Amazon and Alibaba are both e-commerce giants operating largely without physical stores. Amazon dominates the American shopping space, while Alibaba does the same in China. Amazon promotes products directly and at the same time serving as an intermediary for sellers. Alibaba keeps charges from its merchants to appear higher on its search rankings.


Amazon has been trying to tap into the fashion luxury business for years but is always one step behind Alibaba. In recent years, Amazon tried to duplicate Alibaba’s business model from its Prime Day to its failed live-shopping program. Everything Amazon is doing looks like a marketing attempt to turn the platform into the Chinese e-commerce giant.

So far, Amazon’s newest luxury endeavour hasn’t taken off, with Retail TouchPoints announcing that 12 brands have signed on to work with the platform. Just to put things into perspective, Net-a-Porter’s Tmall flagship launched with a catalogue of over 130 luxury brands while Alibaba’s Luxury Pavilion on Tmall is currently housing more than 80 brands. 

Does the question come to why are luxury brands reluctant to team up with Amazon?

  • Amazon has a serious image issue

According to Charlie Gowans-Eglinton, senior fashion editor for the Telegraph, the customer experience on Amazon “is quick and easy rather than special,” and that’s a problem because luxury is all about specialness and exclusivity. Furthermore, most consumers associate Amazon with bargains, low-priced goods, or lifestyle basics. Nothing about that screams ‘luxury’ or ‘extravagance.’

A shift towards the high-end apparel market would require a bold rebranding process to create hype and attract young, affluent consumers. But, so far, Amazon has been relatively silent on this front. Bezos might want to look to Gucci for inspiration. Under the leadership of CEO Marco Bizzarri and lead designer Alessandro Michele, the Florentine brand resurrected itself after controversy by creating unique and quirky looks that appeal to millennials.

  • Chasing the wrong consumer

Amazon appears to be aiming its services at upper-income American households and low-end consumers while forgetting about luxury’s ever-important “aspirational class.”

In 2016, more than 70% of American households making above $112,000 of yearly income possessed a Prime subscription. But since 2017, the American e-tailer began chasing lower-income households with their Prime memberships by announcing it would lower the cost of its Prime membership to $5.99 a month for buyers who have “an electronic benefit transfer card, which is used for government assistance like the Supplemental Nutrition Assistance Program,” according to Business Insider. The same year, it also rolled out Amazon Cash: an initiative that targeted consumers without bank accounts or credit/debit cards. Through Amazon Cash, consumers could walk into a partnering retail store and upload cash directly to their Amazon account.

How Can Western Luxury Brands Navigate China?

But during its aggressive expansion, Amazon forgot about the middle-class consumers. Since today’s moneyed elites have embraced new forms of luxury while also becoming more discrete and less ostentatious with their spending, America’s “aspirational class” is now the only segment still practising conspicuous consumption.

  • The counterfeit problem

Research firm Gartner conducted a study on 321 brands that Amazon offered for sale from third-party merchants and discovered “that one-third of their products had received at least one review by a customer reporting it as fake goods.” Unfortunately, Gartner is not the only firm that raised the alarm on Amazon’s counterfeit problem.

The Atlantic also reported that Amazon is “facing multiple lawsuits from brands who say it does not do enough to prevent fakes from being listed on its website.” Most big e-commerce sites (Alibaba, eBay, etc) had to fight off accusations of making a profit from listed counterfeit items, but this issue is even worse in Amazon’s case. And smaller brands are more vulnerable to Amazon’s counterfeit woes since they don’t have the infrastructure or budget to engage in lengthy legal battles. Inc. highlights how selling on the American e-commerce site “whether as a wholesaler or via its third-party retail marketplace, is fraught with risks that Amazon has done conspicuously little to mitigate — so little that many entrepreneurs believe Amazon’s top executives see those risks as features, not bugs.”

Conversely, Alibaba’s anti-counterfeiting efforts are starting to pay off.  The anti-counterfeiting alliance it created has expanded from an initial 30 members to 121 brands. Moreover, in the fight against fakes, Alibaba has employed the “most sophisticated and comprehensive proactive detection technology to date,” according to the company’s latest Intellectual Property Rights Protection Annual Report. And this has generated a “67 percent year-on-year decline in suspected fake product listings on its platforms in 2018.”

Because of these efforts, Alibaba claims that 96% of Alibaba’s proactive removals in 2018 occurred before any goods were sold.

  • Amazon is popular for US consumers, but China still wins the majority markets

According to eMarketer, Amazon Prime memberships are available in 17 countries today, with Germany being the company’s biggest foreign market. But Amazon accounted for less than 1% of China’s retail e-commerce market in 2018, while Alibaba represented 58.2% of retail e-commerce sales in China that same year.

Amazon’s failure in China is well-documented, so it’s hard to understand why Bezos believes a novel luxury platform would gain traction unless he plans to ignore the Chinese market altogether while focusing on the US and Western Europe. Taking into account how young Chinese consumers are a growth engine for the luxury industry, this plan may prove to be a costly mistake.

According to research based on UnionPay transaction data used in last year’s McKinsey China Luxury Report, “China delivered more than half the global growth in luxury spending between 2012–2018 and is expected to deliver 65% of the world’s additional spending heading into 2025.” Additionally, Chinese buyers spent 770 billion RMB ($115 billion) on luxury items in 2018, which equals a third of global spending.

Looking at these figures, it’s unlikely any retailer can conquer the global luxury market without the Chinese consumer base. But if the target consumer is the American luxury buyer, then the e-commerce platform has another problem. The Trump administration has adopted protectionist policies, restricted trade with the EU (legacy luxury brands are manufactured in Europe), and created a general state of insecurity that punishes not only European brands but also American consumers. In the foreseeable future, these policies will hijack prices, reduce demand, and destabilize the market.

Forbes highlights a similar negative trend by concluding that “enthusiasm to spend on luxury is declining” in the US. So, unfortunately, we estimate that Amazon’s current strategy won’t achieve its expected results despite a strong digital footprint and remarkable brand recognition. Amazon would be better off finding and building a competitive edge rather than constantly developing knockoffs of Alibaba’s initiatives.