Alibaba – An Alternative to Amazon

As Amazon took off here in the US, another similar startup business took its sights on the Far East.  Alibaba may look similar to AMZN but under the hood they are very different. While AMZN handily beats BABA on top-line, BABA  wins by a large measure on opex margins. This is inherent in their business model which is more similar to Ebay than to AMZN. Whereas AMZN primarily owns warehouses and inventory, BABA is lighter and collects a merchant fee as a middleman between buyers and sellers.

AMZN also has this aspect through their 3rd party marketplace but BABA has chosen to focus on this vertical primarily. I’m bullish on BABA, because they have a massive GMV (expected to top $1 Trillion in 2020) and room for significant growth in a country that has >$1b people. There are significant opportunities for advertisers with an audience that big (something AMZN has shown interest in over the last 5-6 years as they grow Amazon Media group). If you’re interested in a company even more similar to AMZN’s model in China, check out They’ve been more successful during the COVID-19 pandemic since they’re more vertically integrated than BABA. Still, when the outbreak subsides, both companies appear poised to grow as they haven’t even penetrated the majority of the market.

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