Alibaba and Amazon: View on the development before and during the Corona pandemic

Alibaba and Amazon: View on the development before and during the Corona pandemic

Amazon and Alibaba in comparison

The US internet company Amazon from Seattle has developed into the number one in European and American e-commerce over the last decade. Every day, millions of parcels from the globally operating warehouses make their way to customers. The online giant’s total worldwide turnover in the 2019 financial year was more than 280 billion US dollars. The stock market value has also long since exceeded the magic threshold of 1 trillion dollars and stands at just under 1,600 billion US dollars in August 2020.

The counterpart comes from China and is called Alibaba. The online retailer with headquarters in Hangzhou is known in this country primarily for its online platforms Aliexpress, Taobao and the online payment system Alipay. Alibaba generates over two thirds of its total sales in its home market China, the largest online market in the world.

Amazon generates four times as much revenue as Alibaba

In terms of worldwide sales, Alibaba is still far behind Amazon. The Chinese had a turnover of just under 72 billion US dollars in the 2019 financial year, which corresponds to a quarter of Amazon’s total turnover. And its market capitalization of a good 670 billion US dollars is also half that of its US competitor. A comparison of the latest quarterly figures of the two groups shows the current business development and how both companies are dealing with the challenges of the Corona crisis.

Strong growth in Corona quarter

Amazon published its figures for the second quarter of fiscal year 2020 at the end of July. Between April and June, the US online retailer’s sales grew by 40 percent year-on-year to 89 billion US dollars. The e-commerce platform was a major contributor to this growth, with a 49 percent increase in sales to 45.9 billion US dollars.

Similar to the first quarter, the second quarter of 2020 was also marked by the global spread of the novel coronavirus SARS-CoV-2. The infection control measures taken in many countries where the company is present to contain the pandemic – from contact restrictions and curfews to store closures – not only boosted the trend towards online shopping, but also the trend towards working from home.

Cloud business as growth driver

As people increasingly worked from home, the US Internet group’s cloud business benefited. With its cloud computing division AWS alone, Amazon generated 12 percent of its revenues, a total of USD 10.8 billion, although growth slowed down slightly compared to previous quarters. The segment grew by 29 percent in the second quarter compared with the same quarter of the previous year. In the first quarter, the growth rate was still 37 percent.

Like Amazon, Alibaba is also one of the winners of the Corona pandemic. The development at Alibaba is similar to that of Amazon. In China, the spread of the pandemic was countered early on with tough lockdown measures. The trend towards online shopping and home offices, which is also increasing in China, brought Alibaba a strong increase in sales of 34 percent to 21.8 billion US dollars in the first quarter of fiscal 2020/2021 (April 1, 2020 to June 30, 2020). Similar to Amazon, the cloud business grew particularly strongly. Revenue in this segment grew by almost 60 percent year-on-year to USD 1.7 billion.

Strong quarterly result despite corona-related additional costs  

In terms of net income, Alibaba outperformed its competitor in the past quarter. The profit of the Chinese group amounted to 6.57 billion US dollars – about 25 percent more than Amazon’s result and 135 times as much as its own profit from the fourth quarter of the past fiscal year. For the period from January 1 to March 31, 2020, Alibaba posted a profit of 49 million US dollars. Between April and June, Amazon more than doubled its net profit to US$5.24 billion compared to the previous quarter and the same period last year, despite high corona-related additional costs of US$4.0 billion for additional safety equipment, ongoing Covid-19 testing and warehouse closures and supply shortages.

Thousands of new employees

Amazon has responded to the additional demand in the online business since March by hiring 175,000 new employees, 125,000 of whom are to remain permanently employed. Alibaba also plans to create 5,000 new jobs by the end of the current year, according to its own statements. However, Alibaba remains more dependent on a stable development in its home market. In contrast to Amazon, which generates a quarter of its sales outside North America, Alibaba’s share of only 7 percent comes from abroad.

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