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CASE 17
Aliexpress: Can It Mount a
Global Challenge to Amazon?
A. J. Strickland
The University of Alabama
Muxin Li, Faculty Scholar 2018
The University of Alabama
A AMAZON’S COMPANY
mazon had just completed another great
year of growth, which included the decision
to purchase Whole Foods. There was great
excitement in the company, as the top leadership and
throughout the company celebrated a job extremely
well done. All the business magazines and newspa-
pers touted Amazon as “the best company ever” and
how Amazon dominated the online segment by hav-
ing a 40 percent market share in a highly fragmented
industry.
The following week the celebration continued
when the strategic management committee met to
consider their next acquisitions. A new member of
the team, Megan Turner, who recently graduated
from college and had worked for Amazon as an intern
in their innovation area, asked a question about a
new entrant in the online space called Aliexpress.
All the focus in the room turned to the newest team
member with a look that suggested, “Why are you
talking about a company that is a gnat compared to
Amazon?”
The new hire then found herself charged with the
task of looking at Aliexpress to see if it really posed a
competitive threat in the years ahead. When the meeting
broke up, Megan found herself alone while the rest of the
team continued to celebrate the best year ever—because
the stock price once again hit a new high. Everyone on
the team participated in the Employee Stock Option
Plan, which historically had provided employees a very
decent rate of return on their share purchases.
tho75109_case17_C184-C190.indd C-184
Joyce L. Meyer
The University of Alabama
BACKGROUND
In July 1994, Jeff Bezos founded the pioneer of elec-
tronic commerce and the biggest online merchan-
diser in the United States, Amazon, based in Seattle,
Washington, as an online bookshop business. According
to the early Amazon logo, being the “Earth’s biggest
bookstore” was their goal. From 1997 to 2001, Amazon
had a successful transition from being an online book-
store to being the largest Internet retailer in the world
(by 2001), and the largest Internet retailer of tech
products today. Amazon has positioned itself as the
world’s most customer-centric company, which has
become the company culture and goal for their long-
term development.
From the time Amazon’s logo was created—
which began with the letter A and ended with the let-
ter S and a smile—Amazon’s purpose “we’re happy to
deliver anything, anywhere,” reflected the company’s
strategic intent to offer consumers everything from A
to Z in its online store. In order to achieve the goal,
Amazon had launched an ongoing strategic initiative
to expand its product line-up and offer an always-
increasing range of merchandise to consumers.
The strategy of retailing everything from A to Z
initially resulted in huge annual losses for Amazon
Copyright ©2018 by A.J. Strickland. All rights reserved.
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Case 17  Aliexpress: Can It Mount a Global Challenge to Amazon? C-185

because of the ongoing need to build and operate

the ever-bigger infrastructure the company needed
ALIEXPRESS’S STRATEGY
to execute its strategy. The company expanded its The goal of Aliexpress was to make it easy to do
geographic scope by rapidly increasing the number business anywhere. Alibaba started with helping
of warehouse and order fulfillment locations and middle and small-sized enterprises. To help these
adding more products and services to its menu of enterprises survive, grow and develop, Alibaba soon
offerings. Early on, Amazon began expanding its geo- learned that their main issue was the lack of funds
graphic by entering new country markets, such as the to develop sales channels. To address this issue,
United Kingdom and Germany. By 2018, Amazon Alibaba started to focus on B2B and laid a solid
was selling and delivering products and services to foundation for this business model. Alibaba became
consumers all around the world—it was a truly global the middleman to provide a platform for sellers and
company. buyers to build connections to generate business
activities. It empowered merchants to do the busi-
ness by themselves.
ALIBABA’S COMPANY
BACKGROUND
Jack Ma was an English teacher in China who EXHIBIT 1 Top Companies in the
founded “Alibaba Group” with a team of 18 people World by Market Value
based in Hangzhou, China in his apartment. It in 2018 (in billions of
started in 1995 and failed because it was too early
to introduce Internet e-commerce to both Chinese U.S. dollars)
consumers and the Chinese government. In 1999,
Ma tried to build a digital yellow page service to Apple $926.90
introduce China to the world in trade, but it also Amazon.com  777.80
failed because he could not obtain support from Alphabet  766.40
his potential customers. Nonetheless, Jack Ma did Microsoft  750.60
not give up because he believed the Internet was Facebook  541.50
going to play a big role in economic exchange in the Alibaba (Including Aliexpress)  499.40
future, although it was not yet accepted in China. Berkshire Hathaway  491.90
In the same year, 1999, he launched the company Tencent Holdings  491.30
he named Alibaba, which received an investment JPMorgan Chase 387.70
from Goldman Sachs for $5 million, and Softbank ExxonMobil 344.10
for $20 million. Johnson & Johnson 341.30
In 2003, Alibaba launched Taobao, which has Samsung Electronics 325.90
Business to Business (B2B), Business to Consumer Bank of America 313.50
(B2C), and Consumer to Consumer (C2C) sales
ICBC 311.00
models via web portals. By starting a business compe-
Royal Dutch Shell 306.50
tition with eBay, Taobao improved the company’s vis-
Visa 295.10
ibility in the international media. As a result, Taobao
successfully replaced eBay in China’s Internet mar- Wells Fargo 265.30
ket, and finally made eBay withdraw from China. China Construction Bank 261.20
Taobao offered services to businesses and con- Intel 254.80
sumers to trade on the online store without any fees Chevron 248.10
for three years, which attracted more people to choose Walmart 246.20
Taobao’s platform for transactions. The next move
was to go global with Aliexpress and further grow the Source: https://www.statista.com/statistics/263264/
market value of Alibaba. (see Exhibit 1). top-companies-in-the-world-by-market-value/.

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C-186 PART 2  Cases in Crafting and Executing Strategy

Taobao offered plenty of unknown products EXHIBIT 2 Leading Shopping Apps

directly from small manufacturers. Tmall, however, had
in the Google Play Store
more well-known brands, usually sold directly by the
brand. These two retail sites generated more opportu- Worldwide in April 2018
nities for middle and small-sized merchants. Aliexpress Number of
is the international version of Taobao. Aliexpress Downloads
launched in 2010 targeting international consumers in Name in Millions
the United States as well as Australia and Russia.
By utilizing the market environment and Wish – Shopping Made Fun 16.56
resources, Alibaba expanded business services to AliExpress – Smarter Shopping, 5.87
new areas: C2C, software, search engine, auctioning,   Better Living
money transfer, advertising, and logistics. These areas Lazada – Online Shopping & Deals 4.43
in general covered different kinds of e-commerce Joom 3.44
services, which meant that Alibaba provided better Amazon Shopping 3.08
and more comprehensive support for enterprises. In Mercado Libre: Encuentra tus 2.73
the beginning, Alibaba offered free membership to   marcas favoritas
gather more merchants to this platform. Today, com- Flipkart Online Shopping App 2.27
missions and fees have become an essential source Club Factory – Fair Price 2.27
of income. The more merchants and consumers who Shein – Shop Women’s Fashion 2.02
participate in this platform, the more transactions Pandao 1.74
can be made. Alibaba is a platform and does not own
any products. Merchants can sell products directly
Source: https://www.statista.com/statistics/691274/
to consumers through Alibaba’s website. In general, leading-google-play-shopping-worldwide-downloads/.
Alibaba does not participate in sale processing, but
provides a platform and services for merchants and
consumers to make transactions. the world, but it took longer to get the products.
In 2018, there were thousands of well-known Consumers were able to track their delivery status.
brand name products and an even greater number of As shown in Exhibit 2, Aliexpress had 5.87 mil-
unknown brands on Alibaba and Aliexpress, with an lion app downloads and was the second leading shop-
incredible selection and low prices for the same prod- ping app in the Google Play Store worldwide in April
ucts compared to brick-and-mortar businesses and 2018. Amazon was fifth with 3.08 million downloads.
the limited number of online retail sites in China. Aliexpress, as a global retail marketplace, had approx-
Both Taobao and Aliexpress apps and websites imately 60 million annual active buyers in the world in
were well developed in 2018, and the search engines 12 months ending March 31, 2017.
directed consumers efficiently to the products they
were shopping for. In addition, Alibaba developed
Alipay, an eWallet service that enabled shoppers to
ALIEXPRESS IN RUSSIA
easily pay for their purchases. In 2018, there were With the facilitating conditions of distance, culture,
over 110 countries that used Alipay as a payment and good terms of trading between China and Russia,
option. It was popular throughout a big portion of Aliexpress targeted Russia as a good market to start
China and Southeast Asia because of its simplicity, expanding their business internationally. By the
convenience, and safety. end of 2014, Aliexpress was the number one online
Before a consumer made a purchase they chatted retailer in Russia selling essentially Chinese prod-
directly with sellers to know the products better and ucts, and enjoying huge popularity among Russian
have a quick response for after-sales services. There online consumers who appreciated its low prices and
are a few merchants who still charged for shipping, large assortment. The inclusion of additional offers
but the majority of the products listed on Alibaba were from Russian companies helped Aliexpress close
free shipping, even for a small purchase or single item. gaps in its product range such as heavy home appli-
Aliexpress, as the international market, continued ances that are difficult to deliver from China. Given
Alibaba’s features and provided free shipping around the close proximity between Russia and China,

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Case 17  Aliexpress: Can It Mount a Global Challenge to Amazon? C-187
Aliexpress announced a domestic one-day delivery
service. At the beginning, the one-day delivery was
only for smartphones, notebooks, and other elec-
tronic products in 20 cities. For other cities, deliver-
ing these products took three days.
It is essential that consumers have privacy, secu-
rity, and trust when they are making purchases on
websites. Based on this premise, factors that affected
consumers’ buying motives included customer ser-
vice, convenience, price, shipping cost, speed of
delivery, quality, wide range of selection, etc. Both
Amazon and Aliexpress had a huge range of product
options and their websites were easy to navigate.
SINGLES DAY
Singles Day is a made-up holiday, designed by college
students in China to celebrate being single (11/11,
a group of ones, like a group of singles). Later, this
term spread and became popular on social media.
Today, Singles Day is better known as the grand shop-
ping carnival on November 11 in China. This popu-
lar 24-hour shopping event was launched in 2009 and
has had an impressive growth in one-day sales every
year from $10 million in 2009 to $25.3 billion in 2017
(see Exhibit 3). As a comparison, in 2017, Amazon’s
Prime Day in July—the biggest sales day for Amazon—­
generated an estimated $1 billion sales revenue in
30 hours; Alibaba achieved these sales in just two
minutes.
EXHIBIT 3  Alibaba’s One-Day Gross Merchandise Volume on Singles Day from
2011 to 2017 (in billions of U.S. dollars)
30
In billions of U.S. dollars
25
20
15
10
5 $3.04
$0.82
0
2011
Source: https://www.statista.com/statistics/364543/alibaba-singles-day-1111-gmv/.
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AMAZON’S STRATEGY
Differing from Alibaba, Amazon adopted a self-
employed approach and participated in every step
of the sale. The most well-known Amazon business
model was Fulfillment by Amazon (FBA). Most of
the buying and selling process was through Amazon,
which utilized their big networking and fulfillment
centers to quickly pick, pack, ship, and provide cus-
tomer service. Amazon owned its own products, and
also allowed third-party sellers by collecting sales
commissions. Affiliated merchants either sold prod-
ucts by themselves, or they chose to use Amazon’s ful-
fillment services. Amazon provided warehouses, and
merchants prepared the products. The FBA method
attracted merchants in different countries, decreased
costs, and provided good delivery services. However,
it was not a good option for Alibaba. As the middle-
man, Alibaba empowered merchants to process sales
by themselves. This was a very different orientation
compared to Amazon. The number of merchants on
Alibaba was huge, with most of them from China.
Since there was no guidance for the majority of these
merchants to expand businesses out of the country, it
was difficult for Alibaba to move forward to the global
marketplace as a whole. To maintain good fulfillment
centers and warehouses globally, Amazon spent mas-
sively to support them which resulted in lower profits.
Amazon had a customer service number where
you could talk to a representative, or leave a message,
$25.3
$17.79
$14.3
$9.3
$5.8
2012 2013 2014 2015 2016 2017
Year
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C-188 PART 2  Cases in Crafting and Executing Strategy
but you might wait as long as two days for a response.
Compared to Amazon, Aliexpress offered a chat line,
which allowed consumers to ask the seller any ques-
tions they may have before they actually purchased
the products. This made the communication between
retailers and consumers easier.
With low prices and wide selections, Amazon
dominated the U.S. online shopping market. With
Amazon Prime, members got free two-day delivery
(one-day, same-day, and two-hour in some areas),
streaming music, video, and readings from Amazon
for a $119 annual membership fee. More than
100 million people were Amazon Prime members
globally, and nearly half of U.S. households paid for
Amazon Prime membership. Even without Prime,
consumers could still have free shipping for a pur-
chase of $25. Since the majority of products were
fulfilled by Amazon, Amazon was always reliable.
Customer Service took less time to satisfy customers,
and items shipped from Amazon could be returned
within 30 days of receipt in most cases. In addition,
Amazon’s website and app were easy-to-use, which
provided a fluent shopping process.
For Amazon, its quick, high-efficiency, on-time
delivery and price were their main strategic focuses.
Amazon Prime offered an option for those consumers
who needed speedy shipping to pay for this service,
with a promised two-day delivery or less. Aliexpress
had the same low-price strategy as Amazon, but it was
less expensive than Amazon and there was no sales
tax. At the same time, Aliexpress offered free shipping
for everything, even for consumers who purchased
only one-dollar items. However, the shipping time was
much longer than Amazon, typically 15 to 40 days.
Some would say that there were sellers of coun-
terfeit merchandise on Aliexpress and the customer
service experience for returns and refunds was not
satisfactory. Some merchandise going to rural areas
was stolen or misplaced in transit, which affected
efforts of Aliexpress to make inroads in other coun-
tries such as India.
RETAIL ONLINE MARKET
The retail market had shifted rapidly from brick and
mortar to online because of price, convenience, and
somewhat easy return capability.
Walmart entered the online market with the
acquisition of Jet, and other retail operators moved
rapidly into their own online markets or contracted
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with Amazon to provide the mechanism to handle
their fulfillment. Shopping malls became less popu-
lar as online shopping grew. Google announced they,
too, were entering the competitive arena in a big way.
Substitutes for online segments such as grocery,
clothing, automobiles, etc., were still attracting the
customer who wanted to have the hold and feel abil-
ity. However, the online segment made it easier to
shop for groceries with the use of Amazon’s Echo
smart speaker. With the growth of smart devices
such as the Smart Speaker and Smart Device, the
purchase decision for online got easier. With both
face and voice recognition, the buying decision was
as simple as saying, “Alexa, buy my favorite coffee.”
Both Alibaba and Amazon built their own
mobile apps to allow consumers to complete
­purchasing. Alibaba started using new biometrics to
handle purchase confirmations, such as “Smile
to pay,” which used facial recognition technology
to confirm the online purchase. Gross consumer
spending on mobile apps in 2017 in America was
$17.5 billion U.S. In 2022, consumers are projected
to spend over $34 billion on mobile apps.
While technically it was not difficult to enter
the online segment, the time to build a brand and
a system to take on an Amazon was formidable. An
exception was Etsy that sold crafts and showed great
growth until Amazon quickly countered by starting a
new online operator named Handmade.
Suppliers of goods to be sold were not in a good
bargaining position because Amazon could control
both price and quantity due to their strong bargain-
ing power. Technology suppliers suffered the same
with Amazon’s in-house technology group.
Exhibit  4 provides the financial comparison
of Amazon and Alibaba. Alibaba does not publish
financials for its Aliexpress business unit.
THE FUTURE OF THE ONLINE
INDUSTRY
According to recent statistics from the U.S.
Department of Commerce, total e-commerce sales
for 2017 increased 16 percent from 2016. E-commerce
sales increased to 8.9 percent of total sales in 2017,
compared to 8.0 percent in 2016. The online indus-
try has had good growth years. High-speed Internet
technology development along with the “Internet of
Everything” rapidly changed the buying model for
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Case 17  Aliexpress: Can It Mount a Global Challenge to Amazon? C-189

EXHIBIT 4 Comparison of Selected Financial Data for Amazon and Alibaba,

2015–2018 (in millions, except per share data)

Amazon Fiscal Years Ending Alibaba Fiscal Years Ending

December 31 March 31

Selected Statement of
  Operations Data 2017 2016 2015 2018 2017 2016

Revenue $177,866 $135,987 $107,006 $39,898 $22,994 $15,686

Cost of revenue 111,934 88,265 71,651 17,065 8,642 5,328
  Gross profit 65,932 47,722 35,355 22,833 14,352 10,358
Operating expense 61,826 43,536 33,122 11,783 7,371 5,845
  Operating income 4,106 4,186 2,233 11,050 6,981 4,513
As a % of total revenue 2% 3% 2% 28% 30% 29%
Non-operating income (300) (294) (665) 4,957 1,740 8,122
 (expense)
Income before income taxes 3,806 3,892 1,568 16,007 8,721 12,635
Tax expense and other 773 1,521 972 6,216 2,732 1,552
  related expense
  Net income $ 3,033 $ 2,371 $ 596 $ 9,791 $ 5,989 $11,083
Earnings per share
 Basic $6.32 $5.01 $1.28 $4.00 $2.55 $4.51
 Diluted $6.15 $4.90 $1.25 $3.91 $2.47 $4.33
Weighted average number
  of shares
 Basic 480 474 467 2,553 2,493 2,458
 Diluted 493 484 477 2,610 2,573 2,562

Selected Balance Sheet Data

Total current assets $ 60,197 $45,781 $35,705 $ 40,949 $26,516 $20,792

Total assets 131,310 83,402 64,747 114,326 73,630 56,521
Total current liabilities 57,883 43,816 33,887 21,651 13,623 8,071
Total liabilities 103,601 64,117 51,363 44,270 26,542 17,767
Total shareholders’ equity 27,709 19,285 13,384 69,578 46,654 38,700

Cash Flow Data

Net cash provided by (used in) $18,434 $17,272 $12,039 $419,955 $11,670 $8,815
  operating activities

Net Revenue by Region

North America $106,110 $79,785 $63,708 – – –

China – – – $29,290 $17,403 $13,077
International 54,297 43,983 35,418 3,322 1,938 1,183
Web services (and others) 17,459 12,219 7,880 7,286 3,653 1,426

(Continued)

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C-190 PART 2  Cases in Crafting and Executing Strategy

Net Revenue Percentage

  by Region

North America 60% 59% 60% – – –

China – – – 74% 76% 83%
International 30% 32% 33% 8% 9% 8%
Web services (and others) 10% 9% 7% 18% 15% 9%

Sources: Amazon Inc. 10-K Report, 2015, 2016, and 2017; Alibaba Group Annual Report, 2016, 2017, and 2018.

the consumer. In the future the smart refrigerator
will be automatically purchasing groceries as needed.
Compared with traditional retail, one of the
advantages of electronic commerce based on the
Internet is to obtain big data, which is used to ana-
lyze the customer’s purchasing power, purchasing
behavior, and other relevant customer data.
After researching the growth of Amazon and
Alibaba and its subsidiary Aliexpress, Megan was
ready to make her recommendations with sound
justifications on what strategic position Amazon
should make to counteract Aliexpress’s inroads to
the Amazon market.

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