Amazon and Bezos are in great glory, but they are embarrassed in China

Amazon CEO Bezos has been all over the news on CNN and other international media recently. Last Friday, Amazon announced the acquisition of Whole Foods, the largest natural and organic food chain in the United States, and its stock price rose by 2.4%. Later, according to Bloomberg data, this means that Amazon CEO Bezos' net worth has increased by $1.8 billion to about $84.6 billion, and he is only $5 billion away from replacing Bill Gates as the world's richest man. The secret of Amazon's rapid expansion is not only to acquire offline supermarket chain giants, but also to break away from the limitations of e-commerce and become a consumer and technology giant integrating e-commerce, cloud computing, and artificial intelligence.

At the same time, Amazon is also facing challenges from its peers in China. JD.com and Alibaba are becoming more and more successful in cross-border e-commerce business. Although Alibaba is a latecomer in the technology-intensive cloud computing field, it has also demonstrated its strength. Amazon, owned by Bezos, is experiencing an embarrassment in its development in the Chinese market.

Bezos's road to becoming the richest man

"Watch out, Bill Gates, Jeff Bezos is eyeing your title of richest man," on the homepage of CNN's tech or money channel on June 19, the topic of Bezos' wealth became a hot topic.

Benefiting from the rapid growth of Amazon's stock price, after Amazon just announced the acquisition of Whole Foods, Bloomberg said that Bezos' wealth increased by US$1.8 billion. Bezos is now worth US$84.6 billion, only US$5 billion away from surpassing the world's richest man Bill Gates.

On April 5 this year, Amazon's stock price broke through the $900 mark, making Amazon CEO Jeff Bezos the second richest person in the world. At that time, some analysts pointed out that as long as Amazon's stock price broke through $1,000, Bezos's net worth would exceed $86 billion, which would allow him to surpass Bill Gates and become the new world's richest man. In other words, Bezos is only "$100" away from being the world's richest man. As of the close of the U.S. stock market on June 16, Amazon's stock price was $987.71, and Bezos is one step closer to the throne of the world's richest man.

"He has a good chance of winning," CNN reported that 53-year-old Bezos is ambitiously expanding his Amazon, while 61-year-old Bill Gates is thinking about how to donate his money.

"Amazon destroyed shopping malls, now it's grocery stores." After Amazon announced on June 17 that it would acquire Whole Foods for $13.7 billion, in addition to demonstrating Amazon's determination to further penetrate the offline fresh food market, the US media CNN used the word "wrecked" to describe the impact of Amazon's acquisition on American grocery stores.

In fact, Bezos has been coveting the grocery store market for a long time. In the eyes of the industry, the acquisition of Whole Foods Market means that Amazon will now enter the $700 billion grocery store market. Bezos has been targeting this market in recent years, first launching the Amazon Fresh service and then opening several Amazon-branded grocery stores in Seattle. Now he owns one of the most famous brand stores in the industry.

Judging from the feedback from the stock market, stimulated by the news of the acquisition of Whole Foods, Amazon’s stock price has risen for two consecutive trading days, and its market value has increased by nearly US$15 billion, which is higher than the acquisition price of Whole Foods Market.

Amazon's "unintentional success"

In 1995, Bezos built an online bookstore in a garage in Bellevue, a small town near Seattle, USA. Later, the sales scope gradually expanded and it became a retail giant. When it surpassed Walmart, the whole world was amazed. However, this was only a small step for the Amazon empire. Today, Amazon is the world's largest cloud service provider.

How to define Amazon today? It is certainly inaccurate to simply use the term retail giant. Today, Amazon is a consumer and technology giant that integrates e-commerce, cloud computing, and artificial intelligence.

In April this year, Amazon released its first quarter 2017 financial report, and cloud computing has become an important contributor to its profits. In the first quarter, Amazon Cloud Services (AWS) achieved substantial growth, with revenue of $3.7 billion, up 43% from $2.6 billion in the same period last year. However, the growth rate has slowed down, because last year Amazon's cloud services grew 64% compared to the previous year. The e-commerce business has stabilized in recent years, and Amazon has slowly turned its attention to cloud computing, with Amazon Cloud Services being the top priority.

Amazon has undoubtedly established its dominant position in the field of cloud computing, which is also the strong support behind Bezos' huge wealth.

Amazon, Microsoft, IBM and Google dominate the global cloud computing market. According to Gartner data, the four companies account for more than half of the global cloud computing infrastructure service market.

AWS is Amazon's cloud computing business that was born by accident. At that time, Amazon engineers were forced to develop a large-scale distributed system to cope with the retail business. When all this was completed, Amazon realized that they could not only take the initiative themselves, but also make the research and development results available to other users. Thus, Amazon Web Services (AWS) was born in 2002.

AWS has now become the world's largest cloud computing company. According to Synergy Research Group data, AWS's global IaaS public market share was 45% in the third quarter of 2016, more than twice the combined share of Microsoft, Google and IBM. In the global PaaS public market, AWS's market share almost exceeds the combined share of Salesforce, Microsoft and IBM.

Amazon’s “embarrassment in China”

"Four or five years ago when I was in college, the first place I would think of when shopping overseas would be Amazon in the United States. But now, many domestic cross-border e-commerce platforms have given me more choices," Ms. Jiang, a white-collar worker who likes shopping overseas, told reporters.

During this year's 618, JD.com, Tmall, and the up-and-coming NetEase Kaola and other platforms all joined the battle, but Amazon's presence in the Chinese market was not prominent enough.

The total order value of JD.com's 618 Mid-Year Shopping Festival reached 119.9 billion yuan. According to data released by Tmall, Alibaba's shopping platform, the total transaction value of Tmall's "618" clothing exceeded 1 billion yuan just 10 minutes after midnight on June 18, and Tmall International's transaction value exceeded 100 million yuan just 7 minutes after the opening.

Zhao Ping, director of the International Trade Research Department of the China Council for the Promotion of International Trade Research Institute, believes that Amazon is both a self-operated business and a platform, and pays more attention to the ability to control goods, warehouse entry, and platform control. Amazon faces high labor and logistics costs in the United States, so the acquisition of Whole Foods, which has more than 200 offline stores, can enhance Bezos's resource integration capabilities, use Whole Foods' outlets to better manage warehouses, and based on sales big data, allow goods to be warehoused in advance and nearby, improve logistics efficiency, and improve Amazon's consumer experience in the US market.

Unlike American retailers who focus on building their own brands, one characteristic of China's retail industry is that supermarkets rarely have their own brands, and most of them rent out stores. Department stores have an even lower proportion of self-operated products, and their ability to control goods is limited. This determines that Alibaba's approach to the retail industry will be very different.

"Alibaba has always been a platform and empowerment model, and its cooperation with most partners is based on an investment and shareholding model," said Ouyang Cheng, a senior expert at Alibaba Research Institute. Alibaba will consider the acceptance of society and the industry and will only serve as a platform.

JD.com, another domestic e-commerce giant, is also frequently compared with Amazon. Recently, Bisheng Asset Management released a survey report on JD.com, which believes that its self-operated business has low profit margins and its labor-intensive logistics model will become a burden for the company. However, some industry insiders believe that although Amazon has AWS, it does not have a distribution network, while JD.com is just the opposite. This does not mean which is better or worse, but only means that in different market environments, companies have different choices for development. It is absurd to magnify Amazon's strengths and conclude that JD.com is overvalued and has no prospects.

What challenges does Amazon face?

While Amazon has created a unique growth model, it also faces challenges from multiple aspects.

In the retail sector, its old rival Walmart will not sit idly by. On June 16, Walmart announced the acquisition of Bonobos (a men's clothing e-commerce website) for $310 million. After Amazon acquired Whole Foods, Walmart issued an ultimatum to some partners, requiring them not to use Amazon's cloud services. Walmart said it would keep most of its data on its own servers and use Microsoft's Azure cloud service.

Walmart has a clear advantage in the fresh food sector. For 90% of American shoppers, there is a Walmart store within 10 miles, and Walmart is rapidly expanding its service range. Its online customers can place orders online and pick up their goods at the nearest physical outlet. Amazon is still unable to achieve large-scale delivery of fresh food.

In the field of cloud computing, which is a new growth engine, Amazon also faces challenges from Alibaba.

Yu Sicheng, vice president of Alibaba Cloud, told reporters from the Beijing News and other media in April this year that with the development of China's Internet over the past decade, the IT capabilities and business requests handled by many Chinese companies, including Alibaba, have forced its IT capabilities to develop to a world-class level.

For example, when Alibaba first started the Double 11 Shopping Festival, the peak volume it processed each year was less than one thousandth of what it does now. However, during the Double 11 Shopping Festival in 2016, Alibaba's transaction peak reached 175,000 transactions per second. In this process, the peak speed and customer volume that Alibaba Cloud had to process far exceeded those of its American counterparts.

"Business has a great reverse driving effect on technology, so China's technology, especially Internet-related technology, cloud computing, big data, and artificial intelligence technology have begun to catch up with their American counterparts in the past few years. In the past two years, Alibaba has also gained a lot of customers in the United States," said Yu Sicheng.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.