Firefly vs. Alipay – Clash of the Giants – Group 18


Hello IS-peers,

A current event that may interrupt the B2C e-Commerce market is Alibaba’s IPO (largest in history) and their move into the western market. Alibaba’s biggest competitor in the western market will be Amazon. Since these giants clash in the near future, it is worth analyzing their technologies which are being utilized to gain or extend their respective competitive advantages.

Amazon – The Firefly technology

Amazon recently published their Fire Phone, which is a real-time online shopping device. In theory consumers are able to scan over 100 million items, get information about these or directly buy them online.

Firefly Advantages

  • Enabling Amazon to bind their customers even more to their online-shopping platform
  • Might be able to to gain a big market share in the mobile commerce sector, which has a rapidly growing demand (Ghose et al., 2013)
  • Due to the additive information customers have about a scanned item, they are less likely to be price sensitive, resulting in higher-priced purchases (Li et al., 2014).
  • Enabling Amazon to gather much more qualitative data about the customer behaviour like tracking shopping routes, favourite places and so on.

Firefly Disadvantages

  • Looking at the current ratings of the Fire Phone it becomes apparent that the Firefly Technology is not flawlessly functioning (Source: http://www.Amazon.com/review/R1XS6V3MAX1BYD/ref=cm_cr_pr_viewpnt#R1XS6V3MAX1BYD). This fact alone already minimizes the potential advantages of the technology.
  • Gathering valuable behavioural data of customers could lead to severe problems with the protective European privacy law.

Alibaba – The technology behind Alipay

The Alibaba Group has several subsidies which penetrate the B2B, C2C and B2C market. All these diversions are accompanied by Alibaba’s Alipay – a payment platform, which provides security to buyer as well as seller.

Alipay Advantages

  • Enables Alibaba sellers and buyers to decrease their business risks since the Alipay system controls the whole transaction process. Thus Alibaba enjoys huge trust of its customers
  • Enables to store much personal and behavioural information, these may be skilfully utilized for advertising purposes.
  • A gate into new product segments. Yu’e Bao is enabling Alipay customers to invest their money saved on the Alipay platform.

Alipay Disadvantages

  • Accumulated data of the Chinese customers may prove to be inapplicable to the European or American market due to cultural differences
  • Alipay will not face the same trust as in China. Customers first have to positively experience the Alipay service such that Alibaba may be able to build a large customer base and collect big data.

Conclusion

We showed that Firefly and Alipay are both information technologies with advantages that have the potential to reinforce their firms’ competitive advantage. However, it was also displayed that each company faces its own business problems. Therefore we propose:

  • Amazon needs to upgrade its Firefly technology which is necessary to actually extract value from their innovative technology.
  • Alibaba needs to recognize the cultural differences between the Asian and western market in order to successfully establish the Alipay system and the whole group in this varying environment.

References:

Ghose, A., Goldfarb, A., & Han, S. P. (2013). How Is the Mobile Internet Different? Search Costs and Local Activities. Information Systems Research, 24(3), 613-631. doi: 10.1287/isre.1120.0453

Li, T., Kauffman, R.J., van Heck, E., Vervest, P., and Dellaert, B. (2014). Consumer Informedness and

Firm Information Strategy. Information Systems Research, 25(2) 345-363

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