With Only A Fraction Of Amazon's Sales, Alibaba Earns Nearly The Same Profit

Alibaba Group Holding Ltd BABA has often been called the Amazon.com, Inc AMZN of China. The companies make for an easy comparison: both are known for their e-commerce activity, but also offer a myriad of services including cloud infrastructure, one of Amazon’s fastest-growing segments.

While its sales still pale in comparison to America’s e-commerce giant, when it comes to turning a profit, Alibaba has Amazon beat.

When comparing key metrics apples to apples, Amazon tops Alibaba in nearly every category in absolute terms, but when it comes to profit margin, Alibaba has the edge. Amazon delivered a whopping $51 billion in revenue in its first-quarter report, but turned just $1.6 billion in profit, equating to a roughly 3-percent margin, according to Statista.

Alibaba saw $1.1 billion in net profit on $9.9 billion in revenue in Q1 — an 11-percent margin.

The key difference between the two companies is their approach to e-commerce, and it may be due to cultural factors.

“Amazon’s approach in the United States was essentially to move the 'Walmart economy' online, creating a large retailer based on a high-volume, low-cost model that relied on massive scale and technology to create cost savings,” Porter Erisman, author of "Six Billion Shoppers" and a former Alibaba vice president, was quoted as saying by Forbes.

Alibaba’s model is more similar to the original pioneer of e-commerce, eBay Inc EBAY, Erisman said.

“Ebay’s approach was to move the yard sale economy, online, creating a market for used goods and collectibles,” Erisman said.

Alibaba took this a step further through a collective entrepreneurship approach by taking mom-and-pop store businesses online, allowing small retailers to open online stores to sell new products.

The company has since pivoted to a "new retail strategy," with the intent to provide a seamless consumer experience between the online and offline universe.

Related Links: 

Alibaba's 'New Retail' Strategy Turns This Analyst Incrementally Bullish

Alibaba's Q4 Print: What You Need To Know