Conducting statistical analysis of return on equity (ROE) to evaluate business models of Amazon and Alibaba

Abstract

Over the past ten years, the retail market has undergone a significant transformation. One of the transformative factors is the growing market power of marketplaces. Amazon and Alibaba currently shaping the vector of development of the global e-commerce market. The authors conducted a qualitative comparative analysis of the business models of Amazon and Alibaba and examined the dynamics of these companies’ return on equity (ROE). It was founded that ROE demonstrated high volatility, depending on the phases of the investment cycle and the return of invested funds. The authors conclude that Alibaba’s business model, being historically adapted to the conditions of the emerging Chinese market, demonstrates relatively more predictable margin dynamics, but in recent years has faced challenges limiting profitability. The Amazon model, which requires constant high investments, creates the potential for superprofits, but is associated with higher operational and financial risks, as evidenced by the greater amplitude of ROE fluctuations.