Why Amazon and Alibaba will have very different stories in 2022


E-commerce entrepreneur Alexander Graf gets out his crystal ball and discusses the two big ‘As’ in E-Commerce, Amazon and Alibaba

Graf: Alibaba will make a move for eBay

Amazon will absolutely maintain its dominance in 2022, despite anything Facebook or Google will attempt. And eBay won’t exist as a separate company by the end of 2022 as it will be part of Alibaba.

What makes me so confident here? I think the reasons are worth sharing, as these trends will shape a lot of retailer online strategies in the year ahead. First, Amazon.

Metaverse, shmetaverse

Google and Facebook have tried to compete before, unsuccessfully, in e-commerce. Now, Facebook is looking at ramping up its e-commerce hopes with its Metaverse vision. Facebook has already said that its Horizon Marketplace will allow creators to sell and share 3D digital products. “Our hope is that this will enable a lot more commerce, and help grow the overall Metaverse economy,” says Mark Zuckerberg

The Metaverse won’t change e-commerce in 2022. In the future, there might be use cases that will emerge, but as it stands, this is Second Life: it’s solving a problem nobody has. Until or if that equation changes, Amazon looks likely to continue its growth and maintain its marketplace dominance. I anticipate Amazon could triple or quadruple its business in the next 3 years.

Why? Amazon remains best positioned in a market that is still shifting from offline to online. There will be more payment methods, maybe even crypto, coming along, but Amazon will offer them or make it more convenient to use the ones it prefers, so they won’t matter. There are still contender brands in the space—payment providers such as Klarna may well try to make a play in e-commerce. That makes sense as there is lots of revenue to earn in the buying, distribution and selling of online goods. It is best earned from a platform perspective which is about selling customer access and not being the one handling the merchandise. The player handling the merchandise is, surprisingly enough, the biggest loser in e-commerce: it’s the player who gains the most access to the end customers who is the absolute winner.

So you could say no real change with the first e-commerce ‘A,’ Amazon. One big change which is on the horizon is that Alibaba will make a move for eBay. For one, in December Alibaba made a notable adjustment to its shareholding structure, splitting itself into Chinese and overseas operations. Indeed, Alibaba is explicitly saying it is doing that to have a better landing pad in the US and Europe. This makes absolute sense, as the majority of the Alibaba GMV is China based. To become a true global commerce player, Alibaba needs better access to Western customers. The company blog where it announced all this was entitled, “Alibaba Introduces More Agile Organizational Structure to Accelerate Domestic and International Growth.” The clue is in the name.

Additionally, eBay is good value in terms of market cap right now. eBay is worth something like $40 billion. This is a lot of money seemingly but not to VCs, private equity firms and Alibaba, whose own market capitalisation is more like $320 billion. 

The fight for customer loyalty

eBay also has a powerful brand. And so, eBay is an obvious target, and for eBay’s remaining investors the best thing is to reap the benefits of selling the operation to Alibaba. And from Alibaba’s point of view, the company’s been struggling in the past 12 months because of changes in the way China wants to work with technology firms, so it needs to change something and build another strong initiative. Within the Chinese market, Alibaba is already so strong that there is little potential for growth. All its tier two and tier three selling brands, such as AliExpress and others, are not yet making a difference to Western customers. So why not become a brand already familiar to millions, and who customers may actually feel affection and loyalty to, instead?

If this happens, look to eBay’s new Chinese owners moving swiftly to change eBay’s whole orientation to focus more on Asian merchants, and on using the brand as a consumer-facing portal. Alibaba is paid by Asian merchants to get access to consumers, wherever they are. eBay would deliver access to 90 million consumers, which is 90 million data points to sell back to them. Lazada, Daraz and Trendyol have already learned how to acquire other retail brands and integrate them into Alibaba. Now it’s time to use this training and step up. Eventually, eBay might become an exciting commerce case again.

Whatever happens with the two ‘As’, 2022 will be a pivotal year for major retail brands. That’s because it will be a year to reassess traditional models of digital commerce and ways of working. It will also be a year to keep up the pace and drive innovation in transaction models that will keep customers coming back.

The author is Alexander Graf, co-founder & co-CEO of e-commerce B2B software leader Spryker and co-author of The E-Commerce Book.