Strategic Planning For Information Systems
770.627.71
Allan Fisher
Kareem Sumner
eBay: King of the Online Auction Industry
March 9, 2016
1. The competition in the online auction industry is extremely explosive and competitive
especially among the larger online sites (i.e. ebay, Yahoo!, and Amazon.com). It is a
large market with a very low barrier to entry because of readily available software
that one can purchase. The following five-force analysis shows what the market is
like.
Five-forces Analysis
Threat of Entry
 Barriers to entry for online auctions sites are low
 Packaged software readily available
 Switching costs are relatively low
 Threat of entry is high
Rivalry of existing competitors
 Highly competitive industry
 No product differentiation – sites have similar categories and items for bid
Supplier Power
 Concentration of suppliers is high
 Customer importance is high
 Many available substitute products
 Switching costs are low-to-non-existent
Buyer Power
 Concentration of buyers is high
 Customer influence over pricing, quality and conditions of purchase is
high
Threat of Substitute
 Strong substitute for services and site features and functionality
 Price/performance is competitive amongst the larger online auction sites
 Competitive rivalry of substitute is relatively high
2. The competitive arena as it stands is regional. It is changing towards a more global
competition with ebay heading the way. Ebay is setting up and customizing sites for
various countries. They are partnering and acquiring local organizations in various
countries to provide local and global content and categories. In order to remain
competitive, other online auction sites will have to follow suit and enter the global
market.
3. Some of the forces that are operating in the online auction macro environment that
can alter the nature and structure of competition are:
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Strategic Planning For Information Systems
770.627.71
Allan Fisher
Amazon.com, a full line, one stop shopping retailer providing 18M items
and is the second largest online auction web site. It opened up two
international sites to compete internationally and has a large international
user base.
Yahoo.com, a popular navigational guide to the web, offered services to
nearly 120M users per month. They operated in North America, Europe,
Asia, and Latin America and captured the Japanese market in its localized
online auction. They provided auction services free of charge.
Microsoft, Dell, Lycos, Excite, CBS Sportsline, CompUSA and others,
formed Fairmarket, a leading provider of private – label, outsourced,
networked auction services for business clients.
Auction Watch provided content service that allowed users to compare
and contrast the fee structures of the top consumer-to-consumer, businessto-business and business-to-consumer.
Auction.com provided 24 hour customer service and an online transaction
security program Bid$hare – the best fraud protection programs on the
web.
eWanted.com, being completely different, provided backward auctioning
where sellers competed with each other for particular buyers.
High
Yahoo!
GO Network
Total # of
Unique Visitors
Amazon
eBaY
Auction
Watch
Low
Low
# of Items Listed for Auctions
High
4. Ebay is not in the best possible position when comparing total number of unique
visitors and the number of items for auctions to the other major players in the online
auction industry. Even though ebay has more than doubled the number of items
offered for auction than its nearest competitor, Yahoo!, it is not bringing in new
viewers to its web site to view or bid on those items.
Strategic Planning For Information Systems
770.627.71
Allan Fisher
5. The key success factors for firms in the online auction business are:
 The growth of the internet users in 150 countries worldwide.
 Business-to-business e-commerce accounted for over 65% of all internet
transactions in 1999.
 Online auction sales of collectibles and personal merchandise were
expected to represent an $18.7B market in 2002.
 6.5M customers would use online auctions in 2002.
Strengths
Strong name brand
Expanded marketing activities to include
advertising online and in traditional media
Formed alliances with key large
organizations
Carry broad range of products
Built loyal and trustworthy community
Expanded value-added services offering
‘end-to-end’ person-to-person trading
service
Relentless implementation of its business
model
Creation of SafeHarbour to combat
fraudulent activity
Opportunities
Development of International markets to
create a global trading community
Business-to-business and automobile and
regional sites
Become a full online retail store like
Amazon.com
Weakness
Fraudulent/Illegal acts conducted be sellers
Least number of unique visitors compared
to competitors
Niche auction sites can focus on a
particular set of users
Threat
Market share erosion
Auction software packages offered to
anyone interested in creating an online
auctioning web site
Low barriers to entry for online auction
market
6) Ebay is in an attractive position because of its strengths in particular its strong name
brand. Its competitors are full online retail shops – an avenue that ebay is heading into.
They are also heading towards a global market and are in the best position to lead the
way. One of its weaknesses has been addressed (Illegal acts by users) with the
creation of the SafeHarbour program.
7) Ebay is in a good position financially compared to its strongest competitors that have
more business areas. Sixty-five percent of their closing sale on 3.8M items listed for
auction was the best in the online auction industry. It has the best average selling
price for completed auctions. The only downside is the number of unique visitors
during the month of December 1999. They were listed fourth in the industry.
Strategic Planning For Information Systems
770.627.71
Allan Fisher
8) Ebay has a competitive advantage over its competitors. They have the strong name
brand and their high ratings in the Gomez Advisory’s for best site characteristics and
types of users the site attract, were number one in both categories. They are also
pioneering the development of a global trading community that will inevitably
increase its customer base.
9) Ebay’s top management must address the lack of unique customers as their top
priority. Their competitors are not only able beating them in this category, but they
have more business areas to offer potential customers. Management must also address
adding other business units to the site and offer additional services to its customers.
They would be able to compete directly with Amazon and Yahoo (its biggest
competitors). They can either partner with other online sites to build their customer
database (i.e. sites like auctionwatch.com, auction.go.com, etc.).
10) It is recommended that Mrs. Whitman and Mr. Omidyar should consider partnering or
acquiring smaller auction sites and offer services similar to Yahoo and Amazon. This
can increase the amount of unique visitors and their overall customer base.