Amazon has consistently been the company that makes every retailer quake at the mention of its name, but one apparel industry expert says retailers’ fears have been directed at the wrong e-commerce company.
The company to fear, according to Edwin Keh, CEO of the Hong Kong Research Institutes of Textiles and Apparel (HKRITA), is Alibaba.
Speaking at the American Apparel & Footwear Association’s Supply Chain Innovation sourcing conference in New York City last week, Keh explained that the apparel industry is at an inflection point and that the old ways of retail aren’t really working for anyone anymore. But really, the challenges retail is facing have a lot to do with business models in dire need of adjustment—something Alibaba has well figured out already.
“If you’re worrying about Amazon, you’re worrying about the wrong company. I wouldn’t worry about Amazon. Alibaba is the company to worry about,” Keh said. “To worry about Amazon is the foreign affairs equivalent of worrying about North Korea as an existential threat.”
(Read more about what Keh had to say: Why Retailers Are Headed Into Industry 4.0 With the Wrong Mentality)
For one, Alibaba has the world’s fastest growing market locked down.
Since 1990, China’s GDP has grown more than 536 percent, Keh explained citing International Monetary Fund data. By comparison, U.S. GDP grew 61 percent in the same time. What’s more, global middle-class consumption is expected to shift heavily toward China and other Asian nations as higher-income countries start to lose their share. By 2030, the East Asia Bureau of Economic Research forecasts middle-class consumer spending will have grown another 571 percent in Asia Pacific, led, of course, by China.
And Alibaba is reaping the benefits of all that growth. In 2016, the e-commerce behemoth sold $485 billion worth of goods across its platforms—that’s 27 percent more than it sold in fiscal 2015, and more than 40 percent more than all U.S. online sales in 2015.
In its most recent financial statement for the fiscal year ended March 31, 2017, Alibaba said revenue jumped 56 percent to $23 billion. Active buyers on its China retail marketplaces rose 11 percent to reach 454 million, and the company sold $547 billion worth of goods across its platforms.
“They are neck and neck with Walmart and they are on course to be the first trillion dollar retailer,” Keh said. And, as he added, “Now that they have saturated the Chinese marketplace, they want to go overseas.”
What makes this whole scenario problematic for U.S. retailers, is that considering the new global consumer will be emerging from Asia in a big way, U.S. companies have their inventory in the wrong place to service those customers.
“Our view of the world, ‘make things in the East, consume things in the West’ is probably outdated,” Keh said. “Worse, our global supply chains might be optimized in the wrong direction.”
But Alibaba doesn’t have that problem.
“I think they’re the more scary one,” Keh said, adding, “You can embrace them or you can play outside their ecosystem.”