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Alibaba Poses Most Serious Threat Yet To Amazon's Business Model

January 21, 2014: 12:00 AM EST
China’s online retailer Alibaba poses the most serious challenge yet to Amazon.com and its business model, which is based on the so-called three pillars —operating with low margins, helping customers find deals easily, and creating a lineup of customer-oriented services. Alibaba threatens Amazon with its no margins business; it earns money not from sales but from advertising and premium services. Unlike Amazon, Alibaba keeps its customers and operations away from online search engines. Also, Alibaba creates revenue no matter what kind of customers is accessing its online store. There are two ways that Amazon can respond to Alibaba’s disrupting effect: first, the online retailer can ignore the challenge and instead continue focusing on its most profitable customers and, second, it can create an independent business unit that would adopt Alibaba’s revenue model.
Juan Pablo Vazquez Sampere, "Alibaba: The First Real Test for Amazon’s Business Model", Harvard Business Review, January 21, 2014, © Harvard Business School Publishing
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