Alibaba faces uphill battle to replicate US tech model
Firm's e-commerce lead at home won't translate into an advantage in US, where innovation is key
Now that Alibaba has decided to list in the US, investors need to think about the company's ability to succeed in the US as a technology business. Alibaba has already stated bold ambitions for US and global e-commerce domination. While it is a leader in China there is little evidence to suggest it has the proven talent to succeed in America.
Alibaba is admired as an e-commerce titan because its China sales volume exceeds both Amazon and eBay combined. But, Amazon isn't an appropriate comparison to Alibaba because American internet companies don't find online product retailing to be particularly attractive anymore.
In terms of technology and innovation, e-commerce retailing is no longer Amazon's most important activity. It has evolved from e-commerce to digital commerce - the online provision of a wide range of media products.
[Jack Ma] and his senior managers have no direct experience in US technology culture
Amazon's web services represent state of the art, global data centre infrastructure used by governments and major corporations. Kindle is a platform for streaming and downloading digital media from books to movies. And Amazon even produces original TV series that can be streamed to its Kindle tablet.
E-commerce's dirty secret is that online retailing is actually just a front end website with troublesome customer fulfilment requirements lurking in the back office. Logistics, inventory and warehousing are costly and labour intensive activities, even with robots. Jack Ma Yun claims he will defend his China e-commerce business like "a crocodile on the banks of the Yangtze River", but it is doubtful if Amazon really cares.
Why bother with China when technological innovation allows Amazon and Netflix to transform and re-imagine their entire business models in free markets like the US? While online retailing of physical goods continues to be profitable Amazon and Netflix are now media companies and content makers.
Ironically, Alibaba is engaged in yesterday's technology business. Indeed, Alibaba recently acquired a department store, which is unrelated to technology innovation. It should acquire a US media company like Sony Columbia Pictures to transform its media capabilities.