Oct. 2017
SHOPPERS will spend record sums online in the next few weeks—in China for Singles Day on November 11th, in America on Black Friday and around the world in the run-up to Christmas. E-commerce has been growing by 20% a year for a decade, shaking up industries from logistics to consumer goods. Nowhere does debate rage more fiercely about what this means than in America, where thousands of stores have shut this year and where retailing accounts for one in nine jobs.
Astonishingly, online shopping has only just got started. Last year it amounted to a mere 8.5% of the world’s retail spending. In America the share was about 10%. Its effects on business and society will be huge. Not just because retailing is a big employer that touches many industries, but also because its two greatest exponents, Jack Ma and Jeff Bezos, the founders of Alibaba and Amazon, have used it to amass a new sort of conglomerate. The question is whether its creation will foster competition or demand restraint.
Through one lens, this is a boon for competition. The e-commerce sites of Amazon and Alibaba lower barriers to entry by providing a simpler, cheaper way for small manufacturers to distribute goods and find potential buyers. Local manufacturers are challenging multinational giants. Consumers benefit, as they can choose from more and better products than ever.
Yet as the giant e-commerce platforms grow, so does unease about their might. With access to cheap, patient capital, Amazon can make big investments, including in warehouses, artificial intelligence and other firms such as Whole Foods, a grocer it bought for $13.7bn this year. Those investments, combined with the vast amounts of data on the consumers and businesses on its platform, mean that competitors struggle to keep up.
Amazon’s challengers should learn from China, where Alibaba’s rivals are teaming up. Tencent began as a gaming and messaging company. It now has a thriving digital-payments business and is the biggest shareholder in JD.com, Alibaba’s closest e-commerce competitor. JD is working with other retailers and tech firms, too. In August it announced that shoppers could buy through Baidu, China’s leading search engine.
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