eBay Analysis

eBay Analysis Completed by University of Outline 1 Business overview 2 Form of business ownership 3 Business strategies 4 SWOT analysis 5 Management 6 Operations 7 Human resources 8 Marketing 9 Financial 10 Summary 11 Works Cited The eBay site was founded in the US in 1995, originally under the name Auctionweb. The UK site was launched in 1999, growing after a slow start to become the UK’s top e-commerce site measured by monthly audience numbers, with 6.8 million people (compared with Amazon’s 6.1 million and Tesco’s 2.7 million). In the year to March 2003, eBay’s audience increased by 160 per cent, compared to Amazon’s 28 per cent. Internet growth overall was only 7 per cent. The figures are ‘a significant sign of the potential of [the most profitable and successful Internet players] to sell to consumers’, according to Nielsen/NetRatings (www.nielsen-netratings.com), who supplied the figures. Cheap though most individual products may be, eBay still sells over $2 billion of them per year. If eBay were considered to be an e-retailer, this would make them number one in UK and US market shares respectively. While many dot.coms are mainly publicity, eBay is profitable, making a quarter of a billion dollars on worldwide operations in 2001. It survived the dot.com crash relatively untouched and the share price rose from US$18 in 1998 to US$110 by 2003.Visitors to eBay spend an average of 1 hour and 11 minutes per month on the site - one of the longest of any US site. Visitors return to the site to check the status of items they are bidding for or selling and ebay.com is one of very few e-retailers to achieve over a billion pages views per month. Many US users are earning a healthy living as ‘power sellers’, taking advantage of the worldwide market to offer everything from sports utility vehicles (SUVs) to comics, records and oddments like garden gnomes, T-shirts and kettles.

In the same way as the major bricks retailers are suffering increasing competition from charity shops and car-boot sales, so the established e-retailers face growing competition from online auctions. Most sellers are private individuals. For example, Pat Austin makes $55,000 per year selling an assortment of bric-a-brac that she finds in charity shops, car-boot sales and physical auctions. She sells 1,000+ items per year and 99.9 per cent of her transactions have been positive. It is a full-time job, though, with correspondence and dispatch taking up the mornings and sourcing goods the afternoons. Rosie English has a turnover of $175,000+ selling high-class women’s fashion for prices of $200 to $2,000+. She reads the fashion press to identify what editors recommend and what celebrities are wearing, then buys from sample and factory sales or direct from designers. However, eBay is not all one-person businesses, as the ‘big boys’ are seeing the opportunities and joining in with companies like Dell, Dixons and Sears using eBay to shift excess stock.It’s a case of ‘buyer beware’, as auction sites do not take responsibility for deals that go wrong and offer only low insurance cover for losses. The way for buyers to identify the most reliable sellers is from feedback ratings - many regular sellers have hundreds of positive ratings. How eBay Works • Signing up is free • Buyers bid online and the highest wins • Sellers and buyers rate each other • Listing fees vary in the approximate range $0.25 to $4 • The site also charges a percentage of the sale price, between approximately 1.75 per cent and 5.25 per cent - the more valuable the item, the lower the percentage The following results apply to students and are not representative of the average population.

Indeed, these are people who within a few years are likely to be earning and spending significantly more than the national average. Bearing in mind this income effect and the high computer literacy of graduates, these are shoppers who will account for a disproportionately high percentage of discretionary income and comparison shopping. Our results, and those of other researchers, show a consistent picture of the importance of the social and experiential aspects of e-shopping. These motivators are being satisfied to good effect by the most successful e-retailers such as, for example, eBay - one of the most successful sites in terms of sales, time spent on the site and providing enjoyment (Reynolds 104-105). Enjoyment motives for e-shopping • Involvement • Not boring • Fun for its own sake Enjoyment and social features of e-retailing sites • Chat rooms • Bulletin boards • Customer written stories • Product reviews • Suggestion boxes • Personalization of offers The most popular ‘enjoyment’ e-shopping sites (in ranked order) • Amazon (www.amazon.com) • CD WOW (www.cd-wow.co.uk) • eBay (auction, www.ebay.com) • Ticketmaster (show tickets, www.ticketmaster.co.uk) • Ryanair (www.ryanair.co.uk) Source: Dennis and Papamatthaiou. SWOT analysis Strengths: A. leading e-retailer in the US and UK markets. B. Considerable speed and flexibility in decision making (made possible by the small number of employees). C. High expanding paste (ebay.com, ebay.co.uk, etc). Weaknesses: even though e-retailing is thought to be the future of retailing, brick and mortar companies still occupy the significant portion of the market. eBay is not competing with these companies in any way as it operates solely on the e-market. Opportunities: A. Possibility of diversifying its e-based operations to include more brick and mortar or traditional retailers.

B. Possibility of creating the similar structure in the traditional retail settings (non-Internet based, something like a warehouse that will take eBay principles as its foundation). Threats: almost anybody can open a website, but not everybody can promote it to the level of eBay. However, the number of e-retailers is growing and various competitors such as Auction Universe and Onsale Exchange, for instance, start taking portions of the eBay’s market. The threat is that a large corporation with considerable funds will establish a business similar to eBay and will outperform this company by spending more on promotion, advertising, and site development. Generally, there is little debate that Amazon and eBay are two of the greatest e-brands since e-retailing began. Neither company was the absolute pioneer in the book or auction categories respectively. However, they were pioneering in the way they did e-business. With its current name, eBay is slightly more recent than Amazon (ignoring its previous life as Auction Web), with the auction category closely following books and CDs as early popular areas. It is particularly well known for its feedback ratings and the way in which categories are laid out. The ratings method seems to be a major contributor to building trust that is really critical for an auction trader attempting to bring buyers and sellers together. To give a brief snapshot of just some of the eBay happenings throughout just one year (namely 1997) we can draw on Cohen (63-71). Up to mid-1997, eBay still had fewer than 40 employees. The new staff being added had to fit in with the culture of eBay, which was itself changing. Marketing and business development was becoming more formalized. For example, rather than relying on organic growth, a pact was made with Netscape for ads that would drive traffic to eBay’s site. It also launched a major public relations offensive.

Further, CKS Interactive, a leading Silicon Valley branding expert, was called in to reposition the eBay brand and redesign its website. Customer surveys indicated some positive news; that the brand conveyed a crisp, clear message about what the company was trying to be - an online trading platform. The eBay website today still proclaims that its mission is ‘to provide a global trading platform where practically anyone can trade practically anything’. Later in 1997, eBay had to do battle with some tough competitors: Auction Universe and Onsale Exchange (Cohen 45-55). One of the real strengths of eBay is that it provides a sense of community, which is a higher-level form of interactivity. The intention is to create a network that is more than just buying and selling. Additionally, users can have fun, shop around, discuss topics of interest, share information, get to know one another and pitch in. Davis and Benamati argue that eBay has performed very highly in this respect, in terms of privacy and protecting users against fraud (45). Overall, eBay is still going very strong and no troubles are predicted at this company in the foreseeable future.