
Amazon Building Global Delivery Business to Take on Alibaba - prostoalex
http://www.bloomberg.com/news/articles/2016-02-09/amazon-is-building-global-delivery-business-to-take-on-alibaba-ikfhpyes
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ripberge
I could see this one coming a mile away. I worked with manufacturers overseas
for a few years and I would just slap my label on products and mark them up
200%.

Those factories should be able to sell directly to the consumer via the Amazon
marketplace, but there's a lot of hurdles for them. And they're certainly not
equipped to run their own Shopify store.

If Amazon can reduce this friction (and I think they can) I expect the prices
of a lot of commodity types of goods (like salad bowls or bike pumps) to drop
significantly.

~~~
rory096
What's stopping them? English ability?

~~~
erkkie
I would guess language and general cultural barriers, spending much time in
SEAsia, many of the (sometimes trivial) things western people expect from
services are really hard for locals to "get" without outside (read western)
guidance.

Just the tiniest bit of branding/marketing often sets someone miles apart from
another otherwise equal local competitor.

~~~
thirdsun
Also, even if they get all those things right, don't underestimate the
complexity of simply shipping goods to other continents. We're manufacturing,
selling and shipping shoes from europe and while it's easy within the EU it's
hell once you try to reach customers in other continents. Just handling
returns (which are to be expected frequently with shoes and their sizing)
simply renders the option too complicated and expensive for small companies.

~~~
roel_v
Meh, I buy stuff from alibaba from europe, cheap stuff like e15 worth of usb
connectors. They seem to manage just fine shipping, for free too, thanks to
subsidized china mail. For those low amounts they don't even bother with
returns; most are so afraid of bad ratings/open disputes that they'll ship
another batch the moment you voice a complaint.

Not saying I disagree with you I guess, it's also about westerners finding
alibaba a bit too exotic (and dangerous), but once you get used to the asian
style shopping, it's fine.

~~~
ghshephard
Right - but consider that you are an outlier.

I've spent 15 years buying stuff off amazon.com (coming from California), and
have recently moved to Singapore. The closest version of Amazon (with
*insanely good local shipping - sometimes same day by bike courier) is
[http://www.qoo10.sg](http://www.qoo10.sg). I've been fully satisfied with
prices, and delivery on everything there - but, it's still a bit of a culture
shock for your average western shopper.

We'll see if I still feel the same way a year from now - but (even ignoring
the discovery issue) I can imagine how having Amazon provide an interface for
my purchases would have made this way more seamless.

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balls187
> Both companies are vying for dominance of the rapidly growing cross-border
> e-commerce market, which by 2020 is expected to swell into a $1 trillion
> industry serving 900 million shoppers, according to a June report from
> Accenture and AliResearch, Alibaba’s research arm.

$1 trillion ecomm market.

> If the logistics business takes hold, financial services could follow, with
> Amazon giving loans to merchants, processing international payments and
> consulting its network of sellers on customs and tax matters.

Today, Amazon FBA Merchants get zero help for Sales Tax, as Amazon pushes all
liability onto the individual merchants. Why would this be different for
cross-border taxes?

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crypt1d
One of the reasons I use Aliexpress over Amazon is because Amazon still does
not ship electronics and many other goods to my country (east Europe). This
has been a restriction ever since Amazon launched and a huge disappointment
for me.

I hope that with this move they will also expand their shipping policy. I've
used Amazon while I was working in Western Europe and I had a pretty good
experience.

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xelfer
It would be nice to not have to pay $50+ to get something to delivered to
Australia.

~~~
balls187
How much of that $50AUD are handling fees, and how much of that is government
mandated duties and import taxes?

~~~
nl
It's all shipping fees.

It's so bad that "Reshippers" are increadibly popular here (in Australia).
They have a US address so you can ship Amazon stuff there, and then either do
a bulk shipment of multiple orders to Australia, or else just accept their
shipping charges (which are usually 50% of what Amazon charges).

~~~
rpgmaker
Those type of courier services are very popular throughout Latin America. I
always assumed that developed countries like Australia had their own local
suppliers and didn't need to buy from US-specific sites. Not enough to justify
the existence of such courier services, anyways.

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jcoffland
Alibaba suffers from two major problems. 1. It is riddled with scammers. 2.
Many of the legitimate businesses don't actually answer queries. Alibaba has
not done a good job of filtering scammers or in rating legitimate businesses.
Maybe Amazon can do better. There is certainly an opportunity there. I think
both American and Chinese businesses would welcome an Alibaba done right but
maybe I'm overestimating Chinese company's willingness to accept a Western
solution.

~~~
andrewclunn
I always sort of assumed that Alibaba benefited from some state sponsored
favoritism (as many Chinese companies do in the domestic market). Honestly
until reading this article I had no idea they even operated in Western
markets.

~~~
tyingq
They do benefit from postal subsidies, on both sides of the shipment. Direct
help from China, then indirect help via the Universal Postal Union in the
receiving country.

~~~
rahimnathwani
I've seen this line about postal subsidies mentioned several times, but no one
I've asked has pointed to any credible original source for these subsidies.

Are you really talking about some specific set of subsidies paid by the
Chinese government? Or just the fact that China Post pays a pretty low rate
per kg for USPS for delivery to US addresses?

~~~
tyingq
The Universal Postal Union is part of the UN. Certain countries get favorable
treatment, based on being designated "transitional" under the current
agreements. China is currently "transitional".

I suppose, technically, it's not a subsidy, but it works like one by setting a
fixed, unrealistic cap on rates from the receiving country.

Does the Washington Post count as credible?

[https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...](https://www.washingtonpost.com/news/storyline/wp/2014/09/12/the-
postal-service-is-losing-millions-a-year-to-help-you-buy-cheap-stuff-from-
china/)

Edit: I have only anecdotal evidence of the other subsidies I mentioned...the
Chinese side ones. We buy a lot from China.

Edit 2: You may also hear people complaining about the special ePacket program
that the USPS negotiated. This is an interesting Inspector General document on
whether it was a good idea;
[https://www.uspsoig.gov/sites/default/files/document-
library...](https://www.uspsoig.gov/sites/default/files/document-library-
files/2015/ms-ar-14-002.pdf)

~~~
rahimnathwani
>> Does the Washington Post count as credible?

It does count as credible, but neither that WaPo article nor the link in your
2nd edit even mention the word 'subsidy'.

(My earlier comment already acknowledged the impact of postal charges. I was
asking specifically about the 'subsidies' which I've seen mentioned
repeatedly, but without any specifics to lend credence to the claim.)

~~~
tyingq
>>It does count as credible, but neither that WaPo article nor the link in
your 2nd edit even mention the word 'subsidy'.

I don't see a remarkable difference between charging someone "less than actual
cost" and the word "subsidy".

But, it sounds like you're looking for a credible source specifically on
Chinese government subsidies made to Chinese exporters. That would be
difficult to find, as it would likely violate treaties...the Chinese
government wouldn't talk openly about it.

Not specifically about postal subsidies, but indicative of the controversy
"proof" would stir up: [https://ustr.gov/about-us/policy-offices/press-
office/press-...](https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2015/february/united-states-launches-challenge)

~~~
rahimnathwani
>> I don't see a remarkable difference between charging someone "less than
actual cost" and the word "subsidy".

OK:

\- I think we're in agreement that neither of us is aware of a credible source
for the 'Direct help from China' you mentioned in your earlier post.

\- Although transitional countries pay less in terminal dues than do other
countries, I've not seen data to suggest that the amount paid by China Post to
USPS is 'less than actual cost' for USPS to deliver said packages. (I'm
presuming by 'cost' here you mean 'marginal cost'.)

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voltagex_
Maybe now they can stop limiting what they'll ship to Australia. Even with our
now-worthless currency there are still some things that are cheaper to buy
from Amazon.

~~~
hobbes78
Have you ever considered using a re-shipper service?

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Aissen
They definitely need that. What I find fascinating on Aliexpress is that they
can ship a product a whole world away, for the price it costs me to send a
letter to my neighbour. They need a way to compete with the zero-margin
(negative margin?) ChinaPost service.

~~~
tyingq
It's the Universal Postal Union subsidies. The low prices aren't hurting
ChinaPost. Your tax dollars in the receiving country are where the money comes
from.

~~~
Aissen
Thanks, I didn't know how international shipping was organized, but the trick
they use to get low prices is pretty clever.

~~~
tyingq
One funny side effect is that the subsidies don't work in the opposite
direction. It's not uncommon for the postage cost for a return to
significantly exceed the original cost of the item+shipping.

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annnnd
Alibaba: shipping to anywhere in the world, but just from China. Amazon:
shipping goods from all over the world, but just to selected countries (others
pay premium delivery rates or can't get the shipment at all).

Maybe there is a place for a third, truly global competitor?

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sharemywin
I wondered about this business model for a long time. The cost to ship
something Fedex is 3x-5x more than shipping something in a container. I always
thought a efulfillment company that would offer a service to buy space in a
shipping container to there facility would be a good value add.

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xiaoma
I think Amazon will have a hard time of it. Alibaba has a considerable lead,
superior processes, lower costs and more access to top talent.

~~~
dovdov
top talent xD

~~~
xiaoma
What ratio of the _most talented_ developers in the US (and similar markets)
do you think want to work for Amazon?

Alibaba is a dream job for the best of the best in China, and to be honest,
the developer market in China is a lot bigger than that in the US. In all
fairness, Alibaba can probably hire a better dev for 50k USD/year than Amazon
could for 150k.

~~~
eva1984
To be fair, best of best Chinese programmers, I see, a considerable of them,
come to US for better pay...

But could you elaborate on your claim a little bit? Amazon is not as
incompetent as you might think, they have cutting edge logistics and mechanics
in terms of delivery, the degree of automation is both futuristic and mind-
blowing. Also AWS is definitely the market leading player, Aliyun outside of
China has zero chance going against it.

Disclaimer: Ex-Amazon employee, visit the fulfillment center once.

~~~
xiaoma
Sure. No problem.

The vast majority of people in China can't come to the US no matter how good
of programmers they might be due to immigration reasons. Even if that weren't
a barrier, the vast majority of Chinese people don't have the language skills
to work in the US. As with many other places, the best coders often aren't the
best language students. Think of some of the most well-known and respected
programmers in the US. How many of them could function professionally in
another language? Very few excluding immigrants.

A lot of the best engineers in the US don't want to work for a huge company.
They want to join a start-up or start their own. This isn't usually the case
in China. Kaifu Lee has struggled greatly trying to get top talent to consider
anything other than a large company like Alibaba or Tencent (or for the
government). The Chinese people you meet who are working in the US aren't a
very representative segment of the market.

I wasn't speaking specifically of AWS. The territory occupied by Chinese
companies is divvied up a bit differently than in the US. Shengda (a gaming
company) was a relatively early cloud provider for example, and Alibaba is
late to that market. On the other hand, Alibaba also does a variety of things
that Amazon doesn't, and its e-commerce _is_ beating Amazon in multiple
countries that aren't China.

Alibaba's pace of expansion in developing countries is brisk, they dominate
Chinese e-commerce much more thoroughly than Amazon does US e-commerce (80% to
~30%) and most importantly their business model is less capitally intensive
than Amazon's. In fact, according to their annual reports, their net margins
are clocking it at over 40%!

The one possible caveat that will be interesting to watch is Amazon India.
That model is much closer to how Alibaba operates and could be key to winning
in other international markets.

Amazon and Alibaba have a lot of of similarities and I don't at all think
Amazon is incompetent. Amazon is terrifyingly competent, but just has some
problems around reputation amongst prospective employees, partners and pretty
much everyone except for customers. Alibaba is also terrifyingly competent,
but loved and even leaner and even more efficient.

(I don't have any investment in either company)

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TheLogothete
I think that Amazon will stretch itself too thin at some point, leading to a
disaster for them.

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adventured
They're more likely to begin structuring the company as Alphabet has, helping
to avoid the risk of disaster.

Logistics/fulfillment, retail, AWS

There are pretty straight-forward division lines. AWS is already a separate
corporation for example and will inevitably be spun-off in the distant future
as an independent $75-$100 billion company.

~~~
TheLogothete
Except Google is literary printing money for everybody else in the group.
Amazon is cashflow-from-operations positive, but nowhere near Google. More
importantly, Amazon attempts to enter HUGE, developed markets, not the non-
existent markets (at the time) of internet retail, cloud computing or public
information retrieval. The only way for Amazon to enter in those markets is if
they make a serious commitment. It is my opinion that if they commit
themselves to the new markets they have been eyeing in the past couple of
years (b2b commerce AND logistics), investors will become very bearish,
leading to a disaster for Amazon, probably even a buyout.

