Question 1: eBay is one of the only major Internet “pure plays” to consistently make a profit from its inception. What is eBay’s business model? Why has it been so successful?
eBay’s business model takes the form of a Brokerage Model, more specifically an auction broker as it provides a platform for auctions for sellers whilst charging a listing fee and a form of commission which is relative to the transaction occurring (Rappa, 2005). eBay acts as an intermediary between the seller and the consumer, allowing for various transactions to take place. Similarly, it involves a supplier-to-consumer model, where it acts as the ‘middle man’ as such between the supplier and consumer.
I believe that eBay has been so successful due to the unmatched diversity that it offers, with millions of different items being available to browse and purchase at any given time on any given day and over 128 million users across the world. The user interface within the website, both on a computer and a mobile device, is also extremely simple and easy to use, as well as the the integration of PayPal within the website ensuring transactions between buyer and seller are safe and secure.
eBay logo. Source: http://fontsinuse.com/uses/2119/new-ebay-logo
Question 2: Other major web sites, like Amazon.com and Yahoo!, have entered the auction marketplace with far less success than eBay. Howhas eBay been able to maintain its dominant position?
eBay has been able to ensure that they have remained successful even when competitors are entering the marketplace as it is constantly improving and upgrading. Compared to other major websites e.g. Amazon.com, eBay does not hold it’s own stock, therefore does not have to deal with transportation and shipping fees. This therefore means that they are able to constantly charge a minimal commission fee on transactions through the website, as well as saving money on other areas such as storage, packaging and various other overhead costs. The ever growing number of users that eBay consists of also ensures that the organization is continually growing and developing in that regard.
Simplified diagram of eBay’s business model. Source: http://www.boardofinnovation.com/2009/05/02/online-auctions-from-products-ebay-to-experience-sweemo/
Question 3: What method does eBay use to reduce the potential for fraud among traders on its site? What kinds of fraud, if any, are eBay users most susceptible?
The major method implemented by eBay to reduce fraud within the organization is the use of the feedback system, which is produced by the buyer in regards to the overall performance of the seller. After every transaction which occurs on the website, eBay provides the opportunity for feedback to be given which will be available to be viewed by the public, with a negative rating appearing on the offending users page. The feedback about a particular seller can heavily influence whether or not an individual purchases from them, as obviously if an individual has a negative rating then they will likely look for other sellers. Through eBay encouraging all users to feel like members of the eBay ‘community’, it enhances the cohesion within the overall group and trust of other users feedback.
eBay also ensure that PayPal is available as a transaction method for all transactions on the website, ensuring that transactions are secure and removes the need for the transferal of personal details such as addresses and bank details between the buyer and the seller.
Screenshot of PayPal available on eBay. Source: http://www.theblog.ca/paypal
Other frauds which the buyers are susceptible to are when the seller does not physically send off the package, or when items are damaged or different to those which were initially purchased.
Question 4: eBay makes every effort to conceptualize its users as a community (as opposed to, say “customers” or “clients”). What is the purpose of this conceptual twist and does eBay gain something by doing it?
Through the promotion of a community within eBay, it ensures that it develops a culture within the organization where individuals, whether they are buyers or sellers, are able to work together in a mutualistic relationship. This is obviously important in an organization which is extremely dependent on their users and the relationships between them, as well as the limited ability of the organization to provide assured guarantees for products sold over their website. Users will also be attracted to the website ‘community’ ensuring that the consumer numbers continue to grow now and into the future. It is also part of human nature to want to be involved and belong in a group or community, so this also plays a vital role in maintaining and developing overall numbers.
Funny eBay commercial on YouTube. Source: https://www.youtube.com/watch?v=dvwJDAtHxuU
Question 5: eBay has long been a marketplace for used goods and collectibles. Today, it is increasingly a place where major businesses come to auction their wares. Why would a brand name vendor set-up shop on eBay?
One incentive for major businesses to utilize eBay as a service is due to the increased usage of online shopping in the modern world, rather than physical shops which may have been used previously. It also provides another means of reaching out to consumers, and potentially they may be exposing themselves to a new marketplace. This can also include exposure to a wider geographical scope than previously, not only within the same country but globally. The convenience of being able to browse and purchase products at any given time from any given location is also an attractive feature on the consumers behalf and is something which the major businesses would be encouraging.
Question 6. I have a few businesses, and I have used eBay for about 12 years on and off. Currently I have about 600 books listed on eBay (seller name ozrural). I stopped selling on eBay for a few years but they changed the rules this July and it is viable again (for me). What do you think changed?
In July 2010, eBay changed the rules in regards to the fixed price of books being listed through its website. Due to the decreased demand of paperback books in society nowadays, eBay lowered the price of the listing fees for each book, provided a free gallery to display items and set the final value fee as 9.9% (eBay, 2011).
How I feel when I browse products on eBay. Source: http://www.memecenter.com/search/ebay
References:
eBay. (2011). Tips of the trade; New store fees for media categories – coming in April 2011. Retrieved on 7 May 2014 from http://pages2.ebay.com.au/News/InsideSelling/New_Store_Fees_for_Media_Categories
e-Business Fundamentals 