Amazon and Alibaba represent a new type of conglomerate. How should rivals and governments adapt?

SHOPPERS will spend record sums online in the next few weeks—in China for Singles Day on November 11th, in America on Black Friday and around the world in the run-up to Christmas. E-commerce has been growing by 20% a year for a decade, shaking up industries from logistics to consumer goods. Nowhere does debate rage more fiercely about what this means than in America, where thousands of stores have shut this year and where retailing accounts for one in nine jobs.

Astonishingly, online shopping has only just got started. Last year it amounted to a mere 8.5% of the world’s retail spending. In America the share was about 10%. Its effects on business and society will be huge. Not just because retailing is a big employer that touches many industries, but also because its two greatest exponents, Jack Ma and Jeff Bezos, the founders of Alibaba and Amazon, have used it to amass a new sort of conglomerate. The question is whether its creation will foster competition or demand restraint.

In the past two decades Alibaba and Amazon have added ever more services, from cloud computing to video. The firms’ businesses will reinforce each other as consumers and companies become more likely to use their platforms, and diverse sources of revenue and data power further growth. As a result, the two giants sit at the centre of all sorts of activity. In America Amazon is showing, week by week, the havoc that an innovative e-commerce firm can wreak in a giant, mature market. In China Alibaba is showing how dramatically one company can reshape business in a fast-growing economy. They will not conquer every industry they touch but, as they expand, few firms will change as many sectors in as many places.

Through one lens, this is a boon for competition. The e-commerce sites of Amazon and Alibaba lower barriers to entry by providing a simpler, cheaper way for small manufacturers to distribute goods and find potential buyers. Local manufacturers are challenging multinational giants. Consumers benefit, as they can choose from more and better products than ever.

Yet as the giant e-commerce platforms grow, so does unease about their might. With access to cheap, patient capital, Amazon can make big investments, including in warehouses, artificial intelligence and other firms such as Whole Foods, a grocer it bought for $13.7bn this year. Those investments, combined with the vast amounts of data on the consumers and businesses on its platform, mean that competitors struggle to keep up.

Amazon’s challengers should learn from China, where Alibaba’s rivals are teaming up. Tencent began as a gaming and messaging company. It now has a thriving digital-payments business and is the biggest shareholder in JD.com, Alibaba’s closest e-commerce competitor. JD is working with other retailers and tech firms, too. In August it announced that shoppers could buy through Baidu, China’s leading search engine.

Amazon’s would-be competitors might follow a similar path, by forging partnerships. Walmart (another investor in JD), for example, seems to be adopting JD’s tactics, making its products available through Google’s voice assistant to counter Amazon’s Alexa. Facebook wants to make it easier for customers to buy goods featured in its ads. And Google, to the horror of some privacy advocates, is tracking consumers to help bricks-and-mortar shops see which online ads work. American firms may yet catch up with their Chinese counterparts.

Will that be enough to guarantee competition? Regulators must be vigilant. More mergers are now likely among both makers of consumer goods and retailers, as they seek the heft to battle Amazon. Deals between retailers and tech firms will complicate matters further.

Watch the giants

In antitrust cases America’s courts have tended to assume that new entrepreneurs would challenge profitable incumbents. But in America venture-capital funding for e-commerce firms is dropping, in part because investors think Amazon will be dominant. This newspaper has argued that regulators should weigh the effect of mergers on the control of data as well as market share—especially for Amazon, given its existing power and range. Antitrust rules, as with so much else in the Amazon era, look as if they will need updating.

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