as it consolidates the US market and continues to grow, putting it directly at odds with local markets.
One byproduct of this is that a supply chain that spans the world can provide a huge competitive advantage in new markets. Helping foreign sellers gain access to global markets appears to be at least one of the factors in Amazon registering as an international freight forwarder late last year, while also indicating that it views logistics companies as potential competition.
Alibaba isn’t taking this sitting down. With an 80% market share in China, it’s been working on building an underlying physical infrastructure in the US with investments in Jet.com, Lyft and Groupon. It has encountered difficulties while doing this, including a sale last year of 11 Main, a local marketplace. Alibaba’s real competitive advantage may lie in its anticipated rapid development of the local Chinese logistics infrastructure, which could give it ownership of low origin prices for exports as well as fulfillment on shipments to China.
3. Everything as a Service
One result of the Ecommerce Cold War is an attempt to expand services across the supply chain. Amazon started with online sales, before expanding to fulfillment, warehouses and then delivery. Each time, it leveraged technology and market penetration to replace existing vendors and reduce costs.
Despite the 10+ Uber for Trucking solutions out there, none have Amazon in their name. And none come close to the volume that Amazon already reaches. Problems in Amazon holiday shipping in past years pushed it to lease a full cargo plane fleet; there’s no doubt that excessive spend on trucking, as well as the ability to better serve the growing Fulfilled By Amazon (FBA) service the accounted for 50% of sales on Amazon last year, are a good incentive to enter the trucking fray.
If successful, this business could scale beyond Amazon. The company has a track record of taking internal tools it builds, rolling them out to broader Amazon usage and then turning it into a service (think Amazon Web Servers and FBA).
Beyond using Amazon’s Uber for Trucking service and drones for freight delivery and last-mile package shipping, there’s a chance that existing trucking companies and USPS may be threatened down the line by these platforms.