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Comparing Amazon and Taobao

Title: A Comparison between Amazon and Taobao
Date: 2011-03-28 09:02:52

I have been a user of Alipay for a long time, since 2007 until now. Before 2008, I didn't even know the meaning of the term B2C. I used to buy things on the C2C platform of Taobao. It wasn't until one day when I clicked on an advertisement for that I realized online shopping could be secure. After that, I tried buying things on these big B2C platforms like, Newegg, Amazon, Dangdang, etc. The service was really good, and I became dependent on these B2C platforms.

A few days ago, Shi Yuzhu recommended a book called "How We Decide" on Weibo. I searched for it on Taobao and found it confusing. I wasn't sure if the Chinese translation of "Why Smart People Make Big Money Mistakes" was the official one. The shop owners were not available, so I went to Amazon and easily placed an order before going to sleep.

I want to clarify that this article does not have any specific national bias. Those who have anti-American sentiments, those who shout "Long live the Communist Party," and those extreme patriots, please stay away. To these people, I have one thing to say: in this era, whoever can save me time, I will love them.

First, let's talk about Amazon. It is a typical business model that attracts customers through convenient services. It is also a typical business model of developed countries. When I use Amazon, I don't need to apply for an online banking account or go through the tedious process of filling out bank card information, security cards, dynamic security codes, etc. I don't need to deal with hundreds of sellers selling the same thing and feel overwhelmed. I can even buy everything without revealing my name. If you give me a list, I can buy everything within 5 minutes. That's efficiency.

All the products on Amazon are sourced and supplied by the company through various channels. All electronics have a national warranty and reputation guarantee. All books can be guaranteed to be genuine and low-priced. The reason for the low prices can be compared to why Walmart's prices are lower than your local supermarket. When I buy things, I don't need to clarify the quality guarantee of a phone, whether it is genuine, or if there are any accessories, etc. Amazon has already provided detailed information in the product description.

Every company and website has its own core competitiveness. Amazon's core competitiveness lies in its services. The products I sell are clear, and my delivery is free. You don't need to pay in advance when buying from me. The policy of cash on delivery is a demonstration of trust from the seller to the buyer, and it is also a way for the seller to attract buyers. You can buy many books and then refuse to pay. Of course, I believe that very few people would do that.

On the other hand, Alibaba's business philosophy is what? It is still the traditional Chinese thinking: you must send the money first before I can give you the goods. To achieve this goal, Jack Ma established a platform that allows you to fully trust this platform as a guarantee. You give the money to this platform, and this platform will transfer the money to the seller after you receive the goods. In this process, Alipay, which is this platform, does not take any profit. Let's put this aside for now and see how Jack Ma makes money.

Jack Ma's second philosophy is that he delegates all the responsibilities to the hundreds of thousands of stores on Taobao. If you search for a commonly used mouse or keyboard, you will find that there are thousands of stores selling the same product at similar prices. The intensity of this competition can be imagined. And price is not the only factor for consumers when purchasing goods. Various conditions, including product services and shipping, determine the consumer's hesitation and concern when making a purchase, fearing that they will buy counterfeit or refurbished products, etc. At this point, Jack Ma is smart. Alright, since you are afraid of making mistakes among these thousands of sellers, then we have a service on Taobao. Some sellers pay a fee, for example, if you pay a few thousand yuan per year, you can have a store certification and quality certification on Taobao, which will make consumers feel at ease. It's somewhat similar to Baidu's bidding system. once published an article about it, you can search for it, it's called "Baidu is becoming a money-making machine."

Taobao's money is extracted from the sellers in this way. Jack Ma himself said that we don't make money from consumers, but is that really the case? You can search for it. The prices of certified stores on Taobao are generally 3%-5% higher than others. Why? Because I am a certified store, consumers, according to economics, have an instinctive bias towards purchasing from me. So, even if my price is slightly higher, you will consider buying from me because I am certified and trustworthy. This is what? It's clear that Taobao is making money from the sellers, and the sellers are also exploiting the interests of consumers. This is the Taobao model.

I once read a book that analyzed why Walmart became the top 500 companies in the world. Walmart created logistics channels and proactive services that had never been seen before. I believe Amazon is the same. If you compare it to the online Walmart, are the prices high? If you don't believe it, go and compare. And you often see tempting special offers, such as the EX500 headphones for 299 yuan, or the MX360 for 99 yuan.

Where does Taobao's competitiveness lie? It lies in its local characteristics and promotion. There are all kinds of online merchants with Jack Ma's presence. I have attended various lectures and was once infatuated with it. But now, when I think about it carefully, Jack Ma has made a lot of money, and so have many small businesses that opened stores for free. There are countless people who have made a lot of money. In this whole process, who has lost? You can say it's a win-win situation for Taobao, sellers, and consumers, but I want to say that you are naive. There is no real win-win situation in capitalism. It's like the essence of the imbalance in global economic development, which is the transfer of social wealth between countries. Consumers have been exploited by hidden services and only receive the appearance of low prices.

Nokia occupies 48% of the mobile phone sales and 60% of the mobile phone profits, while Apple has only 1% market share but has 20% of the mobile phone profits. Did Steve Jobs make money too easily? This is the data I remember, don't take it too seriously. It's probably something like that. You can refer to an article from CBNWeekly last year. Where does Apple's profit come from? In North America, you can get a good phone for $199 with a contract or even just $129 without a contract. Why? Nokia still follows the cost difference profit model from factory to end consumer, while Apple has created a new profit model of software and services. You have to pay for downloading songs on iTunes and for software. Why do many people still foolishly buy them? They are buying the service. I willingly accept your service and am willing to pay a considerable bill for it.

Amazon's trust in buyers ultimately earned them praise from people like me and increased their sales. At least, I originally wanted to buy the book "How We Decide," but ended up buying so much more. With free shipping, I just need to provide an address and phone number, and it will be delivered to me. I sincerely admire that in China, there are sellers who trust buyers like this and businesses that still rely on services to sell products. I also hope that Chinese people will not be deceived by so-called low prices (besides, the prices are generally only about 1% lower). Remember, in this information age, whoever can provide me with higher efficiency and save me more time, I will buy from them.

Speaking of selling services, the booming e-book reader market is an example. E-book device providers like Sony, Amazon, Shanda, and Hanwang are all building their own e-book libraries to compete in the future. The future e-reading market will replicate the business model of iTunes: low-profit devices and high-profit services. Currently, Kindle 3 has not been officially released in China. The official price for the Wi-Fi version is $139, which is about 947 RMB. The Wi-Fi + 3G version is $189. Although the prices are still high, the potential market for e-book readers can be seen from the low-priced K series tablets. With the decrease in e-book reader prices and the maturity of 3G technology, the 3G module will become a standard feature of e-book readers in the near future. People's reading habits will also change. At that time, whoever can seize the opportunity in the content market will be able to create a miracle like Apple.

Once again, thank you Amazon for allowing me to receive my beloved book in just three days.

Of course, I also want to thank Jack Ma. You have given yourself greater profits and provided many new job opportunities in China.

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