Key Drivers of Profitability for Ebay - Case Study Example

The key drivers to the profitability of the eBay business model include a rigorous auction marketplace, fixed-price sales, and seamless buyer and seller experience on the website. Key drivers of profitability to eBay Pierre Omidyar, founder of eBay, designed the website to restore previously ‘corporation-held’ market power to individuals. The company connects buyers and sellers via an online platform (Ramon and Anant, 2). Its core business is not to sell products and services but rather to facilitate a community of individuals (eBay).

This community is an intended buyer-seller community. Once established, the company generates its revenue from sellers who pay fees to list their products on eBay. In addition, the company also gets revenue from the transaction fee that is charged on every successful auction sale (Ramon and Anant, 2). The sellers get their money from auctioning their products to their buyers thereby having a great price control. According to Ramon and Anant, since 2000, eBay has grown from the auction model to adopting fixed price trading after acquiring the website Half.com. The company has also included an extra option known as buy it now that enables the buyers to instantly win auctions at the seller's pre-determined price.

This fixed price option has enabled the company to include retailers like Home Depot enabling them to offer goods and make sales at fixed prices on the eBay platform (3-4). Ramon and Anant noted that eBay has remained profitable and retained its users over the years by ensuring that buyers and sellers have a seamless experience on the website (3). This has been achieved through the rating of buyer and seller relations during transactions. With this approach, Pierre has ensured that the fraud rate in the company is kept at a low rate i.e. less than 0.01%. eBay is no place for dishonesty and thus the company and its brand have gained worldwide differentiation and loyalty of over 100 million users to date.

Key drivers of profitability to Amazon Amazon Inc., based in Seattle, Washington, is an international e-commerce company and owns the world’s largest online retail platform. The company commenced operations as an online bookstore but diversified over the years to sell other consumer goods such as furniture, toys, jewelry, and food. The company is diversified with the production of consumer electronic goods such as the Kindle tablet series and provider of cloud computing services to other companies.

The key drivers to the profitability of the eBay business model comprised a successful retail model, enhanced customer convenience, and steadfast expansion as well as diversification. The company started as an online bookstore. The founder of Amazon, Jeff Bezos envisioned his company as a large online platform with the capability of selling over a million titles. The company’s success is based on an established retail chain of supply that displays the products online. Critics have accused Amazon of being a broker and not a store.

With an established retail model, Amazon has been successful over the years as it uses these established retail links in its expansion. The retail model enables Amazon to remain very profitable as it has reduced costs on the products. Bezos has ensured that the company expands in its retail strategy through the growth of supply chains and distribution networks. The company’s driver to success is highly dependent on the enhanced customer convenience that it provides to its customers (Jeff 1).