Tech titans: It’s all about the customers with Alibaba and Amazon

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Tech titans: It’s all about the customers with Alibaba and Amazon

By Ed Rowland - 03/09/2018
Whole Foods founder John Mackey once said, “It’s competition that forces companies to get out of their complacency.” For Whole Foods’ new owner, Amazon’s Jeff Bezos, and Alibaba’s Jack Ma, that’s not the case. For them, innovation starts with the customer. The impending struggle between these two global giants will directly impact consumer health care and most everything else.

Both companies are pleasing customers globally and will inevitably compete. Bezos, who acquired Whole Foods, observed, “If you’re customer-focused, and you’re already the leader, customers are never satisfied.” Ma is more direct, “Forget about your competitors, just focus on your customers. He also has been quoted saying, “Never ever compete on prices, instead compete on services and innovation.” In the HR realm, Ma is a maverick, “Don’t hire the most qualified, hire the craziest.”

Vision aside, the two companies were even named in a somewhat similar fashion. Ma, during a visit to San Francisco, liked Alibaba — founded in 1999— as a good name. He asked a waitress what Alibaba meant. She said, “Open Sesame,” and indeed, the company opens the world up for small-to-medium-sized companies. Meanwhile, Bezos initially thought about naming Amazon, founded in 1995, Cadabra, short for “abracadabra,” but the name was soon discarded as too similar to “cadaver.” Bezos then settled on Amazon, the world’s longest river, and was strategically helpful in the early Internet days when website listings were commonly alphabetical.

As a U.S. consumer healthcare brand owner, what do the missions of these retailers mean? Essentially, it means that any global aspirations and channel pricing discipline will be framed by one or both of these companies. Of the two, Alibaba is probably the longer-term one to watch. Interestingly, Amazon utilizes Alibaba as its infrastructure engine in China. Meanwhile, Alibaba is studying the U.S. market and how best to enter it. Of the two, Alibaba is the larger. Alibaba’s online sales and profits surpassed all U.S. retailers, including Walmart, Amazon and eBay, combined since 2015, and has operations in more than 200 countries. And some parts of Alibaba, notably its e-payment system Alipay, are not part of the traded stock. In short, if U.S. brand owners worry about the so-called Amazon effect, a bigger storm is on the horizon.

Alibaba, though, has a structural advantage. With TMall and Taobao — Amazon and eBay equivalents — as key interacting divisions, the company’s data, marketing clout, pricing insight and, ultimately control, capabilities, as well as the ability to create, shape and direct efficient logistics are unprecedented. China’s restrictions on the Internet also have sharpened Alibaba’s content. Chinese consumers look to TMall as one of the definitive consumer healthcare information sources. It could be argued that Alibaba, along with other Chinese e-commerce platforms, also serve as their markets’ WebMD.

Coinciding with Alibaba’s structural strengths, the Chinese consumer healthcare market is poised to overtake the United States as the world’s largest, sometime within the next 10 years. While it is difficult to measure the conventional market sizes, China’s traditional Chinese medicines market is both huge and difficult to measure. The Chinese market is larger than the legacy U.S. framework. In short, Alibaba has structural strengths, while leveraging its domestic soon-to-be largest consumer healthcare market.

As a U.S. consumer healthcare brand owner, what is a strategic response? To quote one of my inspirations, Yogi Berra, “The future ain’t what it used to be.” A long-term (what is long-term?) U.S. consumer healthcare strategist must both understand Amazon now and Alibaba very soon — and certainly before it’s too late. When will it be too late? It’s hard to say, but when you consider Alibaba is a teenager and Amazon is in its early 20s, the window is potentially closing fast. Or as Yogi once said, “You’ve got to be very careful if you don’t know where you are going, because you might not get there.”

Ed Rowland is a Drug Store News Contributing Editor covering global issues. As the principal of Rowland Global LLC (rowland-global.com), he believes in the promise of global business and supports companies in their strategy, tactics and execution of international growth initiatives.

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