CCAMP e-Commerce Group Mini Project

Tuesday, October 9, 2007

About eBay

eBay was once a tiny auction site overrun with Beanie Baby listings but today, eBay.com uses Internet technology to create a virtual marketplace where millions of users buy and sell everything from antique pickle jars to Ford trucks through auctioning system. eBay’s unique business model has enabled it to be one of the most successful e-commerce site in history. eBay is forecasted to reach its 2007 revenue of $7.3 billion to $7.45 billion range creating a powerful online platform for the sale of goods and services by a passionate community of individuals and small businesses. Most of eBay’s revenue comes from the commission earn from posting by sellers and from advertisement posted by other businesses.

There are several types of online auctions. In an English auction the initial price starts low and is bid up by successive bidders. In a Dutch auction, multiple identical items are offered in one auction, with all winning bidders paying the same price -- the highest price at which all items will be sold (treasury bills, for example, are auctioned this way). Almost all online auctions (including eBay) use the English auction method.

eBay using English auction method

Business model

The idea behind eBay is occurred to its founder, Pierre Omidyar that the Internet could solve the information asymmetry by creating a perfect market that had never existed outside of the realm of economic textbooks. Buyers would all have the same information about product and prices, and sellers would all have the same opportunity to market their wares. Instead of selling products from a centralized source, it connects individuals to other individuals (consumer-to-consumer) directly, so that anyone on the network could buy from or sell to anyone else. Thus, it promotes disintermediation that can help to reduce the cost of either transporting the goods or having warehouses. He wished to give the individual the power to be a producer as well as a consumer. Today, eBay users include individual buyers and sellers, small businesses, and even enterprises. From the buyer who shops on eBay for practical needs or for fun, to the seller who relies on eBay as a primary source of income, eBay becomes a part of its members' lives.

eBay generates revenue from a number of fees. There are fees to list a product and fees when the product sells, plus several optional fees, all based on various factors and scales. Different countries were charged differently. For example, the U.S.-based ebay.com takes $0.20 to $80 per listing and 5.25% or less of the final price (as of 2007). While the UK based ebay.co.uk (ebay.co.uk offices) takes from GBP £0.15 to a maximum rate of GBP £3 per 100 for an ordinary listing and from 0.75% to 5.25% of the final price. In addition, eBay now owns the PayPal payment system which has fees of its own.
The company's current business strategy includes increasing revenue by increasing international trade within the eBay system. eBay has already expanded to almost two dozen countries including China and India. It allows large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts. So, while on the front end, eBay runs on a C2C business model, at the back end, it also runs a Business-to-Consumer (B2C) business model.

Characteristic of Business

The key characteristic of eBay is not just from its auction web, but also from its community. The relationship between the members of community is so strong that it became one of the greatest assets of this auction web. The message boards had controversially created a convivial outpost, a place where users never felt alone in the vast, cold expanse of cyberspace. The warmth of the message boards had set eBay apart from its competitors. It strips the anonymity away and makes the members of its community feel like important individuals. While other few online services have attempted to create a community-like feeling by offering bulletin boards and asking users for the input of their improvements or by offering testimonials, their bulletin boards are edited by the company, unlike the free-flowing conversation made by AuctionWeb community. In June of 2006, eBay added an
eBay Community Wiki and eBay Blogs to its Community Content which also includes the Discussion Boards, Groups, Answer Center, Chat Rooms and Reviews & Guides. Ebay also has a robust mobile offering, including SMS alerts, a WAP site, and J2ME
(Java Programming Micro Edition) clients, available in certain market.

The eBay’s success is also supported by its virtual business that could take advantage of all the efficiency offered by a wired world. It never touched its product, nor did it engage in land-based activities such as storing inventory and shipping goods, making eBay to reduce its operational cost. eBay also provided a better user experience, since eBay has a clear focus in this only online auction business. Consequently, it creates a network effect that came with having so many buyers and sellers in a single place, which other auction web like Yahoo! –invested not only in auction website, but also in Broadcast.com for its television online, and in Geocities.com for its collection of personal websites -has only relatively small numbers of buyers and sellers on the site.

In April of 2006, eBay opened a new service through its new eBay Express site, which is designed to work like a standard Internet shopping site to consumers with United States addresses. Selected eBay items are mirrored on eBay Express where buyers shop using a shopping cart to purchase from multiple sellers. Here, buyers can shop for brand new produces instantly without waiting or bidding.

Design

eBay adopted a simple outlook in its design layout, user has the choice to source for items through categorized listing or search engine making eBay easy to navigate even for users with information system illiteracy. The sellers are required to register for an account after which they can post their products’ description and pictures enabling the buyers to have a better idea on the condition of the items they are interested in before deciding on bidding. Moreover, eBay has also provided Answer Centre through its community board that customers can get a quick help from other members.

ebay's main page layout

Payment modes

Photo Sharing and Video Hosting at Photobucket

The most common mode of payment used in eBay is through Paypal. This payment scheme is acquired by EBay Corporation in 2002.
Paypal enables any individual or business with an email address to securely, easily and quickly send and receive payments online. Its service builds on the existing financial infrastructure of bank accounts and credit cards and uses the world's most advanced proprietary fraud prevention systems to create a safe payment solution. Alternatively, buyers can arrange with seller to pay via cash on delivery, wire transfer, concealed cash etc.

Competitors

eBay faces a lot of competitors who also sells similar products and services online. Basically, eBay’s competitors include Yahoo! Auction (Yahoo! Auctions is now defunct in America, but remains active in other countries such as Japan and Taiwan), mocca.com, Amazon.com as well as those companies who have both physical and online stores. Thus, eBay has to compete with them for sales etc. Despite competitors bidding for market share, eBay's leadership has not flagged. Building on its dominance, the company is now addressing international markets as well as local domestic markets with personalized websites. eBay has also moved into auctioning rare items.

Strengths

Since all transactions are conducted online, customers have to fill in their particulars on the online form in order to purchase products. This information is private and confidential and therefore, if this information is disclosed, there might be misuse of people’s private and confidential information. There might be other issues that cause threat to eBay. For example, there might be “cookies” hidden on the web site, which will then store the customers’ passwords and may lead to wrong usage later on. This provides security to the consumers.

eBay has achieved competitive advantages that it outperformed its competitor through its e-commerce. eBay has reduced information asymmetry. Buyers would all have the same information about product and prices, and sellers would all have the same opportunity to market their wares.

By creating a “virtual storage”, eBay has saved on its transaction cost. It does not have an array of expenses – storage, shipping, and inventory. Onsale could have earned larger profits However, the company earned its revenue from the sale of the goods it sold, there are a lot of expenses incurred. Often, Onsale faced overstock of the products it sold since it took possession of the goods it sold. eBay has also pinched pennies on rent, salaries due to the much fewer labors hired, and marketing at a time when start-ups and daily management costs were routinely blowing a lot of money in “bricks and mortars” type of businesses.

eBay has given individuals a degree of economic independence that was impossible before the internet. Meg Whitman, president and CEO of eBay since March 1998, is no doubt the only one who spent couples of days in a rural Mayan village in Guatemala investigating how local craftswomen can pull themselves out of poverty by selling their handiwork on eBay to buyers in the developed world. Thus, eBay has empowered people to change their lives.
eBay has created stronger social relationships and improved communication between people from all over the world. Unlike other online businesses, eBay has created a conversation platform for all the members including the staff of eBay itself, to interact with each other through its discussion forum. eBay does not treat its customers as customers. In fact, eBay always call its customers as the community. eBay let the community’s views to carry an extraordinary amount of weight of eBay’s business decisions. Thus, it has created a sense of belonging in the community. eBay also has allowed people to build relationships that would have been difficult for them to sustain off-line. Most people shining on eBay message boards are often depressed in their off-line world. eBay has stripped the anonymity away and help people to feel like important individuals.

Weaknesses

Fraudulent is the common crime which occurs in all E-Commerce. eBay is also an easy place for unscrupulous sellers/buyers to market/purchase merchandise, which can be difficult for novice buyers/sellers to distinguish without careful studying of the auction description. Sellers overcharge to cover the fees that PayPal charges them. This is officially banned by eBay and PayPal and is violating some local laws and merchant agreements with Visa, Mastercard and Discover. eBay does sometimes police for this and will suspend auctions where the seller requests an additional fee for taking PayPal. Therefore inexperienced users often wind up paying these illegal and unenforceable fees
The buyer sends a forged payment-service e-mail which states that the buyer has made a payment to the seller's account. An unsuspecting seller may ship the item before realizing the e-mail was forged.

Controversy has arisen over certain items put up for bid. For instance, in late 1999 a man offered one of his kidneys for auction on eBay, attempting to profit from the potentially lucrative (and, in the United States, illegal) market for transplantable human organs. On other occasions, people and even entire towns have been listed, often as a joke or to garner free publicity. In general, the company removes auctions that violate its terms of service agreement within a short time after hearing of the auction from an outsider; the company's policy is to not pre-approve transactions. eBay is also an easy place for unscrupulous sellers to market counterfeit merchandise, which can be difficult for novice buyers to distinguish without careful studying of the auction description.

One of the purposes of eBay is to reduce asymmetry. However, due to fraud, information asymmetry between the buyer and seller actually widen. Seller cannot tell or verify the authenticity of the buyer except for the email correspondences and bids through eBay.

One mechanism eBay uses to combat fraud is its feedback system. After every transaction both the buyer and seller have the option of rating each other. They can give a "positive", "negative", or "neutral" rating and leave a comment. However, small and large transactions carry the same weight in the feedback summary. It is therefore easy for a dishonest user to initially build up a deceptive positive rating by buying or selling a number of very low value items, such as e-books, recipes, etc., then subsequently switching to fraud.

Although eBay protects sellers from getting a negative feedback from a deadbeat buyer when the deadbeat buyer/bidder did not respond to Unpaid Item dispute, they do not offer the same protection for a buyer who gets a deadbeat seller. eBay acknowledges weaknesses in its feedback system on its own policy pages, and implement ways to When a user feels that a seller or buyer has been dishonest, a dispute can be filed with eBay. An eBay account (whether seller, buyer or both) may be suspended if there are too many complaints against the account holder.

A third party businesses, such as CheckMEND, are compiling lists of stolen goods from local authorities and businesses so eBay consumers can check to see whether the goods they are buying are stolen.
In online company like eBay, they are more of customer-to-customer business instead of business-to-customer business; therefore, it will be very difficult for them to do any personalization or customisation. It is not within their control which type of products will be available; this has to depend on the customers who are trying to sell away their belongings. Hence, eBay’s products do not carter to everyone needs and they might risk loss of customer.

In the virtual marketplace, clients are more price sensitive and will tend to source for cheaper alternatives outside eBay. Thus it is difficult to retain customer’s loyalty. eBay has to come up with good marketing strategies to attract the customers.

ccamp;
12:33 AM