Walmart and Alibaba may have a retail war coming up. Alibaba is China’s primary online retail company. Walmart is the US big box retailer. So why compare them? The reason is that one is an offline mall store and the other is an e-commerce giant. Perhaps we could compare Alibaba with Amazon, but that would be comparing chalk with cheese.
Amazon sells products directly to consumers. Sometimes these products are delivered by the retailer, but normally by Amazon itself. Alibaba operates almost like eBay. It is a middleman between sellers and buyers. Alibaba does not hold stock but facilitates the sale of goods between the buyer and the seller. Alibaba provides a network of websites to facilitate this.
Alibaba has just reported a 56% increase in revenue this quarter ending June. Between the beginning of April and June 30, Alibaba’s net was 14.7 billion Yuan: equivalent to $2.2 billion and £1.7 billion. This is a 94% increase over the same quarter last year.
Now let’s compare that to Walmart. Walmart is an offline mall store, operating primarily within the US, although it owns some other retail stores such as ASDA in the UK. ASDA has been suffering from competition from discount stores Aldi, Netto and Lidl. Walmart’s net income dropped by 23%. Amazon has not had a great deal of success in China. It is selling but has not made much inroad into the Chinese market. Its brand recognition is low. Alibaba is definitely topped in China.
This difference in performance between these two giants in their own fields of activity represents the shift to e-commerce from traditional mall shopping practices. Not only that, but many analysts believe it also points to a shift towards Asia. However, e-commerce is only 15% of the total Chinese retail market. The potential for online marketing is still enormous – and is sure to expand.
Investors have been impressed by Alibaba, displayed by the company’s shares increasing by 81% over the year. This level of change may seem enormous by Western standards, but not in Asia. Some believe there is still room for growth and that Alibaba shares are still worth an investment.
As the other 85% of the huge Chinese population begin to move online, then Alibaba is in a massive driving seat for this huge potential market. Alibaba founder and CEO Jack Ma has stated that his company is not relying on the US for growth – it can grow without any increase in US sales.
Walmart is currently working hard to maintain a decent level of competition against Amazon. So much so that its net income fell by 23.2% due to expenditure on trying to compete. That is also because of a debt payment of $788 million – a one-off payment that is now behind the company.
In the battle between Walmart and Alibaba, the latter appears to have the huge Chinese market tied up – for now! In China, however, Amazon does have a bricks and mortar presence which Alibaba does not. It has also reached an agreement with JD.com which is one of Alibaba’s main competitors.
So while Alibaba is the head honcho in the massive Chinese market, Amazon may soon become a significant competitor. That said, Jack Ma knows his own country and has less got it tied up. It is South-East Asia that is going to be the next significant retail battleground. Who is best prepared to dominate that market? Walmart and Alibaba are the main contenders.
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