Selling on Amazon vs Alibaba: Which is More Profitable?
Two of the largest platforms that online sellers can choose from are Amazon vs Alibaba.
Both platforms are incredibly popular, but they serve different purposes, which can lead to very different strategies, outcomes, and profits.
In 2022, Alibaba Group held the title of the largest ecommerce retailer globally, with an estimated 780 billion US dollars in annual online sales. Amazon ranked second during this period, generating approximately 690 billion US dollars in online sales.
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What is Alibaba?
Alibaba is a global online marketplace based in China, which connects businesses with suppliers for manufacturing and bulk purchasing.
Founded in 1999 by Jack Ma, Alibaba grew into one of the world’s largest ecommerce platforms, focusing on B2B transactions. Alibaba offers a wide range of products that cater to wholesalers, manufacturers, and businesses looking to source goods in bulk at competitive prices.
Alibaba operates essentially in two ways:
Alibaba.com: The main platform that connects businesses with suppliers to source products for resale.
AliExpress: A retail version of Alibaba, allowing customers to buy products in smaller quantities, typically aimed at consumers.
What is Amazon FBA?
Amazon FBA (Fulfillment by Amazon) is a service provided by Amazon that allows sellers to store their products in Amazon’s fulfillment centers.
Amazon then takes care of storage, packaging, shipping, and customer service on behalf of the seller, allowing sellers to tap into Amazon’s extensive logistics and customer service infrastructure, making it easier to sell products on one of the largest online marketplaces in the world.
Selling through Amazon FBA helps sellers to focus on growing their business while Amazon handles the operational complications.
Amazon FBA vs Alibaba: Pros and Cons
Both Alibaba and Amazon FBA present valuable opportunities for entrepreneurs, but each comes with its own set of advantages and challenges.
Pros of Selling on Amazon FBA
Amazon FBA is one of the world’s largest online marketplaces, with millions of active customers worldwide. Selling on Amazon gives you immediate access to this wide customer base.
With Amazon FBA, you don’t have to worry about warehousing, packaging, or shipping your products.
Amazon FBA sellers have the opportunity to offer their products with Amazon Prime eligibility, which significantly boosts product visibility and sales, as millions of Amazon Prime members prefer fast, free shipping.
Amazon provides sellers with a range of advertising tools like Amazon PPC (Pay-Per-Click), which helps increase product visibility and sales. Amazon’s algorithm also helps your products get found more easily through its search ranking system.
Amazon is a trusted platform, and many consumers prefer to shop from established marketplaces due to Amazon’s customer service and easy return policies, building trust with new buyers.
Cons of Selling on Amazon
Amazon FBA fees include storage fees, fulfillment fees, and other additional costs that can eat into your profits. You’ll need to calculate Amazon FBA fees carefully to understand how they affect your bottom line.
With so many sellers competing in nearly every niche, it can be hard to stand out, particularly in popular categories.
Selling through Amazon means that you’re limited in how much control you have over your branding and customer experience. Amazon manages the customer service and packaging, which can be a drawback for businesses that want to maintain their unique brand identity.
Amazon has strict seller guidelines and policies, and failure to comply can lead to account suspensions or bans, making it difficult to maintain a consistent presence if your account faces issues.
Pros of Selling on Alibaba
Alibaba provides an easy way for businesses to source products in bulk at very low costs, which is especially advantageous for those starting an ecommerce business or those looking to expand their product lines without leading to significant costs.
Alibaba connects buyers with a wide network of suppliers and manufacturers, primarily from China, giving businesses access to competitive pricing and customization options for products.
Alibaba offers a huge variety of products across multiple industries, making it easy to find what you need, whether it’s consumer goods, industrial products, or electronics.
The platform is a perfect fit for wholesale purchasing, meaning businesses can buy in bulk or large quantities of products at a low unit price, leading to higher profit margins once the products are sold.
Cons of Selling on Alibaba
Alibaba focuses on wholesale transactions, so you typically need to buy products in large quantities. For new businesses or those with limited upfront capital, can be a significant barrier.
Since Alibaba connects you with manufacturers, ensuring the quality of the products before shipment can be a challenge. Sellers need to carefully vet suppliers to best avoid receiving subpar products.
Unlike Amazon, Alibaba doesn’t offer a built-in customer base for direct sales to consumers. Sellers need to find their own methods for marketing and selling their products, which can be challenging without a platform like Amazon.
When buying from Alibaba, shipping from China can be complex and costly. International shipping, customs clearance, and long delivery times can create additional struggles for sellers hoping to sell or reach customers quickly.
Alibaba vs Amazon: What’s the Difference?
While Alibaba vs Amazon might seem the same initially, the platforms serve fundamentally different purposes:
- Target Audience: Alibaba generally caters to businesses looking to buy products in bulk, while Amazon targets consumers looking for individual products.
- Business Model: Amazon is a retailer where products are bought and sold directly to consumers, whereas Alibaba operates as a marketplace for suppliers and manufacturers to connect with businesses that need products in bulk.
- Fulfillment: Amazon offers Amazon FBA for handling logistics, storage, and shipping, while Alibaba does not provide fulfillment services. Sellers on Alibaba are responsible for their own shipping and delivery.
Sourcing and Manufacturing
When selling on Alibaba, you are usually sourcing products directly from manufacturers, allowing for better pricing and often more control over product design and customization.
In contrast, Amazon FBA sellers don’t have as much control over manufacturing since they are usually reselling products that have been produced by other manufacturers or suppliers.
Fulfillment Models
Amazon FBA uses a centralized fulfillment model where products are stored in Amazon’s fulfillment centers and shipped directly to consumers from there, making it easier for sellers to scale their businesses, as Amazon handles the logistics, including packaging and customer service.
On the other hand, Alibaba does not provide fulfillment services. Sellers need to manage their own logistics, which can be more challenging, especially for small businesses.
Fees
Both platforms come with their own set of fees.
For Amazon FBA sellers, the fees include FBA storage fees, fulfillment fees, and referral fees (percentage of the sale price), which can vary depending on the size and weight of the products being sold.
For Alibaba, fees are generally related to the purchase of products in bulk, but there are no direct selling fees like those on Amazon. However, sellers will need to factor in shipping, customs duties, and import taxes, which can add up depending on the size and destination of the order.
Which is Better: Amazon or Alibaba?
Well, which is better depends largely on your business model.
If you’re looking to sell directly to consumers with minimal logistics management, Amazon FBA is likely your best bet. However, if you’re looking to source products in bulk and have more control over manufacturing and pricing, Alibaba may offer the best opportunities.
Alibaba vs Amazon FBA FAQ
How to Ship from Alibaba to Amazon?
Shipping from Alibaba to Amazon FBA involves several steps. First, you’ll need to order your products from Alibaba, ensuring that they meet Amazon’s requirements for FBA shipments.
After the supplier sends your products, they need to be shipped to an Amazon fulfillment center. The shipment needs to be labeled and packaged according to Amazon’s specifications, and you’ll need to create an FBA shipment plan in your Amazon Seller Central account.
How to Buy from Alibaba and Sell on Amazon
To buy from Alibaba to sell on Amazon, you first source products on Alibaba, ensuring they meet Amazon’s product standards.
After placing the order, ship the products directly to Amazon’s fulfillment centers using the FBA service. Once the products arrive at Amazon’s warehouse, they become available for sale on Amazon’s platform.
Can i Buy from Alibaba and Sell on Amazon
Yes, you can buy products from Alibaba and sell them on Amazon. Many Amazon sellers source their inventory from Alibaba and use Amazon FBA to handle storage, fulfillment, and shipping to customers.
However, you need to make sure that your products comply with Amazon’s policies and that you factor in any associated costs, such as Amazon’s FBA fees and shipping from Alibaba.