Amazon, eBay, PayPal and practically any like sites could have a serious problem in the next few years. As I explained in an earlier post today, Alibaba is the Chinese equivalent of the three companies and it has filed for an American IPO.
Alibaba reportedly has 300 million customers in China. That is only about 14 million short of the population of the entire United States.
To put it in another perspective, Alibaba did about $248 billion in sales last year. Amazon did a little north of $74 billion. For an investor, Alibaba has some great things going on – the Chinese middle class is growing and it just so happens to be the largest middle class in the world.
However, Alibaba is a Chinese company and does play by Chinese rules. It has been accused of knowingly selling knock-off products. But $248 billion in domestic sales may just be too good to pass up.
Alibaba’s prospectus says that it intends to continue to concentrate on China. But the reality is that, if it has a significant investor presence in the US, then it is only a matter of time until it takes up roots here too.
This brings up an interesting problem from a brand perspective. Will US consumers openly do business with a Chinese company? Oh sure, most of us buy Chinese goods but we typically buy them through a US, Canadian, or European retailer. I think there is going to be some cognitive dissonance in changing that behavior. How Alibaba handles that will be key to its success outside of China.
The second issue really has to do with Amazon, eBay and PayPal. Does a single global service make them obsolete? Do they go on the offensive with their nationality (Made in the USA)?
The possibility of Alibaba having a presence in the US illustrates a fundamental problem with how businesses approach business on the Internet. Ask anyone, “What does Amazon mean to you?” and the primary answer would center around “they have lots of stuff.”
The Internet has given consumers the ability to find what they want at prices they see as fair. But Internet retailers have generally rested on their ability to deliver more for less money without building a foundation to drive meaning. Your business is to provide “stuff.” Your brand must be something different that you can own and defend. In Amazon’s case, having your brand mean “lots of stuff’ fundamentally means that a company that can give you more “stuff” will win.
Luckily for Amazon, eBay, and PayPal, there is still time to act, but that time is quickly passing. If the Alibaba IPO ends up being successful, Alibaba will come to more markets and will be in a position to make a run at the established non-Chinese players with so much money in its coffers.
The established players have their businesses down pat. But unless they solidify their brands, Alibaba won’t just make a run, it will run them over.