EBay Case Study [PDF]

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Running head: EBAY

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EBay (A Case Study) Name Institution

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2 EBay, just like any other big and profitable business venture, started off small with the

company growing to becoming one of the major companies that provide an online platform to various sellers to market and sell their products online to a huge number of clients. The company started its operations on 4th September 1995. It started as a small company with only a handful of clients, but it has grown into a big entity that allows customers from various countries to sell almost everything to their customers. In fact, 2005 estimates by the company indicated that about 75,000 people depended on the company for their livelihood. This does not include the number of people selling their products through a company. Following its success, the company acquired PayPal, which is an online money transfer company that allows customers to transact with speed in an approach that was not effective, but safe to both the sellers and the buyers. In fact, using PayPal as the main means of payment has ensured that the company cultivated trust amongst its customers with trust enabling the company enhance its growth and popularity across the world. In effect, eBay has continued to offer convenient shopping among its customers. The e-business model at eBay Based on the case study, there is evidence to suggest the use CRM, which is customer relationship management, by eBay. In fact, the company appears to have benefited a lot from this practice as exhibited by its focus on secure transactions since most of the transactions are on the internet. To manage the operations of the company’s customers, the data on both sellers and buyers is stored by the company upon registration and it is based on the data that the company manages all operations. Consequently, this implies that the company has integrated a business to customer (B2C) model. Other than the B2C model, the company has also integrated a customer to customer (C2C) model, which is exhibited by the fact that customers are able to engage in direct

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transactions with each other when the seller sells the goods directly to the buyer. In this case, the seller is eBay’s customer while the buyer becomes a customer to both eBay and the seller. The C2C model has ensured a strong connection between eBay and its customers, which promotes trust. The C2C model has been phenomenal to the success of the company since it has ensured the long-term sustainability of the company and its profitability. Nonetheless, it should be noted that eBay’s integration of various aspects of business has provided it with an impetus to achieve its current profitability status. One of these aspects is its acquisition of PayPal, which did not only ensure that customers had a secure ways of transacting business, but also ensured that the company provided a unique and convenient way of transacting business. It is also significant to point out that eBay continuously invests in improving PayPal to make the online payment platform more secure and safe especially in the current internet age that is characterised by daily vulnerabilities that could risk the safety of the transaction carried out via any online platform. Hence, safe and secure transactions, which have been usually associated with eBay’s operations, improve the dependability and reliability of a company as any C2C model is expected to be trustworthy more so when engaging in business online. The Changing Strategy at eBay EBay is identified as among the first, if not the very first, companies to engage in auctions online, which consequently explains its dominant presence online. As a first adapter of online auctions, the company integrated an effective customer service system that promotes quality services to its customers who are an important component of its success. This explains the company’s shift to offering differentiated services to its clientele. The shift provided the company with a favourable position in the online auctioneering market. To further cement its

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position in the market, eBay integrated a safe and secure method of conducting transactions online following its acquisition of PayPal, which was consequently followed by another acquisition of Skype in order to ensure seamless interaction and communication between its clients. Nevertheless, the company later allowed Skype to operate as an individual entity following its success despite the original objective of the company. Although eBay relinquished Skype as an integrated tool of communication through eBay, it invested in a strategy that integrated diverse communication tools that enhanced its success online. However, the acquisitions of both PayPal and Skype are enough evidence that the company had diversified to other business ventures although these ventures operated within eBay. Despite all this, it is crucial to point that eBay has been focusing on the development of its website by improving on various aspects of the site that will make it more competitive in the industry. This will make the company more appealing and enhance its capacity to operate in international online markets, which Wang and Emurian (2005) indicated as being promoted by design the interface in a manner that made the graphics and structure more appealing. Other than this improvement, the company has enhanced its operations across a multiple of devices to allow customers to transact business on their phones and tablets by developing apps for iPhones and Android OS operating phones. Hence, customers are able to conveniently transact business onthe-go when on their mobile devices. Factors that Contribute to eBay’s Popularity with Vendors As a market leader, the company has the capacity to define the direction taken by businesses that engage in online transactions. In line with this, it is crucial to point out that eBay has the capacity to offer vendors a wide customer base that cannot be guaranteed by similar companies. Besides, the trust aspect of the company makes it a strong brand with the strength of

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the brand promoting the company’s popularity amongst vendors. The trust aspect is also enhanced by the safe and secure platform offered by the company to its clients. Halvey and Melby (2007) identified the important nature of positive feedback in developing network economic effects. In this case, a company that uses feedback, either positive or negative, to develop its business aspects has the likelihood of achieving a strong competitive edge. EBay has utilised this approach effectively since it asks its clients to offer feedback on their experiences when using the website and the company to transact business. The feedback ensures that the company has a foothold on any aspect that could negatively affect its operations or its customer retention capacity. Hence, the approach makes vendors and their customers feel like an important component of eBay and it promotes a sense of being in the right place. Consequently, a strong community emerges and people have the capacity to transact business despite their location in any part of the world. Different Types of Online Auctions The popularity of online auctions has been associated with their capacity to provide buyers the opportunity to purchase an item at a less cost than what it could have originally cost were it to be bought in another platform. One type of online auction is electronic auctions that primarily involves a bidding process that goes on electronically, which is similar to the conventional open physical bidding, with the winning bid determined online with disregard of the amount of the bid placed (Schwind, 2007). Another online auction is the forward auction, which is the most popular among many online auction sites. This form of online auction typically involves the winning bid being the one that not only meets a certain threshold expected by the seller, but it is also the highest bid placed by bidders on an item being sold (Schwind, 2007). Thereafter, the winning bidder buys the item

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with the objective of the seller being maximizing the revenues on sales. This is the type of auction that eBay uses. Finally, there is the reverse online auction, which is in contrast to the other two forms of auctions. In the case of reverse auctions, the winning bid is not the highest bid placed by bidders but rather is the lowest bid placed in an auction (Schwind, 2007). The general implication is that the aim of the seller is not to make profits unlike in the other types of auctions since the highest bids are not picked as the winning bids. Forms of Online Payment Online markets have generated various approaches through which buyers can make payments conveniently. Conventionally, it is common knowledge that debits cards and credit cards were the only approach that people could transact money electronically. The two means of making payments were consequently adopted following the introduction of online markets. Nonetheless, the global online markets have witnessed the development of other methods for making payments online. Cybermediaries have become the most popular approaches of making payments online. The word borrows from cyber and intermediaries, which means that such companies act as online intermediaries to collect payments. This makes a cybermediary any company that offers people a platform to make online payments. There are various cybermediaries chief among them being PayPal, which is predominantly used at PayPal. With a PayPal account that a buyer has loaded money from their card or bank account, they can virtually make any payment online (Morley & Parker, 2010). Other than PayPal, other cybermediaries include Payza, Skrill, and other companies.

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7 Other forms of making online payments are through the use of digital wallets, which are

the most recent forms of online payments with their popularity growing following their discovery. Morley and Parker (2010) identified these form of wallets working in a similar way as the conventional physical wallets by storing credit and debit card information that is consequently used to make purchases and payments online. Evaluating the Efficiency and Effectiveness of eBay A report by Bendle, Pfeifer, and Reibsten (2011) identified click-through rate as a crucial metric to determine how a website, such as eBay’s website, was effective and efficient. In this case, a website is supposed to arouse some form of reaction from the user visiting its web pages. Therefore, the statistics on the pages clicked and the number of visitors who clicked through various web pages at eBay could be used to determine the effectiveness of the website. Other than the click-through rate, it is important to point out that eBay could use its banner ads posted in another website as a metric of determining the efficiency of its website. The statistics of the number of visitors who follow links posted in these other websites onto eBay’s website will be essential in determining the efficiency of the company’s website. Data mining is another crucial approach in which eBay could determine the efficiency and effectiveness of its website. Data mining essentially determines the website’s activity and provides statistics on customers who are active and quiet on the website. High statistics of quiet clients is indicative of a website’s lack of inactivity while high activity among clients indicates interactivity, which implies that the website is both effective and efficient since clients engage continuously in trading activities whether it is through participating in auctions or direct purchasing of products from sellers.

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8 Finally, statistics on client visits on the website could be used to evaluate the

effectiveness and efficiency of eBay’s website. This is in consideration to an individual client. In this case, the company could capture a visitor’s data on the dates and the time in which they were active on the site and visited the website. In addition, the metrics could also include the number of times that they accessed the website during their visits besides the duration of their stay on the website while actively engaging in activities on the website. These activities could include a search on various products for sale, engaging in ongoing auctions, or even purchase of products sold on eBay. In line with this, a website that is both effective and efficient means that a visitor will most likely stay for long hours on the website while engaging in various activities.

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9 References

Bendle, N. T., Pfeifer, P. E., & Reibstein, D. J. (2009). Key Marketing Metrics: The 50+ Metrics Every Manager Needs to Know. Upper Saddle River, NJ: Financial Times Prentice Hall. Halvey, J. K., & Melby, B. M. (2007). Business Process Outsourcing: Process, Strategies, and Contracts. Hoboken, NJ: John Wiley & Sons. Morley, D., & Parker, C. S. (2010). Understanding computers: Today and tomorrow, comprehensive (13th ed.). Boston, MA: Cengage Learning. Schwind, M. (2007). Dynamic pricing and automated resource allocation for complex information services: Reinforcement learning and combinatorial auctions. Berlin: Springer. Wang, Y. D., & Emurian, H. H. (2004). Inducing consumer trust online: An empirical approach to testing e-commerce interface designs. In M. Khosrow-Pour (Ed.), Innovations through Information Technology (vol. 2) (pp. 41-44). Hershey, PA: Idea Group Inc (IGI).