Amazon is in a strong position to offer better products and prices in a region they enter.
However, since their operation strategies requires them to heavily invest in each region
they enter, they can only focus on one new region to expand to at a time. Combined with
an already debt-heavy financial structure, Amazon is not in the optimal position to
innovate quickly for the omnichannel retail industry.
Although Amazon is not in the optimal position to innovate quickly for the omnichannel
retail industry due to its debt-heavy financial structure, their strategy is focused on
dominating each region that they enter one at a time. The heavy investment in facilities
and regional technology have proven to be a core competency in being able to out
compete their competitors on operating costs. Amazon has a strong long-term
omnichannel retail strategy which could aid Amazon position themselves for eventually
iterating on a proven omnichannel innovation to become the dominant player in the long
run.
Alibaba is in a better position to enter and disrupt new regions. Its partnerships with
local vendors and other brick-and-mortar stores means it can quickly establish physical
channels and distribution networks in new regions on a tighter budget. Alibaba also has
the technology specific to integrating different sources of supply chain information
together in order to fully utilize the benefits having different partners onboard. Alibaba
also has a better mix of in-house and allied implementations when it comes to
omnichannel strategies. Combined with their better financial leverage and ability to raise
more funds through debt, Alibaba is in the optimal position to innovate on new concepts
in the omnichannel retail industry.
For a company in the retail industry that are looking to succeed in omnichannel retail,
there are some insights that can be drawn from Amazon and Alibaba. These insights can
be applied to both companies who are primarily brick-and-mortar and companies who are
primarily ecommerce retail. The strategy is to identify weak areas of operation and to
develop capabilities in those areas according to the financial support available.
The first insights which Amazon and Alibaba do very well is to build strong
partnerships in channels and operations that cannot be integrated in-house in the
short-term. Next, if the company is in a good financial position to raise funds enough funds, the
company should slowly expand their capability into those areas for the eventuality of
integrating those areas of operation back in-house. If the company does not have the
necessary long-term financial capability, the company can focus on developing
technology to better integrate those partnered channels and operation into the company’s
operations. The partnerships will be further strengthened if the technology can also
benefit and add value for the partners. These partnerships will allow the company to
expand into more channels without having to invest heavily into the physical assets to
support these channels.
Both Amazon and Alibaba has done well in their implementation of omnichannel
strategy. Should a competing company wish to realize their own omnichannel retail, they
should not directly model their strategy after any one of the two. Rather, they should use
the insights learned from Amazon and Alibaba to adapt their operations according to their
own financial and competitive position.
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