If your brand is afraid of Amazon, then you should be terrified of Alibaba

Share this story with other MarketersShare on LinkedIn
Linkedin
Share on Facebook
Facebook
Share on Google+
Google+
Tweet about this on Twitter
Twitter
Email this to someone
email
Print this page
Print

[sg_popup id=”9″ event=”onload”][/sg_popup]Now begins the North American battle of Amazon vs Walmart, with the winner to take on Alibaba on the world’s retailer stage.

alibabaI love watching the Kentucky Derby, especially those horses that start off slow, then pick it up on the back straight, and then basically fly past everyone on the last turn, like they are standing still. That’s how I feel about watching the Alibaba brand.

The joint venture between Walmart and Google is a signal that both might be a little bit scared of Amazon. 

But, Alibaba is using their dominance in the world’s largest market (China) to pick up all that speed in the back straight and likely beat both Amazon and Walmart.

Walmart is a tough competitor. They won’t go down without a fight.

Obviously, Amazon has a huge advantage in the US, but things are about to get really ugly as Walmart and Amazon attempt to destroy each other. 

But, if you have ever dealt with Walmart, you would have to be an idiot to ever count them out. Their culture focuses on the relentless fixation on fast-moving items that helps drive cash flow. Sure, Walmart beats up their vendors over price–but that’s mainly to drive sell through. If your brand moves slow, there is no debate–you are told to speed up your sales, and if you don’t, you are gone.

I remember when Walmart starting sending us their weekly sales data. My first thought was “Wow, this is true partnership, amazing data, thanks Walmart”. Then the questions started to come. “Your 250ml cherry flavored cough syrup is not selling fast enough, what will you do to accelerate turns”. We lowered the price. Or even worse, “Your Listerine Pocketpaks product accounts for the highest theft of any product in our stores, fix it”. We changed the packaging, just because they asked us.   In the bricks and mortar space, while most department store retailers sell through their inventory in 130-150 days. Walmart sells through their inventory in 29 days. That’s cash flow.

I expect Walmart will go lower on price than Amazon can tolerate. What retailer owned the low price positioning before Walmart?  Sears. If you go compare prices at Walmart and Sears, you will see why Sears stores are empty and about to go bankrupt.

Does the Google partnership help Walmart?  A little. But both better step it up fast. If Walmart loses to Amazon, the case study class starts off with “Walmart should have started their on-line war with Amazon in 2002, not 2017.”

Even if Amazon can tolerate lower prices and eventually beats Walmart, it will do some damage to their profits. Amazon will experience lower margins, squeezed cash flow, and a divided consumer base. It will further open the possibility of seeing Alibaba entering the US market.

Why Alibaba will win

Alibaba, valued at $420 Billion has seen an 80% increase in the market capitalization in the past twelve months. In the same period, Amazon has seen a 20% increase, still with a slight lead at $465 Billion. 

Here are 5 reasons why Alibaba will eventually win the global e-commerce retail space:

  1. Alibaba can utilize their home-field advantage. Alibaba is dominating the Chinese market, which is the #1 e-commerce population in the world. China has 500 million active on-line users, is twice the size of the US market. Walmart and Amazon will divide up the US market.
  2. Alibaba has a business model that delivers higher profitability. Alibaba’s business model, with no listing fees, with the bulk of their revenue coming from keywords and digital-advertising is closer to the social media model. This gives Alibaba significantly higher margins than Amazon. 
  3. Alipay payment system.  Alibaba launched a digital payment system in 2004, just for their own customers. Along with WePay, it has become the accepted method of payment in China. They have moved to a cashless and even cardless payment world. 
  4. Alibaba will ride the growth curve of the Chinese Economy. Despite the recent slowdown, China’s economy is still growing at almost three times the rate of the US – around 7% over the last couple of years, compared to less than 2.5%.The US has a growing trade deficit – it imports more than it exports – while China imports significantly less than it exports, resulting in a trade surplus.
  5. Alibaba’s sales will benefit from the growth of the Chinese Middle Class. In the last ten years, the average income for China has tripled. It is expected that from 2012 to 2022, those in China making more than $34K US will increase from 3% currently up to 9%, and those in the growing middle class ($16K to $34K) will increase from 14% up to 54%.

So when will Alibaba move west? Likely after the Walmart vs Amazon dust settles. By 2020, I would expect both Walmart and Amazon to be weakened. Whoever wins will have to take on a very healthy, highly profitable, cash-rich Alibaba. Realistically, Alibaba could end up two or three times the size of Amazon.Then it will be like watching that horse in the Kentucky Derby, with Alibaba rounding the final turn on the way to the finish line.

To read more on competitive strategy, click on this link: 

Competitive Brand Strategy

 

In retail, the smart money should be on Alibaba for the win.  

 

To learn about strategic thinking, follow this powerpoint slide presentation. 

 

Beloved Brands: Who are we?

Beloved Brands is a brand strategy and marketing training firm that is focused on the future growth of your brand and your people.

It is our fundamental belief that the more loved your brand is by your most cherished consumers, the more powerful and profitable your brand will be. We also believe that better marketing people will lead to smarter strategy choices and tightly focused marketing execution that will higher growth for your brands.

With our workshops, we use our unique tools force you to think differently and help unleash new strategy solutions to build around. I believe the best solutions lay deep inside you already, but struggle to come out. In every discussion, I bring a challenging yet understanding voice to bring out the best in you and help you craft an amazing strategy.

We will help you find a unique and own-able Big Idea that will help you stand out from the clutter of today’s marketplace. The Big Idea must serve to motivate consumers to engage, buy and build a loyal connection with your brand. Equally, the Big Idea must work inside your organization, to inspire all employees who work behind the scenes to deliver happy experiences for consumers.

We will help build a brand plan everyone can follow. It starts with an inspiring vision to push your team. We then force strategy choices on where to allocate your limited resources. With our advice on brand execution, we can steer the brand towards brand love and brand growth.

To learn more about our coaching, click on this linkBeloved Brands Strategic Coaching

At Beloved Brands, we deliver brand training programs that make brand leaders smarter so they are able to drive added growth on your brands. We offer brand training on every subject in marketing, related to strategic thinking, analytics, brand planning, positioning, creative briefs, customer marketing and marketing execution.

To learn more about our training programs, click on this link: Beloved Brands Training

If you need our help, email me at graham@beloved-brands.com or call me at 416 885 3911

Graham Robertson Beloved Brands

 

Share this story with other MarketersShare on LinkedIn
Linkedin
Share on Facebook
Facebook
Share on Google+
Google+
Tweet about this on Twitter
Twitter
Email this to someone
email
Print this page
Print

Published by

Graham Robertson

Graham Robertson is one of the voices of today's brand leaders. As the founder of Beloved Brands, he has been a brand advisor to the NFL Players Association, Shell, Reebok, Acura, Jack Links and Pfizer. He's helped train some of the best marketing teams on strategy, brand positioning, brand plans and advertising. Graham's purpose is to use is marketing experience and provocative style to get marketers to think differently about their brands, and to explore new ways to grow. Graham spent 20 years leading some of the world's most beloved brands at Johnson and Johnson, Coke, General Mills and Pfizer, rising up to VP Marketing. Graham played a significant role in helping win Marketing Magazine's "Marketer of the Year" award. He has won numerous advertising and innovation awards including Businessweek’s best new product award. As a keynote speaker, Graham shares his passion for brands to challenge and inspire marketing minds around the world, whether speaking at Advertising Week, or at the NBA Summer League, or to a room full of marketers in Bangkok Thailand or an agency in New York. He's been a guest writer for Ad Age, and his weekly blog stories have reached millions of marketers, who are trying to improve their skills. His new book, Beloved Brands, has launched with rave reviews. Many brand leaders are using this book as a playbook to help build the brand they work on. And, it serves as a brand management textbook for business schools in the US, Canada and the UK. Graham’s personal promise is to help you solve your brand building challenges, to give you new thinking, so you can unlock future growth for your brand.

Comments: have your say