Amazon vs Alibaba: Learning from the juggernauts
It’s no secret that brands around the world are trying to find ways of combatting the collective competitive juggernauts that are Amazon and Alibaba.
Frequently, commentators attribute their dominance and success to three critical – but in essence pretty simplistic – factors: speed, range and price. They sell everything you could want, whenever you want it, and at a price that is hard to beat.
It might be a surprise to know that these factors aren’t necessarily what keep the brands at the top of the BrandZ rankings year in year out. Finding a competitively priced product is easier than ever thanks to Google Shopping, which reliably lines up the best options in search. Nor is it necessarily the fastest out there – in the UK, Argos can deliver many of its products within two hours, particularly in areas where Amazon’s one-hour Prime slots don’t yet reach.
More likely, it is the unique ecosystems developed by each of the heavyweights that are the true key to their success.
Amazon’s range of services – whether that be its retail offering, video platform through Amazon Prime, Alexa voice assistant, or payments technology – allows the brand to navigate the evolving landscape with ease, and respond to changes in consumer demand quickly.
Equally, Alibaba’s strength comes hand-in-hand with the creation of a wide-reaching ecosystem, including the rollout of physical stores and its hugely successful Alipay platform which performs beyond payments and offers interesting services to customers. Take, for example, its partnership with UEFA to create mini-programs for football fans. These sit within the main apps and will provide Chinese football fans who use Alipay with exclusive content and access to ticket-buying facilities in the run up to Euro 2020. This added benefit-service is what people connect to; it encourages customers not just to shop with Alibaba, but to enjoy the brand and its various entities as part of their wider lifestyle. Importantly, it creates stickiness – why go anywhere else when one brand with well-integrated platforms can deliver it all?
FITCH’s proprietary Experience Themes data model, which codifies what customers expect from the experience brands offer, indicates that customers expect wider services and experiences from brands as a norm. Looking at Amazon, we can determine that consumers now expect the brand to foster exploration – be it through the discovery of new products, services or information about the world we live in. By having such a vast retail ecosystem, Amazon is able to deliver on these expectations. And this is precisely why it has been able to topple Google and Apple from the top spot in BrandZ’s 2019 rankings.
Traditional brick & mortar brands can succeed and give the likes of Amazon and Alibaba a run for their money by applying the ‘ecosystem principle’: it is less about what consumers can buy from you and more about what they can achieve with you. Retail is so much more than just the transaction of your product – it’s about the wider ecosystem your product sits within.
So let’s look at more traditional players to make our case. Despite well-documented struggles among the department stores, Selfridges & Co continues to succeed; much of this strength comes from its focus on in-store customer experiences that add new dimensions to simple purchases.
In recent years, the brand has hosted a number of events for shoppers to enjoy beyond the sales. One of these being the Project Ocean Beauty Booth, where people could celebrate World Oceans Day and learn how to reduce, reuse and recycle packaging. The Nyetimber Manor Terrace on the roof of the store was also developed so guests could drink wine and watch the sun set country retreat-style, or gather for summer events. The Christmas Cabaret and The Skateboarding Bowl showcases are just a couple of more examples of how the brand is most certainly a place to shop…but more importantly (and critically to its success), a place to engage and participate in the zeitgeist.
In the grocery category, Alibaba’s HEMA stores are convenience stores focussed on providing fresh produce but within a wider social experience. Customers can select a fish from a tank, bring it to the counter and then go and enjoy a drink while they wait for it to be prepared and served. It’s a social place where people can go to relax and socialise, as well as buy.
Retail brands have to prove themselves every day and constantly innovate to survive – this is exemplified by Amazon and Alibaba. These two will inevitably continue to disrupt, and consequentially, force everyone to up their game. It isn’t a case of going toe-to-toe on propositions. Instead, it’s about being flexible enough to widen your ecosystem to strike the balance between modern expectations and life-enhancing experiences. Amazon and Alibaba may be industry giants, but there is enough room for anyone willing to meet the challenge.
Dominique Bonnafoux, Strategy Director at retail and brand consultancy FITCH