Amazon, E-Commerce Tech Giant Inching Along in China?

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It’s no secret that China is a coveted market for businesses looking to grow their business. It’s the second largest consumer economy in the world, primed to surpass the U.S. in a few years. Amazon has been wildly successful in the U.S., with 43% market share, but they’ve been “inching along in China, trying to figure out a combination of offerings that will allow it to gain a bigger piece of the market.” It’s no easy feat, considering they’re going up against the native market leader, Alibaba. To make matters more difficult, Amazon also faces strict government regulations and restrictions on foreign companies.

On a side note, Alibaba has taken full advantage of this challenge by offering to partner in joint ventures with foreign companies trying to break into the Chinese market.

Amazon has entered several foreign markets (Canada, China, Europe, etc) and they still haven’t found the “secret sauce” of success like they have in the U.S. Further, they’ve been slow to grow their Prime business internationally as well as it has grown in the U.S. The program consists of 80 million customers world-wide; however, 75% of these members are from the U.S. The remaining ~25% include Canada, India, Japan, U.K., and Germany.

According to Ovide and Abboud, Prime is essential to Jeff Bezos’s mission of making Amazon the sun of the consumer spending universe and analysts estimate the roughly 70 million Prime members spend at least twice as much as the typical Amazon shopper and more of their total spending on the site. Amazon began offering Prime membership in China in 2016, yet they haven’t realized the growth they desire.

As a result, they’ve resorted to launching a store on Alibaba’s Tmall site and a localized storefront with over “30 product categories, including those that appeal to Chinese consumers like apparel, shoes, baby, toys, home, kitchen and beauty.” Russ Grandinetti, Senior Vice President of Amazon, stated that “launching a unique program designed for our Chinese customers shows our obsession with Chinese customer needs, and demonstrates our long-term commitment to growing our business in China and we will continue to innovate for customers in China to deliver more value over time.” Amazon’s strategy is to enter the market at multiple angles. This seems like a good strategy to generate awareness in the minds of consumers, but is it enough to go up against Alibaba? Perhaps, Amazon could integrate with the WeChat app to streamline their benefits?

https://techcrunch.com/2016/10/28/amazon-prime-launches-in-china/

http://www.businessinsider.com/amazon-prime-subscribers-hit-80-million-2017-4

http://www.retaildive.com/news/amazon-delivers-cheaper-limited-version-of-prime-to-china/429331/

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Three Big Lessons from Big Data Fails

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Big data has many implications for marketers, including better insights into the customer experience and more opportunities for personalization along the sales funnel. But with so much information at our fingertips, there is also greater potential for things to go wrong. Thankfully, missteps by major brands can be lessons for us all. Here are three learnings to consider before using consumer data in your next campaign:

  1. Avoid using data that’s not critical for achieving your objective

Marketers should be mindful of the data they’re collecting and how it will help meet campaign objectives. In other words, don’t collect data just because you can. OfficeMax learned this lesson the hard way after mailing a letter addressed to “Mike Seay, Daughter Killed in Car Crash.” The recipient, an off-and-on customer of OfficeMax, had indeed lost his daughter a year prior to an auto accident. As it turns out, the mailing list came from a third-party provider but the PR disaster that followed placed all eyes on OfficeMax.

  1. Be careful not to extrapolate

Big data can sometimes tell us when wedding bells will be ringing or when a family has moved to a new neighborhood. While these major life changes can create thousands of marketing opportunities, we need to be sure that the conclusions we’re making are not our interpretations of the data. Pinterest made this misstep when it sent emails to some of its users congratulating them on their upcoming nuptials. The problem was that many of the women who received them weren’t actually getting married.

Pinterest jumped to conclusions about users based on the content they were pinning. However, it failed to recognize that many may be pinning for a friend or just dreaming of their big (some)day. Avoid making inferences that can lead you to thinking about your audience too broadly or too narrowly.

  1. Don’t be creepy

Target won the creepiest-brand-of-the-year-award when it figured out a teen girl was pregnant before her father did. As the story goes, an angry father walked into his local Target, accusing the store of encouraging his teenage daughter to get pregnant. His daughter had been receiving coupons for baby clothes and cribs. The manager apologized to the man and followed up a few days later over the phone to say sorry again. However, this time it was the father who was apologizing: “It turns out there’s been some activities in my house I haven’t been completely aware of,” he said. “She’s due in August.”

It’s not surprising that expecting mothers were uncomfortable with Target knowing about their pregnancies. What is surprising, however, is that the women were less likely to use the coupons if they felt they were being “spied on.” Target quickly addressed this by mixing in ads for other goods, so the targeted ads looked random. What can be learned from Target’s stocker-esq behavior? Just because we have information available doesn’t mean our customers are comfortable with it. Be respectful of how you use it. Put simply, don’t be creepy.

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IBM is Entering the Chinese Cloud Computing Market

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China is the second largest consumer economy in the world. Garter Consulting projects that the Chinese cloud computing market will be worth roughly $21 billion by 2018. “As in other sectors, the main challenge for U.S. firms in seizing cloud-related opportunities in China is its regulatory environment.” IBM, the U.S. based technology giant, is the latest to enter the Chinese market with their cloud technology. Their mode of entry is a joint venture with Wanda Group. This new company will license IBM technology in Wanda-owned data centers. Wanda will sell the services to Chinese businesses and ensure that they comply with Chinese regulations.

IBM is far from achieving first-mover or even second-move advantage in this market. Further, this isn’t the first American company entering the cloud computing market in China. In 2014, Microsoft Azure entered the market in a joint venture with 21 Vianet. Additionally, Amazon Web Services entered the market a few years ago in joint ventures with multiple Chinese companies.

Considering the strict technology regulations in China, joint ventures are the only mode of entry for American companies.

http://fortune.com/2017/03/19/ibm-cloud-in-china/

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Alibaba’s Desire to Play on the World Stage

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Alibaba is an online platform that consists of several businesses, but primarily:

  • Taobao – China’s largest mobile commerce destination and largest third party platform for brands and retailors
  • Tmall, – China’s largest third party platform for brands and retailors. Alibaba’s higher-end site for established consumer companies.
  • List of other Alibaba businesses: http://www.alibabagroup.com/en/about/businesses

Alibaba Overview

Founded: 1999
Employees: 46,819
Headquarters: Hangzhou, China
Annual active buyers in China: 443 million
Countries with buyers using Alibaba: 200+
Annual revenue*: $21.7 billion
Annual profits*: $5.8 billion
Market value: $264 billion
*12 months ended Dec. 31, 2016

Alibaba was founded by Jack Ma in 1999. Their mission statement is “to make it easy to do business anywhere.” It is often referred to as the Amazon of China and the comparisons between the two companies and their CEOs are the subject of many. By the numbers, Amazon outperforms Alibaba in revenues, $136 billion in comparison to $22 billion, respectively. However, Alibaba is far more profitable, with operating profits of $6.7 billion in comparison to Amazon’s $4.2 billion. Although Alibaba is highly profitable and the market share leader in China (world’s second largest consumer economy), “Ma knows that eventually he will need to conquer new territories for Alibaba to continue on its current trajectory.” Thus far many companies have had trouble entering the Chinese market; however, if that were to change, Alibaba would be in a tough spot.

To date, Alibaba’s “forays into the U.S. market have been furtive.” Their U.S. strategy is the following:

  1. Work with established brands to sell on Tmall;
  2. Help small businesses—the ones that would create new jobs—sell in China on Taobao
  3. Match U.S. manufacturers with Chinese component makers on Alibaba.com, the company’s original business

In order to help achieve their goals, Jack Ma has been working diligently to recast himself as global leader by taking a role as a global ambassador for Chinese business, touting “800 hours aloft last year—­visiting princes, Presidents, and Prime Ministers and lots of mere businesspeople too.” However, the article highlights a key challenge that all business have when trying to enter a foreign market – government relationships and regulation.

Ma has been working closely with the U.S. government and has developed a “felicitous” relationship with government, which “rests heavily on his job-creating pledge to President Trump. And that bold promise is built on a bit of nuance. Specifically, Ma predicted that Alibaba will sign up 1 million U.S. small businesses to its various e-commerce platforms, primarily Taobao, its mass-selling site for individuals, and Tmall, its higher-end site for established consumer companies.”

Although, “many assumed Ma’s bonding with Trump presaged an Alibaba move into selling to U.S. consumers. For now, Alibaba professes to be more interested in helping U.S. businesses sell to Chinese consumers rather than the other way around.”

Additionally, Alibaba has another significant hurdle in dealing with lack of IP protection in China. Taobao has been “plagued with counterfeits,” leaving many business reluctant to use the platform. Adam Lashinsky notes that “problem is so bad that in December the U.S. Trade Representative reinstated Taobao on its “notorious markets” list, a “name and shame” tool intended to pressure non-U.S. marketplaces to clean up their acts.” Although the company has made strides in policing the issue, Ma acknowledges that the situation calls for extreme measures.

What does the future hold for Alibaba’s play to go global? Jack Ma leaves us with this:

“Maybe the business community has to drive this instead of government,” he says. “I feel sorry for government. When you put 200 country leaders in the same room trying to realize something, it’s impossible. But when you put 200 businesspeople in one room, we might work something out.”

http://fortune.com/2017/03/24/jack-ma-alibaba-china-ecommerce-world-greatest-leaders/

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Focus on Value

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In this day in age, globalization and technology-driven innovation leave little room for companies to attain and sustain a competitive advantage. At times, first mover advantage is only good if one can stay ahead of competition, which is especially challenging during a time where many competitors are simply copying strategies and/or capabilities. We’ve seen it over and over again. Facebook copied Snapchat with their Instagram stories. Samsung and HP have copied Apple’s designs. In the airlines industry, Southwest Airlines has been dominating the budget airlines space, but now United, Delta, and American have recently started offering “basic economy” class. Sometimes copying works and it’s a reality of doing business. However, that’s a reactive environment. In Jim Fowler’s article in Entrepreneur, he contends that “winners set the pace, not the other way around.” The secret to outpacing your rivals is competitive intelligence. Use your competition’s “moves to drive your own innovation,” as opposed to just reacting by copying.

Companies are often inundated with data and it often takes a substantial amount of time to do analysis. However, now there are many affordable analytics tools available to help companies distinguish the “signal from the noise.” You don’t have to wait for the monthly or quarterly reports; analytics tools enable organizations to “keep your finger on the pulse with daily tidbits of competitive intelligence.” Companies are investing significant amounts of capital into business intelligence/data analytics tools. Boston University’s CIS study reported that business intelligence practices sparked worldwide revenue of $13.1 billion. Further, the study also showed that 54% of professionals felt that their companies would perform better if they made data-driven decisions.

Below are Fowler’s three tips on using data to stay ahead of your competition.

  1. Keep the skies friendly. Fowler states that it’s a much better use of your energy when you can take the competitive intelligence and use it to define your next move. Your competition doesn’t have to be your enemy. Instead, focus on value. What is your competitor missing? Ask yourself how you might differentiate yourself in the market place or how you might add more value to the customer experience.
  2. Follow other flight patterns. Not only are you keeping tabs on your competitors, but they’re likely keeping tabs on you as well. Fowler states that “you don’t want to get so caught up running your business that you forget to learn from [competitors.]” Further, he states that “gathering intelligence doesn’t always have to be about ‘reinventing the wheel.’” Perhaps you can look at it as a way to improve an existing product or “take it somewhere else in the future.” Again, focus on value.
  3. Stay open to alternate routes. Don’t get comfortable or you could end up being the MySpace of Social Media. Fowlers argues that “if you see an opening that a competitor might take, beat ‘em to the punch.” Don’t let complacency prevent you from seeing shifts in the industry.

https://www.entrepreneur.com/article/288369

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