Alibaba Became the Largest Retail Economy in the World

“We want to be bigger than Walmart,” said Jack Ma, the founder and CEO of Alibaba Group, in September 2014, when Alibaba began trading in the New York Stock Exchange.

It didn’t take long.

Walmart’s total sales were $485.9 billion, an increase of 0.8%, in 2017 fiscal year.

Since Alibaba itself doesn’t sell products, the comparable number is Gross Merchandise Volume, the total value of all products sold through its online platforms. GMV for fiscal year 2017 was $547 billion, an increase of hard-to-believe 22% compared to 2016.

To understand how Alibaba is able to continue growing so much in Why China E-Commerce Is Growing Faster Than the US we wrote:

To understand China’s e-commerce growth one needs to understand why people buy online. In the US most people buy online because it is more convenient. Brick-and-mortar experience is pretty good and access to stores is easy. So the only way US online retailers are able to attract customers is by offering to save time or by better pricing. It’s not a matter of need, it’s a convenience - US e-commerce put traditional retail online. Walmart store sales are still growing, as Amazon is trying to get customers excited about drone delivery.

This is drastically different in China, and many other Asia market countries too. Traditional retail infrastructure is underdeveloped, and as rural areas expand and people get more wealthy they have no access to the products they want. This is why e-commerce has been growing so rapidly - it’s because of all of the people in cities other than major metropolis.

Many still separate traditional retailers from marketplaces, and would argue that Walmart is still the largest retailer. We think the difference is not significant. Most retailers are now a mix of traditional retail, online retail, third-party sales, drop-shipping, etc. Walmart is often quoted as the second largest US online retailer, after Amazon, but eBay is much bigger in terms of GMV. Amazon itself is a mix of retail and a marketplace, making the decision what is and isn’t a retailer even more confusing.

Last year Alibaba announced that it has become the largest retail economy in the world, as measured by annual GMV. The keyword used “retail economy” is an interesting one, since the message being sent is that Alibaba has built an infrastructure so wast that it’s an economy by itself. This is something we’ve been saying about Amazon in the US too - it’s a mistake to treat Amazon as a e-commerce website, or as a online retailer, something most people and companies do. Amazon, while nearing 50 percent of total US e-commerce, is an retail economy by itself. The marketplace is how sellers can participate in it.

Traditional retailers like Alibaba are economies for brands, the stores are an offline marketplace for brands. Amazon is an economy for brands and smaller retailers, the website is an online marketplace for products despite the source. Alibaba is an economy for millions of retailers, their websites are marketplaces for niche use-cases. From a bird’s-eye view they are all the same.

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Juozas "Joe" Kaziuk─Śnas

Founder of Marketplace Pulse, Joe wears multiple hats in the management of Marketplace Pulse, including writing most of the articles. Based in New York City. Advisor to other startups and entrepreneurs. Occasional speaker at conferences.

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