Amazon has this key advantage over Alibaba (for now)

The expected encounter of Jeff & Jack in Southeast Asia has been delayed, fuelling speculation that Amazon is unable to pull it off in the region because of a lack of talent and resources.

We at Momentum Works think that this speculation is wrong. Amazon has been hiring in the region; and through Amazon Web Services and sourcing operations, the company is very active in the region.

Why Amazon is not in a hurry

We can only conclude that they are studying the region very, very carefully – and once it decides to enter, it will be a big wave. In our opinion, there are three plausible reasons why it has not done so: market study still in progress, legal & compliance hurdles still being overcome, and decision that timing is not mature yet.

The last reason (about timing) is fairly easy to understand. With so much effort by the pioneers such as Lazada, ecommerce is still less than 2% of total retail in most markets; in addition, Shopee’s sharp entry into Indonesia last year to become number 1 in GMV within months probably demonstrated that a latecomer still has a (good) chance, if your pocket is as deep as Amazon’s (not Shopee’s).

So why in a hurry?

An inherently international company

And once it decides to enter – it has one key advantage over its arch-rival, Alibaba Group.

Amazon, as a company, is much more international in terms of working language, talent and culture.

For virtually each market that Amazon enters, the company can find people in its existing team who are from that market. They speak English and the local language; they are versatile in both Amazon and local cultures.

Even if they can’t find someone internal, they can recruit easily. In Middle East, in India, in Mexico, in Brazil – many of the highly education young professionals are very comfortable with English and American culture.

Once they are onboard, they are dealing with a supporting system, from strategy to supply chain to financing, that functions in English language.

In comparison, Alibaba’s whole ecosystem in China is inherently Chinese-speaking. It is very hard to find some internal who speaks both Indian or Arabic languages and Chinese, and are familiar with both cultures.

It is much much harder to find Indians and Saudis who know the Chinese language and are able to interact seamlessly with various internal teams.

When Alibaba acquired Lazada, many people suspected that they would make swift changes to the management, replacing the Western (and Northern) leadership of that was in place.

This would happen sooner or later, but did not happen for a long time. We think one of the key reasons is – who does Alibaba replace them with?

Alibaba did not have that many people who are well versed internationally.

Rakuten CEO’s famous ‘englishnisation’ is to solve the same problem.

The cases of India & Middle East

The lack of such talent (and international culture), we believe, was a key reason that (often through leading to other factors) hampered Alibaba’s global growth.

In India, Alibaba has made multiple attempts to enter the market, the latest through PayTM Mall. However, you can hardly call any of them successful. At the same time, Amazon is racing ahead, probably beating Flipkart. (Being a latecomer but beating the longstanding local champion in India is probably another reason why Amazon is taking its time about Southeast Asia).

In the Middle East, Amazon acquired Souq.com at a heavy discount, and swiftly replaced/reinforced the core team after Black Friday, putting them in a good competitive position against Alabbar Family’s Noon.com and China’s JollyChic.

In comparison, it has been two years since Alibaba acquired Lazada…

Not to repeat the loss in China

You might ask, it would not be difficult then for Amazon to find English speaking Chinese nationals, why did Amazon lose out to Alibaba in China in the first place? Well, it was one of the early attempts of Amazon into a large foreign market with completely different culture, user preferences and competitive landscape.

According to multiple friends who worked at Amazon China during that period, Bezos was quite adamant about things being done in a certain way, while local competitors such as Alibaba were much more nimble and much more capable of accumulating quick wins. Amazon as a long-term-view company was soon left behind and found it very difficult to catch up.

Through that battle, which not only cause Amazon to lose the giant market of China, but also bred Alibaba as an international competitor for Amazon.

A person as smart as Bezos is probably determined not to let it happen again, although other markets will probably not produce global giants, as we at Momentum Works previous argued.

Hence we see Amazon’s aggressiveness in India, and in the Middle East.

Alibaba not staying idle

However, a company as smart as Alibaba is not going to stay idle – seeing a problem and not addressing it. It has built a Global Leadership Academy and has been hiring MBAs, despite Jack Ma’s early reluctance towards business school graduates.

Putting Lucy Peng in charge of Lazada is another big commitment towards global markets. We at Momentum Works previously argued that only Peng will be heavy enough to push things through, and we would like to add a point that only she is able to mobilise sufficient internal resources (ultimately Lazada is a BU at Alibaba) to make such happen.

Gradually more people will graduate from the Global Leadership Academy, and more MBAs will be brainwashed with Alibaba’s culture.

To rejig the culture across all aspects (and build a truly international company) would not be easy (and might fail), but Alibaba is marching on.

There have been many instances through Alibaba’s history where things were extremely challenging and chances of success dime, but they managed to overcome these situations to be where they are today. No reason to write them off for internationalisation.

Moving forwards

Maybe Amazon will acquire Shopee?  

But based on Amazon’s track record, they will extort a heavy discount.

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Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed in our blog, please drop us an email at [email protected] and let us know how we can help.