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I understand the opaqueness of both retail giants. Both can manufacture their P&L and control their numbers easily. Their stock prices could go up and down at will. Cautious on both stocks please.
But I am interested in the business models they have.
Amazon is doing fantastic job in creating new opportunities in multiple fronts. Spending CAPEX big time in building up humongous warehouses (count by football fields, Kavi Robots, secured warehouses with little chance of theft) and distributions and even in distribution (they probably is the main supporter of US POSTAL Services now, even delivering their packages on Sundays). Their strength is NOT really in making available products cheap but ALSO convenient. Many times I found item on sale and went to store, either it is out of stock, or hard to find. Waste gas, time and not getting it. And this is a place with a lot of stores and selection. I would be a lot better off to get it from Amazon, even if the price is not cheaper. The only issue with Amazon is that they COULD ship it in 2 days but WOULD not. And it has to be $35 in total to get the 5 days free shipping. So for a country with saturated retail stores, Amazon has it advantages, CONVENIENCE at very competitive price. Country with 70% GDP in consumer spending, it is kind of Matured.
Now to Alibaba, again we do not talk about stock pricing. Only on growth.
Yes JD.com to catching up to Ali and Ali should wake up.
But the environment is still very favorable. Ali had very little inventory and if I understand it correctly, it provided little inventory, mainly as a middleman to facilitate the transfer of good from vendor to consumer. Hence the issue of counterfeit good suit coming up from luxury manufaturers.
But China is still only 30%GDP from consumers and trend to move up the ratio a lot higher. Domestic consumption of goods and services versus Exporting in GDP composition.
Geographically, it is spreaded both RURAL and URBAN and the recent migration to cities are decreasing due to the hardship and cost of living away from family in major cities. Rural area has little selection or available of products to buy. Also the output of farm products are small scale and has a lack of logistics to move them to where the consumers are. Apparently Ali is trying to first supply rural consumers product to use via shipping and choice, then they will pursue opportunites to entice the old consumers to be supplier to ship their agricultural or home made products to urban or other rural areas to buy and raise rural area people earning power via their product sales. Central government is encouraging such a trend to increase the family life and living standard of rural people. Otherwize the bubble nature of the major cities is going to cause all sorts of unrest from the unfavorable living conditions.
So Ali may have an advantage in growth and they are actually doing the same or more like Amazon by investing in major distribution center vs the EMPTY shell they had before with LITTLE inventory. |
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