Running head: CASE ANALYSIS: EBAY
Case Analysis Report
Mary A. Cohen
Boston University
MG 448: E-commerce and Web Designs
Professor Jung Wan Lee, Ph.D.
February 12, 2015
CASE ANALYSIS: EBAY
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Abstract
eBay was an idea software engineer Pierre Omidyar came up with. The reason for this
idea was so that his girlfriend could pursue her hobby of buying and selling Pez dispensers with
people not only in the United States but from around the world. The internet was brand new and
creative people were finding uses for this new tool. Prior to the internet you would need to visit
a collectors shop or put an ad in the newspaper. You could never have reached the amount of
potential buyers and sellers that you can today thanks to such sites as eBay! Pierre Omidyar
didn’t know it, but he was ahead of his time. His idea would change the way people shop.
Today eBay has gone beyond collectibles. Once thought of as an online yard sale is now
a site to buy not only used hard to find items, but also brand new items usually at a discounted
price.
This paper will talk about the beginning concepts and the growing pains this company
has experienced as well as the strategic business concepts they are now using to keep up with not
only the large competition but new to market competition.
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Contents
Abstract ................................................................................................................... 2
Introduction ............................................................................................................. 4
Business Description ....................................................................................................... 4
Value Proposition ............................................................................................................ 5
Customer Description ..................................................................................................... 6
SWOT Analysis .............................................................................................................. 7
Applying and Implementing an E-Commerce Business Model to Resolve Problems in
the Company: ............................................................................................................................ 10
References ............................................................................................................. 14
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Introduction
This year eBay, Inc. is celebrating its 20th anniversary. Over the past 20 years, eBay has
been very successful in the online auction sales, but in order to keep growing they have realized
that their business model needs to change drastically. In this case analysis I will examine the
changes made during its inception, growth along the way, as well as their plans for growth in the
future.
Business Description
eBay, Inc. (short for Echo Bay Technology Group) was started in September 1995 by
Pierre Omidyar. Omidyar started the company in his living room so that his girlfriend would
have a way of trading her collectibles online. It did not take Omidyar long to realize that this site
he started as a hobby was going to be a major corporation. Today eBay’s net worth is $16
Billion dollars. Not long after the company was started Omidyar hired some talented help
needed to grow the company. Jeffrey Skolls joined in 1996. He was the first employee hired,
held the position of President, and wrote the original business plan. In 1998 he stepped down
and to Senior Vice President of Strategic Planning and Analysis when Margret Whitman was
hired. Whitman held the position of President and CEO up until 2008.
eBay is the world leader in the online marketplace, it sells $2,100 worth of items every
second totaling almost $69 Billion dollars annually in 2011 (eBay, 2012) and employees 37,000.
Individuals, commercial customers, and government customers buy and sell items daily. As of
2011 eBay had over 100 million active users in over 150 countries. Its primary focus was to give
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sellers an online type of yard sale/flea market in the comfort of the sellers own home and be able
to reach buyers all over the world.
Over the 20 years eBay has been in business it has changed its business model drastically.
eBay operates its business through three segments: Marketplaces, Payments, and Enterprises.
Marketplace segment includes eBay.com as well as companies eBay purchase such as
StubHub, Fashion, Motors, Half.com, and Skype (it then sold Skype to Microsoft making a 40%
profit).
The Payment segment is PayPal which allows individuals and companies to purchase
products in a secure easy way by sending or receiving payments quickly. The Enterprise
segment is for large Retailers. By offering this segment, it is now broadening its clients to
include retailers selling new items to consumers at set prices vs. customers bidding on
collectibles and other hard to find items. Most recently eBay is working with retailers to offer
online buying while utilizing direct shipping options from the store directly to the consumer. By
offering this solution, retailers are able to use their store spaces and retail employees for both in
store inventory as well as online inventory and shipping services.
Value Proposition
eBay is committed to offering a convenient service that both the buyer and the seller
benefits from. Ways in which this is a valuable asset is by giving buyers and sellers a
marketplace which has a combination of a place to communicate, share information, and
complete transactions all for lower fees than the competition. eBay is an online resource
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environment which will allow the buyer and seller to become successful when using the
opportunities and guidance provided.
Customer Description
Not only is the customer important to eBay, but the seller is equally if not more important
to eBay. The reason for this is eBay wants their sellers to be loyal to eBay. In order to do this
eBay feels they also need to be loyal to the seller and in order to do this they have changed their
fee structure. The new fee schedule is much easier to understand. It rewards the higher sellers
and also offers a flat rate for the lower sellers. Under this new fee structure most sellers
(regardless if they are low volume or high volume) will pay less for each listing vs. the old fee
structure. This structure also makes it easier for the seller to quickly figure out how much they
are paying to sell on eBay vs. Amazon. They now list this table on the site which compares eBay
and Amazon’s fees:
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SWOT Analysis
This analysis will center on eBay’s core internal Strengths and Weaknesses as well as
eBay’s external Opportunities and Threats. By listing the Strengths and Weaknesses we will
look closely at the current activities as well as the deficiencies of the organization, in other words
the major strategic issues. When listing the Opportunities and Weaknesses we are looking at trends
and events external to the company which is out of the control of the company.
Strengths
1.
2.
3.
4.
5.
6.
World leader in online marketplace
Global client base
Easily Accessible
Easily Identifiable
Profitable
Free service to buyers
Opportunities
1. New Technology
2. Acquisitions
3. International Growth
Weaknesses
1.
2.
3.
4.
5.
Privacy
Fees
Content
Strategic Growth Strategy
Technology Issues
Threats
1. Competition
2. International Exchange Rate
Volatility
3. Security
Strengths (Internal):
World leader in online Marketplace: eBay, Inc. knows their market and has made many sellers
successful as well as providing many buyers with the exact products they were searching for.
Global Client Base: As of 2011 eBay had over 100 million active users in over 30 countries.
Easily Accessible: The eBay website is easy to use and name recognition is well known in the
industry.
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Easily Identifiable: The eBay logo is well known and highly recognizable.
Profitable: In 2011 eBay’s net worth was $16 billion.
Free Service to buyers: Buyers do not need to pay a fee on top of the selling/auction price +
shipping.
Weaknesses (Internal):
Privacy: eBay just like other major corporations could be hacked putting their active user’s
private information as well as their own company information and resources in jeopardy. eBay
does have steps in place to protect its buyers and sellers privacy such as Truste Certified Privacy
systems as well as documentation about privacy on their website, but as with any company these
days, there is always that chance that your information could get stolen and violated.
Fees: Although the service is free to the buyer, the sellers do pay a fee for listing their products
on the website. These fees have recently been modified and are within the industry standards.
Content: Although eBay monitors their website, there is always the possibility that illegal activity
will happen. It is estimated that 10% of transactions are fraudulent.
Strategic Growth Strategy: Over the 20 years in business eBay has not always made profitable
decisions. There is always the chance for competition to find a newer way or less expensive way
to sell products online.
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Technology Issues: Working with computer equipment, servers, service providers, etc. there is
always the opportunity for systems and services to fail leaving buyers and sellers unable to do
business.
Opportunities (External):
New Technology: As more mobile devices and newer technology is developed this increases the
platform for which buyers and sellers can do business. For example, with the implementation of
tablets you no longer need to be sitting in front of your computer to place an order, you can now
do this on your phones, tablets, mobile devices.
Acquisitions: eBay has acquired companies such as PayPal and StubHub. This allows them to
offer more services to their current client base as well as provide them with a growing client
base. By acquiring PayPal they were able to provide their customers with a secure way of
paying for items purchased. By acquiring StubHub they were able to now offer concert and
event tickets as part of their services provided to their current customers as well as provide
additional services to the StubHub customers in addition to concert and event tickets.
International Growth: As of 2011 almost 1/3 of the people living in the United States already had
an account on eBay. This means in order to grow its customer base they need to start targeting
international clients as well. Since all you need to use eBay is an internet connect and a device,
there is no reason why Sellers could not do business outside of the United States.
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Threats (External):
Competition: Amazon is eBay’s main competition. With eBay’s net worth at $16 billion and
Amazon’s net worth at $89 billion (as of 2011) Amazon is in a position to target eBays clients.
There are also other smaller competitors as well as more stores going online and selling direct.
International Exchange Rate Volatility: A big factor when selling into the international market is
the value of the dollar. Depending on which country you are selling into the exchange rate could
make it nearly impossible to make a profit.
Security: Hackers could send emails representing eBay; private information could be stolen from
both eBay as well as its clients.
Applying and Implementing an E-Commerce Business Model to Resolve Problems in the
Company:
eBay, Inc. used the Business to Consumer Model (B2C) when it designed its website to
conduct auctions. This allowed the seller (business) to do business with the buyer (consumer).
They were able to create their own market segment and design the auction website in a way that
was easy to use and convenient for both the seller and the buyer.
Besides growing competition, Amazon being their largest competitor ($89 billion in sales
for 2012) and a brand new Indian company by the name of Alibaba ($8.5 billion in sales for
2013) is gaining market share. eBay needs to continuously grow their client base, as discussed in
the SWOT Analysis, as already 1/3 of people living in the U.S. have eBay accounts. This means
eBay needs to provide more than just the auction service website. In order for eBay to keep
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growing they will need to broaden their business model and find different niche markets to sell
into. One way they are getting into different markets is with the joint venture of Simon Malls
and eBay called “Connected Mall”. Simon is the leader in the brick and mortar malls. eBay and
Simon are working together to find ways to get more people into malls while giving them the
convenience of technology used for shopping. This technology will assist them in finding the
items they are interested in, including deals and savings specifically customized for that shopper.
“Simon and the Retail Innovation Division of eBay, Inc. have been working on an exclusive
basis in the mall space to enhance the shopping experience and provide retailers with a new and
compelling way to engage shoppers”, Mikael Thygesen, Simon’s Chief Marketing Officer.
eBay Enterprise (an eBay, Inc. company) is also using a Business to Business Model
(B2B) by offering their retail business partners “Store Fulfillment Solutions”. This solution
allows the retailers to not only have brick and mortar locations, but also handle internet orders by
storing inventory right in the store locations, thus not needing additional warehouse space. The
store employee is then able to ship orders out locally to the consumer. This saves on warehouse
space costs as well as shipping costs. Using this fulfillment solution, eBay clients had more than
$1 billion in sales in 6,500 store and 3 continents.
Considering the 8 unique features of E-Commerce, I feel that eBay does a very good job
at covering all of these but “Information Richness” could be improved. The reason for this is
sometimes the products do not have a good description. It looks like sometimes the same picture
is used for multiple products. Especially if purchasing a used product you really want to see a
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clear picture of the quality the product is in. Detailed information about the product is also
important.
Conclusion:
The internet has changed the way we live. Most of our day to day lives now depend on
the internet and sites like eBay are a part of the way life is now. Billions of dollars are spent
annually on online shopping sites. We now carry around mobile devices, which allow us to go
online from anywhere at any time, we are no longer tied to our home computer.
eBay’s growth opportunities are unlimited. Being the leader in the global online
marketplace for online auctions has already allowed eBay to change the way shopping is done.
Now using creativity and social media more features can be implemented to make the process
even more user friendly. Implementing a social e-commerce business could open more doors of
opportunity. If users were to have chat rooms for “collectibles”, “antiques”, and an expert source
of information then there would be an obligation to using eBay versus the competition.
eBay has a vast network of active users who are experts in this field. They need to start
reaching out to the experts for ideas. A good example of this was when eBay purchased Skype.
At the time Margaret Whitman, President and CEO thought Skype would make it easier for the
buyers and sellers to be able to call each other (they could be located anywhere in the world) and
talk about the products being sold, find out details, and have more of a relationship with the
buyer/seller. As it turned out the buyers and sellers did not want to talk with each other,
communicating through email worked just fine. Skype was not a good fit for the company. If
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eBay had listened to its active users they would have saved themselves a lot of time and
headaches.
eBay understands that they have competition. Amazon has grown tremendously
compared to eBay. Amazon has its own niches in the market such as the Kindle and Amazon
Fire. eBay is also finding its niche and understands there will always be competition, but you
have to be able to differentiate yourself and offer specialized services not found with your
competition.
With the issues happening in the world today (hacking of computer system and obtaining
private information not only from thieves here in the United States but also from other
countries), I think eBay has to remain on top of this issue and invest heavily in the security and
safety of its clients. When clients need to pick which service to go with, eBay will show
dedication to the client for their safety and wellbeing.
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References
Business Services:; ebay inc. files SEC form 8-K, current report (jan. 7, 2015). (2015).
Economics Week, , 256. Retrieved from
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eBay enterprise clients reach more than $1 billion in ship-from store and in-store pickup
sales. (2-15, Jan 13). News Bites – Computing & Information Retrieved from
http://search.proquest.com/docview/1644509604?accountid=9676
"EBay Inc." EBAY Key Statistics. N.p., n.d. Web. 12 Feb. 2015.
How did eBay Start?. (n.d) retrieved Feb 09 2015, from
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Market Watch Web Site:. (n.d) retrieved Feb 09 2015, from Ebay, Inc.
http://marketwatch.ar.wilink.com/?link=EBAY
"Morgan Stanley Technology, Media & Telecom Conference." Investor Relations. N.p.,
n.d. Web. 12 Feb. 2015.
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Simon and eBay inc. launch “connected mall” at Stanford shopping center. (214, Dec 03).
News Bites – Computing & Information Retrieved from
http://search.proquest.com/docview/1629481586? Accountid=9676
Social Innovation, .(n.d) retrieved FEB 10 2015, from Ebay, Inc. Web Site:
Http://www.ebayinc.com/social-innovation. N.p., n.d. Web.
“Standard Selling Fees” . (n.d) retrieved FEB 10 2015, from Ebay, Inc. Web
Site:."Standard Selling Fees”. N.p., n.d. Web. 11 Feb. 2015
10 years ago, eBay changed the world. (2005, mar, 21). retrieved Feb 09 2015, from
http://usatoday30.usatoday.com/tech/news/2005-03-21-ebay-cover_x.htm