Amazon – the biggest online retailer in the world has recently turned 20, and my, has it grown. In these short 20 years, the American wonder has managed to reach more than $70 billion in revenue. In its path to world dominance it began selling everything from books, to ebooks, to apps and recently even groceries.
From across the globe, Amazon’s hegemony itself has been challenged by AliBaba, a company founded in 1999 by former English teacher Jack Ma. Just like China’s economy and ecommerce spending, AliBaba has grown to match its mightiest competitor.
The Chinese company is the product of a splendid growth in China’s eCommerce, a market that is expected to reach $655 billion by 2020. Encouraged by these developments and pushed forward by global ambitions, AliBaba will take its IPO to the US, later this year.
Now how would these two companies look side-by-side? The good folks at SmartIntern decided the world was ready for a comparison between the two behemoths. Have a look at the infographic below. The full version opens in a new window.
Quickly – think of one market you know is a sure bet for growth. If you guessed the groceries market, awesome! You’ve spotted the subtle hint in the title. The groceries market in the US is expected to reach $1.1 trillion in 2016. China, the largest groceries market, is expected to peak at almost $1.6 trillion in 2016. India, Brazil and Russia are growing at a fast pace and are expected to overtake Japan within the same threshold.
All in all – the US and BRIC states groceries market is expected to total $4.2 trillion within the next two years.
That’s a big market. Obviously, some of those groceries will be purchased online. For the online groceries market to take off, some disruption has to happen. Although not yet mainstream, we can see signs that consumers will be purchasing at least some of their groceries online.
Amazon is going Fresh
If there is one thing that online retailers need to get right in the groceries market – that is the logistics. From a consumer point of view, a reliable fulfillment and a guaranteed product freshness is a must. To do that, online and omnichannel retailers need to set new logistics policies to allow for a quick order delivery, without loss in product quality. Do we know a company that is really good at online retailing logistics? Of course we do:
Amazon is clearly the leader in online retailing so it was expected to move into this market. It did so 5 years ago. Its Amazon Fresh grocery service was first tested in Seattle. Now the company unleashed the grocery service in San Diego. Customers in Northern and Southern California can pick from 500.000 products, ranging from vegetables and milk to batteries and hair care products.
Jeff Bezos previously mentioned that in order to become a $200 billion company, Amazon has to learn to sell food and clothes. The obvious target was Walmart, a company with revenue north of $475 billion.
To do so, the company will continue to improve its service and increase the number of cities Amazon Fresh is available in. “We’ll continue our methodical approach – measuring and refining AmazonFresh – with the goal of bringing this incredible service to more cities over time” mentioned Bezos, addressing Amazon’s shareholders.
The methodical approach Jeff Bezos is talking about might reach New York soon enough. Re/Code mentioned the company has already prepared an warehouse in the area, instructed suppliers to ship frozen products to it and is hiring workforce for the service.
In New York, Amazon will have to face competition from online groceries retailers such as FreshDirect or popular startup Instacart.
Online Groceries in Europe are growing fast
It’s not just the US, though. Online supermarket Ocado now covers 73% of UK’s population, more than any other supermarket chain. It’s plans are outrageously ambitious: take the world by storm through a global marketplace, similar to Amazon’s. Only for groceries.
Whatever it is they’re doing – it must be right because the company jumped from being evaluated at less than £300 million to a £2.3bn valuation in less than 13 months.
Uber rides into ecommerce, brings groceries
You’ve probably heard a bit about Uber. It’s that company that’s turning the cab industry on its head, enraging french cab drivers and linking riders with drivers.
Now it’s testing a new service, called Corner Store, in Washington. Customers can order from a limited inventory right now, 100 products only, ranging from “drinks” to “feminine care” to “first aid”. Not in that particular order.
Online retail is a fast moving sector and there are lots of outstanding business leaders out there. Among the best of the best, some really stand out. The way they’ve founded their companies and directed their investments have placed them in the higher echelon of influence in online retail.
Jack Ma, a former English teacher in China, got his first taste of internet entrepreneurship in 1995, when he founded China Pages, a directory of Chinese businesses. He previously worked as a lecturer in English and International trade in the Hangzhou Dianzi University.
After founding and running China pages he briefly worked for the Chinese Ministry of Foreign Trade and Economic Cooperation, between 1998 and 1999. In 1999 he founded Alibaba, a B2B marketplace connecting Chinese manufacturers to the world.
Alibaba’s spectacular growth pushed Ma and his associates to add new companies to the group. AliBaba Group now owns Alibaba.com, Taobao Marketplace, Tmall, eTao, Alibaba Cloud Computing, Juhuasuan, 1688.com, AliExpress.com and Alipay.
The company is now only outmatched by Walmart in terms of revenue. Recent developments and an increase in online retail spending have made the Chinese market the largest online retail market in the world. The big winner: Alibaba Group. Through its subsidiaries, the AliBaba Group now handles $248 billion in transactions, 84% of the total online retail market in China.
You wouldn’t think of the fifth wealthiest man in the world as one of the most influential persons in online retail. But he is. Through it’s flagship company and different personal investments, he is in control when it comes to online retail infrastructure and software.
For once, Larry Ellison is Oracle and Oracle means, first and foremost, databases. Ellison started his career working for the Ampex Corporation in 1970, on a relational database for the CIA. His designs were based on a paper written by Edgar F. Codd, called “A Relational Model of Data for Large Shared Data Banks”. The same design was implemented by IBM, but the company didn’t have time to solidify its dominance on the market. Challengers soon began to emerge.
One of those challengers was Larry Ellison’s Software Development Laboratories (SDL), founded with two partners and later renamed Oracle, based on the database Ellison developed when he was working for the CIA database.
After a long struggle against the largest competitor, IBM (which would push its DB2 and SQL/DS products) and other challengers (Informix, Sybase, Microsoft) – Oracle eventually took lead in the database war. In 2010 the European Union approved Oracle’s acquisition of Sun Microsystems. One of the most important assets Oracle got was the wide-spread, popular MySQL database.
So for one – Oracle now dominates the database market, the underlying infrastructure of connected systems and retailers worldwide.
And that’s just the begging – Oracle is currently on a purchase streak, aiming to build a strong multichannel retail presence. It is second only to Adobe Systems, with its customers registering over $200 billion in revenue in 2013.
It’s presence is split between Social marketing, ecommerce platform software, site search, customer service, personalized content and transportation management.
To give you a glimpse on how serious Oracle is about its investments in multichannel retail – they paid $1.5 billion in 2011 for Right Now Technologies, a company providing customer service software and services to the likes of Overstock.com.
Larry Ellison is also one of the major shareholders in Netsuite and Salesforce, two companies shaping the global B2B and B2C commerce future.
1. Jeff Bezos
Net Worth: $30.1 billion Company: Amazon
Jeff Bezos is the one man we all picture when we think about ecommerce. He is a Princeton graduate with a degree in Computer Science. After graduating from college he pursued a career in investment banking in Wall Street, which he left to found Amazon, after noticing the fast growth in Internet usage.
He set up his company in the proverbial garage with few employees and in 1995 launched the beta version for 300 friends. Days after the launch the book selling eshop managed to ship books across US and 45 foreign countries. Yearly sales in the first year reached $510 000, much more than Bezos envisioned. The company grew and grew, survived the dot com and went on to register $74.5 billion in 2013 revenue.
By expanding the initial book selling operations into CD’s, videos and later clothing, toys, electronics, home & garden, jewelry and even art, Amazon essentially became the “everything store”. Amazon is now the biggest online retailer and a disrupting force in retail.
Everything from the ecommerce revolution to online payments, shipping and marketing has been heavily influenced by Amazon and guided by Jeff Bezos, both a star-gazing visionary and a focused micromanager.
But beyond his influence in online retail and retail at large, Bezos is a special human being. A libertarian, he invested in projects most of us would consider unreal and unattainable. He was one of the first investors in Google, financed a clock that would run 10 000 years and a company that’s working on lowering space flight costs, to allow humanity to explore the great unknown.
This short list, headed by Jeff Bezos, is prone to change. The world around can change as well, partly due to these people’s and efforts. To get a deeper glimpse on how they did it and what motivates them, have a look at Jeff Bezos’ Princeton graduation address, “What matters more than your talents”:
If you think about someone who was there when ecommerce started, who would you picture? Jeff Bezos? You may be wrong because Bezos started Amazon in 1995, a full 17 years after ecommerce was born, in the UK.
The ecommerce revolution was televised
Back in 1979 a 38 year old innovator put together an online shopping system called Videotex. It was one of the first end-user technologies that displayed interactive information on a TV screen. Unlike most other connectivity breakthroughs of that age, the Videotex was more of a TV than a computer.
It was basically a domestic TV connected through a phone line to a central transaction processor. It might sound simple now but at the time things like e-commerce, online orders, online banking and others were pretty close to science-fiction.
One day, early 1979, Michael Aldrich received in his office a 26” TV, capable of teletext. The TV was able to display news and weather information, broadcasted by the BBC. It had several components that allowed it to do that. Among them – a modem and an auto-dialer.
Those two components proved to be really useful to Aldrich. Later that year, after superficially examining the device, Aldrich was out with his wife, walking their dog, Tessa.
They chatted about the kids and such. At some point the subject of weekly supermarket expedition came up. Aldrich was thinking of how could he make that boring trip easier – and that’s when it hit him: He could connect the modem enabled TV to a central server and help companies process transactions and sell things. Things such as groceries.
Online shopping before the Internet
He worked with his colleagues, set up a basic system and demo-ed it to major companies. As he had sales and marketing jobs before, he was able to convince executives of the system’s competitive advantage.
It as a hit and his team received some heavy requests for the system. He spent most of the ’80s designing and implementing online shopping systems. Remember – this was an era predating even the most basic forms of computer technology – such as MS DOS, the IBM PC , internet and yes, the World Wide Web.
It wasn’t until 1990 that another great brit, Tim Berners Lee would write the World Wide Web and unlock the Internet’s potential.
Tesco shipped the first online shopping order
Truth be told, Videotex never really caught up with end consumers. It was mainly used as a B2B shopping / ordering technology. But people did use it to place the world’s first online shopping orders.
She needed only 15 minutes to learn how to use the remote. After that she was able to choose from the 1000 products available on Videotex. Her order was payed on delivery as no card processing was available at that time. But she did order and the order did arrive.
She, among other senior shoppers, were the first to shop online. What was then a local experiment with little success is now a $1 trillion industry and growing fast.
Aldrich, now a grandfather of 8 grandchildren, may not have been the Jeff Bezos of its time but he is the man that invented online shopping, among others. There was no B2C market for him to work on, but there was a B2B market. His innovations started what we now call the IT industry and revolutionized the way people thought of media (from few-to-many to many-to-many).
This is a man that innovated his way to ecommerce, the IT industry, and basic Social Media notions we apply today. Pretty great, right?
Amazon is already selling more ebooks then we might expect. For every 100 paperback and hardcover books, Amazon delivers 114 ebooks to its readers in UK. The fact is astonishing as this is sure to trigger the same long-term effect as iTunes had: it will change the publishing industry just like iTunes changed the music industry.
Change happened gradually. Legend has it Jeff Bezos saw the eInk readers and understood that such a device might be, in the wrong hands, Amazon’s arch-nemesis. In 2004 he order 30 eInk readers and asked Steve Kessel to setup a research facility for a future switch to ebook publishing.
In 2007 the team at Lab 126, Amazon’s subsidiary in charge of Kindle’s R&D, launched the first product. It was a big hit. Users could choose from 88 000 books, which was way above any other competitor in the ebook reader market.
The elements involved in Kindle’s success are invisible when we look at the product. The sleek design, the beautiful typography or the eInk technology are not enough to understand the ecosystem that lead to Amazon’s results. Let’s have a look at some key factors involved in Kindle’s adoption and evolution:
1. The existing clients: When Amazon launched the Kindle it already had more than 65 million customers. Even at a low adoption rate Amazon would have had the greatest chance to succeed selling ebooks.
2. The large selection of electronic books: The 88 000 books available at launch were more than any of the competition had to offer its readers. 5 years after the first generation Kindle Amazon has extended its ebook offering largely.
3. Impulse buying: In 1999 the US Trademark Office issued a patent to Amazon.com regarding 1 Click buying. By using previously entered credit card information the user can skip the shopping cart hassle and purchase any item with the click of a button. This patent was never awarded in Europe but Amazon created a impulse-buying consumer behavior that lead, in time, to the success Kindle is right now. By using this technology Amazon makes sure that consumers don’t think too much about purchasing. They just do it. Psychologically this resolves the so called “buyer’s remorse”.
4. Instant delivery through Wi-Fi and the Whispernet 3G network: one of the greatest things about the Kindle is the fact that you don’t have to wait until it’s shipped. The books are being delivered anywhere in the world instantly. The Whispernet network is nothing short of genius and its benefits in customer satisfaction greatly exceed the costs.
5. Syncing: the current lifestyle of many of Amazon’s customers doesn’t allow them to read to peacefully enjoy reading a book for more than an hour at a time. Our attention span has greatly decreased as modern jobs leave little time for personal development. Kindle is available as a standalone application on the PC, Mac, iPhone, iPad etc. Basically we can read our book wherever we are, whenever we can. Using internet connection the books are synced cross device and readers can enjoy books whenever they can.
6. Evolution of indie publishing: The Kindle allowed many indie authors to self publish their books. As these authors entered a market they couldn’t previously tap into prices have dropped and the book selection has increased. It’s not yet clear whether buyers are reading or just collecting the books. However – they pay for them and that means a shift in spending that will lead to further changes in book publishing.
The 6 facts above are the things we don’t usually see when looking at the Kindle but they are very important. One cannot try to understand Kindle’s success without understanding the ecosystem Amazon has built to support ebook sales.
In 2011 Amazon launched its Android powered Kindle Fire. This year the company is generating 89% of iTunes App Store revenues selling Android Apps. Read more on the subject here.